One of my friends recently offered me additional insurance. The plan covers ₹5 crore sum insured without deductible of ₹20 lakhs. This would cost approx ₹1,000 per year. My wife and I are 40 years old and my children are 12 and 7. Is this a viable option or a scam? How is an insurance company going to make money on something like that?
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A top-up plan is a very effective way to improve your health insurance coverage. The costs of supplementary insurance are considerably lower than those of regular health insurance. The cost range you describe is indeed offered on the market. However, when purchasing the plan, make sure you pay via a secure link to the insurer’s account.
The main reason a top-up plan is cost-effective is the deductible. The average claim size for health insurance is well below 30% ₹1 lakh. Furthermore, claims are greater than ₹20 lakh are rare. The insurer builds this low incidence rate into its pricing. When this policy is adopted by many users, the corpus becomes self-sustaining and economically viable.
Note the following four points. First, a supplement plan is only offered to healthy individuals. It is unlikely that insurers would offer the plan to individuals with serious pre-existing health conditions. They can issue a policy with a premium increase for minor, pre-existing conditions. Secondly, plans with higher sum assured are offered to a particular age group. Third, top-up plans also have a waiting period for specific conditions and pre-existing conditions. Fourth, premiums for additional insurance would increase with age, just like regular health insurance.
Definitely consider purchasing a top-up subscription. Although the chance of a major claim seems small at the moment, it is growing rapidly. The medical inflation rate is higher than the regular inflation rate. With the advancement of technology, the cost of modern treatments increases. It would be difficult to get high coverage later. So it makes sense to extend coverage when it is available.
My cousin used to work at a large multinational. He was 35 years old. He recently died of a heart attack. What insurance benefit can we expect from his employer?
– Name hidden on request
Employers generally subscribe to a number of insurance plans that are activated in the event of the employee’s death. First, there is the group term. Most reputable employers endorse such a plan. In case of death of an employee, a predetermined sum assured is paid to the nominee. The insured amount can be the same for the entire organization, classified by indication or linked to the salary. You must check the methodology used by the employer.
The second benefit would be PF linked life insurance. If your cousin has enrolled in the provident fund, he will be eligible for a life insurance benefit under the Employees’ Deposit Linked Insurance (EDLI) Scheme. Most companies opt for group life insurance instead of EDLI.
Third, if the employer subscribes to a gratuity cash accumulation plan offered by a life insurer, a nominal death benefit would also be payable under the gratuity life insurance plan.
Abhishek Bondia is the Principal Officer and Managing Director at SecureNow.in
