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Financial Express
14 january 2013

There are increasing number of people falling prey to lifestyle diseases at a young age. At the same time, the cost of health care is rising exponentially. As a result, paying off healthcare bills is crippling Indian households. Keeping this scenario in mind, investing in a comprehensive health insurance plan to safeguard the interest of the family, has become imperative.

It is, however, critical to have a sound understanding of the structure and the benefits of different health insurance products before investing. Health insurance plans can be broadly classified in two categories, namely, indemnity–based and benefits–based. Under an indemnity based plan the insured is paid the entire amount that he spends on medical treatment, provided it is equal to or less than the sum assured. Benefits based plans are mainly critical illness plans under which the insured can claim the entire sum assured for the treatment of a critical illness specified in the policy.

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Indemnity (typically like a mediclaim) and critical illness plans serve two different purposes, and both must be included in the health insurance portfolio. Investing in mediclaim can prove extremely useful in case of minor ailments such as food poisoning or appendicitis, as all the hospital expenses including tests etc are taken care of by the insurer. However, they become futile in case the insured contracts a critical illness such as cancer which demands much larger expenses over long–term.

A critical illness (CI) plan can be extremely beneficial in this case as the lump sum received by the insured can be used to get the illness treated by best professionals.

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Before investing in any policy, the sum assured, the entry age, the diseases covered, the term and the premium are some of the critical factors one must consider. While a policy with low premium should be considered, the number of critical illnesses covered must also be given due importance.

Some insurance companies offer online health insurance which is a good option since the premium is lower while the benefits are the same. In addition, the convenience of online transactions makes them more attractive.

Investors can also go for an endowment based health policy from a life insurer with a CI rider as it will give them a comprehensive insurance cover. This is to say that the sum assured can be claimed by the insured in case he survives through the term, or by his family in case he does not. In addition, with a CI rider to the policy, the medical expenses will also be covered in case a critical illness is contracted during the term, over and above the sum assured. In addition to providing a cover for medical expenses, health insurance products also attract tax benefits.

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