Yes , you can port your health Insurance policy!!

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Health Insurance_portability

Gone are the days when you use to get stuck with one health insurance because if you buy a new policy you will again have to wait for the waiting period with the new insurance. Like number portability within mobile operators, you can now also port your health policy to different insurer or within the same insurer in different plan without the need to wait for waiting period.

What is it?

You can port your health insurance policy to a new health insurance company without losing benefits from the previous policy. Benefits like Waiting period for Pre Existing Disease, waiting period for Special illness for surgery like cataract have to be covered by new insurer as IRDA guidelines.

Benefits:

Pre Existing Disease (PED) waiting or Special Waiting Period:

Scenario 1:

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Scenario 2:

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Cumulative Bonus: You have an Individual health insurance plan with Company “A” with 5 lacs basic sum assured plus no claim bonus/Cumulative bonus of Rs 50 k.You can apply for porting of policy with new insurer for Rs 5.5 lacs as sum assured. Not only your basic sum assured but also your bonus part can be used for porting.

Important things about the portability

  • Only like to like policy can be ported Example: Basis policy to Basic policy, Top up Policy to Top Up policy.
  • Premium for the new policy will be at the discretion of the new Insurer.
  • For the pre existing disease the new company can charge loading on the premiums.
  • Medical Test might be conducted by the new insurer and depending upon the medical condition of the insured the company will decide to provide a policy.
  • New Insurer will accept the policy as per its own terms and condition irrespective of the previous terms and conditions.
  • Portability can be done only at the time of renewal.
  • You need to submit the application at least 45 days before the renewal date to the new insurer.
  • Policy should have been in continuation with the old insurer. There should not be any break in the premium payment with the insurer.
  • New policy may differ with the old one as compared to other benefit smaller benefits.

Documentation required for portability

  • Previous policy documents (If you had previous policy for 3 years then policy document for all the 3 years)
  • Claim experience with the old Insurer in detail or self-declaration from the insured of No Claim made).
  • Proposal form filled of the new insurer.
  • Age proof
  • If any positive declarations – discharge card, investigation reports, latest prescriptions & the clinical condition.

Process for normal porting

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How can you port from your Employers group Insurance policy?

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Be Happy, No Claim Rejection after 3 years for Life Insurance Policy!!!!

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“You want me to buy Life Insurance – No they don’t pay any money” this might be a normal response from people around you regarding life insurance. Life insurance has earned a bad named for itself especially in India, where the industry is filled with frauds and claims getting rejected for small or no reasons.

Sumitra’s Dad had life Insurance policy Rs 10 lacs with company “ABC” and was relaxed about her daughter’s future. Her dad died in the month of Sep 14 and after 4 months “ABC” has decided to reject the policy on the grounds on mis representation of facts and fraud. Sumitra has no one to help her to deal with this situation.

Now Modi Government has brought a new change in the industry with the amendment of Section 45 of the Insurance Bill to change what Sumitra or many like her are facing today. This will eliminate any uncertainty of claim getting rejected after 3 years deadline.

Extract of the amendment in the Insurance bill can be found below.

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Explanation:

Recent amendment in the bill provides a great relief to the customer with the provision that the insurance company cannot reject the claim or cannot cancel the policy on the grounds of fraud/misstatement or suppression of a material fact after the completion of 3 years deadline.

It means total immunity to the policy holder after 3 years. So you can be relaxed about your future payment of Life insurance benefit once the policy has crossed 3 years’ timeframe.

How do you understand 3 years deadline?

3 years from the either of the following whichever is later:

  • Date of issuance of the policy
  • Date of commencement of risk – Date of risk commence for the company this is relevant in terms of back dated policy.
  • Date of revival of the policy – If there has been any major or minor revival of the policy then the revival date will be start of 3 year deadline.
  • Date of the rider to the policy

However, before 3 years insurance company can question the policy by giving a written communication to policyholder or nominee and the onus to disapprove will be on the client and not on the insurance company. Other implication of this would if in case of death of policy holder before 3 years and if insurance raises question on the policy, then client’s family will have to prove that there was no fraud intention while buying the policy.

Provision gives a clear understanding that if the insured can prove that there was no deliberate intention to suppress the fact or suppression of a material fact at time of buying the policy than Insurer cannot cancel the policy within 3 years.

All and all it’s a fun time for customers who have shown lackluster response in buying insurance policy.

