Till recently, personal insurance meant doing two separate things: for covering your life, you took life insurance. For meeting medical emergencies, you took Mediclaim.
For maximising your tax relief (under Sections 88 and 80D), you took both. Thanks to the entry of new private sector insurance companies, there is one more risk tool available in the market that offers the best of both worlds.
You cover your life, and for the payment of a little extra, you can also claim cash benefits for being diagnosed with a critical illness or a lumpsum for meeting major surgical expenditures. And, of course, you get tax benefits. Premiums paid under health riders qualify for deduction under Section 80D of the Income-Tax Act.
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A year back, Rajesh Unni was at a loss when his life insurance agent advised him to include health riders under his endowment policy worth Rs 5 lakh. Rajesh was not sure he should be paying for additional health cover when he had already taken Mediclaim.
For the additional health riders, he would have had to shell out Rs 510 per annum for covering himself against critical illness and another Rs 1,222 for major surgical assistance over and above the annual premium of Rs 5,141 for the base policy. But he took the health riders nevertheless, and today Rajesh, 32, does not regret it one bit.
A stressful worklife and metropolitan eating habits forced him to have a coronary angioplasty for which he had to pay Rs 3.5 lakh - three times as much as what his father paid for a similar surgery in 1991.
Sure, he had a Mediclaim policy, but that was worth only Rs 2 lakh. Had he not opted for the major surgical assistance rider, Rajesh would have had to borrow funds from his family to pay for the surgery.
Here, he was able to pay for the full cost himself - recovering Rs 1.5 lakh from the life insurance company and an additional Rs 2 lakh from the New India Assurance Company under his Mediclaim plan.
While Mediclaim cover limits can cover your full medical costs, the advantage of the health rider is that it is given no questions asked.
For example, if you want to bring your parents over during an operation - as this writer had to do two years back - you can pay for their expenses by using money available from the health rider even though this is not part of the medical treatment.
This is because payments for major surgery and critical illnesses are paid upfront without the need for producing hospital bills. Benefits are paid as per the categorisation of various surgeries.
Among the illnesses listed as critical are major organ transplants, complete renal failure, cancer, stroke, paralysis, heart attack, valve replacement surgery, major surgery of the aorta, and bypass.
In the case of surgical assistance, 17 procedures are listed as major, 15 as intermediate, and 11 as minor. Allianz Bajaj, AMP Sanmar, Birla Sun Life, HDFC Standard Life, ICICI Prudential, Max New York Life and OM Kotak Mahindra Life offer critical illness riders. ICICI Pru also offer major surgical assistance.
According to ICICI Prudential Life, 50 per cent of the basic sum assured is payable under major surgical procedures, 30 per cent for intermediate procedures and 20 per cent for minor procedures.
So is this a one time affair? Can Rajesh continue to avail himself of benefits under his life cover or critical illness cover? Under the major surgical assistance rider, life cover continues even if a claim is made under the rider.
In the case of the critical illness rider, life cover continues after the payment of the rider, provided it is a standalone rider, but ceases in the case of an accelerated rider. (An accelerated rider basically accelerates the maturity of the base policy, as no separate payment is made. This is chiefly because accelerated riders are normally taken for critical illnesses, which can be potential cause of death.)
On the other hand, a standalone rider pays a policyholder separately, so the sum assured under the base plan continues to remain unaffected at the time of claim.
Riders are additional and optional benefits attached to the basic insurance policy, just like the toppings on a pizza one orders. Take Rajesh