Use this smart Health Insurance Strategy to get higher cover at a low premium

Karthik (51) lives in Mumbai with his wife (Devani, 43) and two kids (Harsh, 12 and Ritika, 5). He realized the importance of adequate health cover a few years back and purchased a family floater of Rs 10 lacs.

He realizes health care costs have been rising very fast in Mumbai. He thinks Rs 10 lacs may not be enough. He wants to enhance cover to Rs 20 lacs. He has heard of super top-up plans too. He is thinking of an effective health insurance strategy.

Let’s explore the options that he has.

Let’s assume he has purchased Apollo Munich Optima Restore Health Insurance plan. I have no specific preference for this health plan. It is just that I can calculate premium easily on Apollo Munich website (takes lesser time).

As mentioned in an earlier post, the premium of a family floater plan depends on the age of the eldest member. So, if one of the members in the family is in high age bracket (or has a serious illness), the inclusion of such member in the plan will increase the premium for the entire family. Read here for more on the choice between individual or family floater health insurance plan,

Read: Individual or a Family Floater Health Plan

Options available to the family

1. Enhance the cover under Family Floater plan from Rs 10 lacs to Rs 20 lacs.
2. Keep the base cover of Rs 10 lacs and purchase a super top-up plan of Rs 10 lacs (with a deductible of Rs 10 lacs)
3. Karthik moves out of family floater. Purchase (continue with) cover of Rs 20 lacs for Devani, Harsh and Ritika. Purchase an individual cover of Rs 20 lacs for self.
4. Karthik moves out of family floater. Purchase (continue with) cover of Rs 10 lacs for Devani, Harsh and Ritika. Purchase an individual cover of Rs 10 lacs for self.
5. Karthik moves out of family floater. Purchase (continue with) cover of Rs 10 lacs for Devani, Harsh and Ritika. Purchase an individual cover of Rs 10 lacs for self. Purchase a family floater super top-up plan of Rs 10 lacs with deductible of Rs 10 lacs
6. Karthik moves out of family floater. Purchase (continue with) cover of Rs 10 lacs for Devani, Harsh and Ritika. Purchase an individual cover of Rs 10 lacs for self. Purchase a super top plan of Rs 10 lacs with deductible of Rs 10 lacs for wife and kids. Purchase individual super top-up plan of Rs 10 lacs for self.

Under options 3, 4, 5 and 6, Karthik will get portability benefits.

Read: All you need to know about Health Insurance Portability

Must Read:  What are Top-up and Super Top-up Health Insurance plans?

What about the Annual Premium?

I have considered Apollo Munich Optima Restore and Apollo Munich Optima Super plan for this analysis.

What should Karthik do?

Let’s compare all the options.

Current Choice vs. Option 1

Family floater of Rs 10 lacs costs Rs 37,445 while Family floater of Rs 20 lacs costs Rs 54,110 (and not Rs 78,890).  Family floater of Rs 25 lacs costs only Rs 58,724.

For increase from Rs 10 lacs to Rs 20 lacs, you pay Rs 16,665 (Rs 1,666 per lac of increase in Sum Insured). For increase from Rs 20 lacs to Rs 25 lacs, you pay only Rs 4,614 (Rs 922 per Rs lac of increase in Sum Insured).

The marginal cost of purchasing insurance goes down as the Sum Insured increases.

Current Choice Vs Option 4

Under the current option, all four are covered under the same plan with Sum Insured of Rs 10 lacs. Annual premium Rs 37,445

Under option 4, Devika, Harsh and Ritika are covered under family floater plan for Rs 10 lacs. Karthik is covered under an individual plan for Rs 10 lacs. Annual Premium is Rs 38,613.

Hence, option 4 certainly provides better coverage than the current coverage.

You merely have to pay an extra premium of Rs 1,168 in case of Option 4.

Karthik is increasing the premium for all the members in the family floater. By moving out of the family floater plan, he can reduce the premium for family floater for the wife, son and daughter. Subsequently, he can use the savings (and by paying an extra premium of Rs 1,168) to purchase an individual plan from himself.