Some important links –

http://www.thehindubusinessline.com/portfolio/your-money/why-the-insurance-bill-matters-to-you/article6993939.ece

http://www.businessinsider.in/How-the-new-Insurance-Billwill-change-the-way-you-save/articleshow/46554138.cms

Does your policy have a Restore Benefit?

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Most health insurance are providing customer with inbuilt restoration feature with their policy.Apollo Munich, Star Health etc have a restore benefit available with them.

Let us understand what is a restore benefit and how does it works:

If for a policy the Basic Sum Assured, No Claim bonus & Multiplier benefit is completely exhausted in a given year then company provides for a restoration of 100% Basic Sum Assured provided that the restoration cannot be used for the illness/disease for which claim is already made in the policy year.It is essentially buying a policy with double the benefit.

Eg: If you have a Sum Assured of Rs 4 lacs and Multiplier bonus of Rs 2 lacs. Let us see what happens under the given scenarios.

Scenario 1:

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Scenario 2:

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 Important Points to Remember:

  • Benefit is trigger only if the total benefit (Basic Sum Assured + No Claim bonus + Multiplier Bonus) under the policy is exhausted
  • Benefit can only be availed for new kind of illness/Disease in the policy year.

Do you know about the Multiplier benefit in your policy?

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Now a day’s most of the health insurance companies provide a unique feature of multiplier benefit in their policy and they promote it heavily. However, does this feature really multiple your benefit or it is just a jargon used to confuse and lure customers? For this we will need to understand the actual working of this feature.

The multiplier benefit feature is available with Apollo Munich Optima Restore plan. Policy wordings of Apollo Munich Optima Restore explain multiplier benefit as:

If no claim has been made in respect of Section 1 under this Policy and the Policy is renewed with us without any break, we will apply a bonus to the next Policy Year by automatically increasing the Basic Sum Insured for the next Policy Year by 50% of the Basic Sum Insured for this Policy Year. The maximum bonus will not exceed 100% of the Basic Sum Insured in any Policy Year

Explanation of the policy wording with an example

For Apollo Munich Optima Restore plan you get a 50% of the basic sum assured as the multiplier bonus for every one year of claim free year Subject to max bonus of 100 % of Sum assured. Deduction in the multiplier bonus by 50% of the sum assured if there is a claim in the year, however basic sum assured is intact.

Example: Look at the illustration below for better understanding

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As per the diagram, following important point you should remember.

  • Multiplier benefit cannot exceed 100% of the basic sum assured.
  • Multiplier benefit will be deducted by 50% of basic sum assured if any claim is registered by the insured.

How does Section 80D helps you?

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Today I am going to talk about Section 80D of income tax act; many people don’t understand how this section works and how they can fully utilize the benefit of this section for tax planning. You don’t need to be a CA to understand the simple logic behind 80D.

After the Union Budget of 2015, Sec 80D has started gaining more importance as there has been an increase in the permissible deduction under it. Budget 2015 has increased the deduction to Rs 25,000 (for yourself, spouse and children) and Rs 30000 for your parents if they are senior citizen. This deduction is over and above the deduction of 80C available to taxpayers.

Quantum of deduction:

While claiming tax deduction, you can get deduction under Sec 80D for a sum of the following two things.

  1. Premium paid for mediclaim policy for self, spouse and dependent children up to Rs 25,000 can be claimed as deduction.
  2. Premium paid for mediclaim policy for parents above the age of 60 yrs up to Rs 30,000.

Let us look the section for different scenarios given below.

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Further Example:

  • If you are paying Rs 15,000 towards mediclaim insurance premium for you and your family and you are paying Rs 40,000 towards mediclaim insurance premium of your parents. So the maximum deduction that you can get under Sec 80D is Rs 45,000 (Rs15, 000 for Family and Rs 30,000 for Parents).
  • If further from Rs 40,000 paid towards your parents’ mediclaim, you have paid Rs 20,000 and you father has paid Rs 20,000.Than both you and your father can take deduction of Rs 20,000 each for your respective tax planning.

After the union budget of this year, you can get a maximum of Rs 55,000 as deduction for the premium paid towards mediclaim policy.

Top 10 things to know about health insurance

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When we talk about financial planning we only tend to focus on increase our wealth year on year. However we often forget that protecting your already earned wealth is as important as increasing it. By protecting I mean minimizing our cash outflow for any expense.

One of the major cash outflow for a normal person would be the medical expense that he/she would incur in the coming years, especially when in India the cost of medical treatment is sky rocketing. Buying a health insurance provides you with an option to transfer your risk of high medical cost to someone else.

Key things that you should be aware about health insurance policy –

  1. Co- payment Feature –
    1. Co payment in health plan means certain percentage of the cost incurred while hospitalization has to be incurred by you.
    2. For Example is you have taken a health insurance from XYZ Company of Rs 5 Lakhs with 30% copayment feature and at the time of hospitalization the total cost was Rs 1 Lakhs. Then essentially XYZ will pay only Rs 70k (100%-30%) and rest Rs 30 K (30%) has been borne by you.
  • Most of the time insurance agent don’t specify or mention about Copayment restriction while selling the policy. Copayment is common feature in health insurance plans for senior citizens.
  1. Sub-limits on Room Rent/Cost –
    1. Hospital Room rent or cost is the major part of the total hospital expense that you will have to shell out. Most health insurance company cap there expense in terms of room rent to either 1% or 2% of the sum insured. From the above example, your daily room expense is capped at 1% of Rs 5 Lakhs either Rs5k.Anything above that had to be borne by you.
    2. In case of planned hospitalization, one should check with the insurer on the sublimit on room to avoid any unnecessary expenditure.
  2. Exclusion –
    1. Once you buy the insurance, you might be rest assured that you have covered your family from all the medical expense.However, Insurane companies in India do not cover some specific diseases like Injury or disease caused by nuclear weapons or War, any expenses on any disease/injury incurred during first 30 days from commencement of policy, Cosmetic surgeries, cost of spectacles, cost of dental treatment etc.
    2. Policy wording comprise of many such other permanent exclusion which the policy buyer generally don’t see. While buying the policy you must make calculative judgment of the chance of your hospitalization coming under exclusion list.
  3. Restore Benefit –
    1. Restore Benefit is a feature where in if your sum assured is exhausted than insurer company restore the sum assured to the original level for the policy year subject to the condition that the new sum assured cannot be used for the disease which exhausted the original sum assured.
    2. Eg – suppose if you have exhausted your sum assured of Rs 5 lakhs for hospitalization of heart related issue and in the same policy year if there is again a hospitalization of insured for some other disease than the insurance company will restore your sum assured to Rs 5 Lakhs even though it was already exhausted. However you cannot avail the restore facility for any heart related issue in the same year.
  4. Post Hospitalization Expense –
    1. Health policies also contains a post hospitalization feature, which include post hospitalization expense like doctors visit, Medicine expense etc.In most cases, insurer will cap their expense of post hospitalization to around Rs 5000 or certain percentage of sum assured only. Anything above that had to be borne by you.
  5. Network Hospital list –
    1. Insurance company provide cashless payment facilities at their network hospitals in which the customer need not pay anything and amount will be paid to the hospital directly by the insurer according to the terms and condition of the policy. To avail the cashless facilities, customer is provided with an ID card. Customer also has to inform the insurer about the hospitalization with in a stipulated time (either 24 hrs or 4 days depending upon the policy you hold).
    2. It is very essential to check the list of network hospital near your stay so that same can be availed at the time of emergency.
  6. Waiting period for pre existing diseases –
    1. Most companies keep a cooling period for pre existing disease that the policy holder might have. Generally the waiting period is 2 to 3 years which differ from insurer to insurer.
    2. Any hospitalization in the waiting period due to pre existing disease will not be paid by the insurer.
  • It is always better to buy a policy that requires you to undergo a medical checkup, so that the company is clearly able to understand any pre existing disease. Hence reducing any inconvenience to you at time of hospitalization.
  1. Special waiting Period –
    1. Some insurance company might require a waiting period for certain disease irrespective it is pre existing or not. Hospital Expense for conditions like Cataract, Hernia, Kidney Stone etc are covered after a waiting period of 2 years from the date of first policy issuance.
    2. Eg – Optima Health Restore plan of Apollo has a two year waiting period for Cataract operation.
  2. No claim Bonus –
    1. If there is no claim for a particular year than the sum insured will increase by certain percentage for the next year. Generally the No claim bonus is around 5% to 10%.
    2. Suppose you have a sum assured of Rs 5 Lakhs and there is no claim in the first year. As per the No claim bonus feature, next year your sum assured will Rs5.5 lakhs (10% increase)
  3. Free Health Checkup –
    1. Most insurance companies provide for a free health checkup if there no claim or certain specific years.
    2. For Eg – Apollo Munich Insurance has a feature of comprehensive health check-up involving a number of medical tests, up to 1% of Sum Insured only once at the end of a block of two continuous years for sum insured for Rs 15 Lakhs and above.