Given the family structure, the current choice of plan is sub-optimal.

Option 1 vs. Option 2

Purchase of super top-up plans is in vogue. You can augment your existing cover at a small cost. An aspect that needs to be kept in mind about super top-up plans is that these plans are likely to be in reimbursement (and no cashless) mode.  So, you need to pay first from own pocket and then seek reimbursement. Moreover, you have to go through hassles of making a claim from two plans.

Under Option 1, Karthik purchases a regular family floater cover of Rs 20 lacs. The annual premium is Rs 54,110.

Under Option 2, he purchases a family floater cover of Rs 10 lacs and a super top-up plan of Rs 10 lacs (with deductible of Rs 10 lacs). So, the total coverage is still Rs 20 lacs. The annual premium is Rs 52,999.

By paying Rs 1,111 extra, you save the hassles of claiming from two policies.

Personally, I wouldn’t want the pain of claiming from two policies.

Read: How to Claim from two Health Insurance Plans?

Option 1 vs. Option 3

Under Option 1, Karthik purchases a regular family floater cover of Rs 20 lacs. Annual premium is Rs 54,110.

Under Option 3, Karthik purchases individual cover for himself and family floater for his wife and children. Sum Insured under both plans is Rs 20 lacs. Annual premium for the two plans is 55,979.

By paying Rs 1,687 extra under Option 3, Karthik gets a much better coverage. Karthik gets Rs 20 lacs and Devani and kids gets Rs 20 lacs. Total health cover for family is Rs 40 lacs (although none of them is covered for more than 20 lacs).

Option 5 and Option 6

Under Option 5, Individual plan of Rs 10 lacs for Karthik, a Family floater of Rs 10 lacs for the wife, son and daughter.  Super top-up family floater of Rs 10 lacs for the entire family.

The annual premium is Rs 54,167.

Karthik moves out of the family floater to reduce premium. He purchases an individual plan for himself.

To augment the cover for the entire family, he purchases a super top-up plan for the entire family.

Under Option 1, he had to pay premium of Rs 54,110 for a cover of Rs 20 lacs.

Under Option 5, the family essentially has a cover of Rs 30 lacs (10 lacs of Family floater, 10 lacs of individual cover for Karthik and Rs 10 lacs of super top-up). Do note no member is covered for more than Rs 20 lacs.

Option 6 is similar to Option 5. Just that instead of super top-up family floater (for all four members), Karthik goes for individual super top-up for self and super top-up family floater for wife and kids.

Annual premium is Rs 51,047. And total family cover is Rs 40 lacs (although none of the members is covered for more than Rs 20 lacs)

My Preference

My two choices are Option 3 and Option 6. Maximum coverage for the family is Rs 40 lacs under both options. Option 6 is certainly cheaper (Rs 51,047 vs. Rs 55,797). However, if you do not want the hassles of two policies, go for Option 3.

Option 5 is not as good as Option 6. Provides lower overall coverage (Rs 30 lacs) at a higher price. Similarly, Option 2 provides lower coverage (Rs 20 lacs) at a higher price.

There are a few more permutations possible. However, I have ignored those in this post.

To Note

Please understand I have chosen such ages so as to bring home my point better. This approach may or may not work for your family.

I have chosen a particular plan (Apollo Munich Optima Restore and Optima Super). Other plans may throw up different results (though I expect a similar pattern).

The key is Karthik’s age.

Karthik is 51 while other members are much younger. Hence, it is economical for the family if Karthik moves to an individual plan. As mentioned above, the premium of a family floater plan is dependent on the age of the eldest member.

You would have seen a similar impact if one of the members had a serious illness (or any illness that can increase the premium). In such cases too, it is advisable to keep the concerned member out of family floater and in an individual plan.

Explore options in a similar manner so that you can ensure better health coverage for your family at a lower price.

The post was first published on July 17, 2016.