Why you need health Insurance?

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In India buying insurance is not need driven but market driven. In other words it is not pull market but a push market where insurance use techniques to aggressively sell the product. People generally buy insurance because some family friend/relative is an insurance agent and we buy it only because they did some favor to us.

Let us agree we never bought an insurance plan because it fits our financial plan or because of the actual need of protection due to insufficient cover we have. As we don’t use our brain while buying one it leads to high scam or fraud in insurance sector

There are some strong reasons for you to immediately buy an health insurance for you and your family.

  1. Low cost as you enter the policy at the young age.

If you want to buy a family floater, the cost of premium is determined by components like

  1. Number of members and
  2. Age of the oldest member.
  3. Any Pre existing disease

For an individual policy, it to depends upon your age and any pre existing disease condition.

So if you are young and taking a policy the premium charged will be really low as compared to the policyholder for someone with higher age.

Check out the comparison below from some major health insurer.

Age :26 Preexisting illness – None

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  1. b) Age -55 Preexisting illness – None

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So it makes sense to buy when you are young.

  1. It is Cost effective

By making a premium payment of around 1% to 3% (Rs 5,000) of the amount you’re getting a protection of 100% (Rs 5 Lakhs) of the amount for a whole year. For 30 years age healthy person (Insured), an insurance company will charge around Rs 10,000 for a sum assured of Rs 10 Lakhs, which is about 1% of the sum assured.

Let us assume for the next fifteen years there is no claim from the insured then also he is effectively paying only Rs 1, 80,000 – 18% (Adjusted for increase in premium for increase in age) for the cover of Rs 10 Lakhs. By this calculation it would 30 to 35 years to fully exhaust your 100% bracket, however if there is a claim in between the insurance company will cover you till Rs 10 lakhs. So if you had a claim of Rs 9 lakhs in the 10th year than you would have paid only 10% of the actual hospitalization expense as a premium and insurance company will reimburses you with the claim amount. It means out of the total expense your contribution is only 10% and that too you paid over a period of 10 years.

  1. Are you sure about your health:

No one is sure about this aspect of their life. You never know when and how your health might deteriorate in the coming days. A car accident or simple unhygienic food could make you ill and could make your finances go for a toss.Everday we hear a new disease been found among humans be it EBOLA or swine flu. Those who follow a healthy life may also become a victim of it.

It is better to be prepared then to remain vulnerable. I see health insurance as protection from the unknown and I pass on that risk or the tension to the insurance company for a little sum of Rs 10,000 to Rs 20,000 a year.

  1. Hospitalization cost:

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For those who don’t know, the hospitalization costs has already skyrocketed and will keep on going upward in the future. A normal hospitalization on 3 days will cost you around Rs 15000 to Rs 20000 in metro like Mumbai. A normal delivery procedure will cost you Rs 40 k to Rs 50 k in Mumbai in a decent hospital. You can imagine what will be the future, it sensible to protect yourself from the huge burden that you might face in future by buying a health insurance plan.

  1. Cashless facility:

One of the best benefits of having a health insurance plan is that it provides a cashless facility at their designated hospital and if the designated hospital is close to your house, then it effectively provides treatment at no cost. We all know that how it is difficult to arrange for cash at a short notice and that difficulty is further increased when in case of an emergency each second counts. Total cost will be provided by the health insurer.

  1. Tax Benefit

Icing on the cake is that you also get tax deduction for the amount invested in health insurance for you and your family. As per Financial Budget 2015-16, under Section 80D you can get a deduction of Rs 25,000 for the premium paid on health insurance of your family. If you are paying for Senior citizen parents then you can get deduction of additional Rs 30,000 against the premium paid. It is effectively a deduction of Rs 55,000 from your taxable income.

If you fall 30% of income tax bracket then you are effectively paying only Rs 40 k (Rs 55 k * .7)

Now who would not want to save money and also protect himself.