You have been planning to purchase health insurance for your parents. However, you have found the annual premium prohibitively expensive. I had discussed a few health insurance strategies for the parents in one of my earlier posts.
Must Read: Health Insurance Strategies for your parents
In the above post, I had missed out on discussing group health insurance covers offered by Public Sector (PSU) Banks. These plans are cheap, require no medical checkup and can be an important part of insurance portfolio for the elderly. In this post, I will discuss what these plans are, eligibility and pros and cons of these plans.
What are Group Health Insurance Plans offered by PSU Banks?
These plans are typically offered to account holders of the bank. Purchase of such plans is your choice. The bank does not offer the insurance plan on its own. It ties up with a general insurance company and the insurance coverage is offered by the insurance company.
Once you sign up for the insurance plan, all your cashless claims and reimbursements are settled by the insurance company. The premium gets automatically debited from your savings bank account. Bank will nowhere involved in the claims settlement process.
Even though the health plan is offered by the insurance company, I will refer to these plans with bank names in this post.
The greatest advantage of these plans is the low premium.
During the course of this post, I will use “PSU Health Insurance Plans”, “PSU Bank Health Cover” and “PSU Group Health Cover” to refer to group health insurance plans offered by PSU Banks.
Personal Health plans are those plans that you purchase directly from the insurance company (and not through the banks. Personal Health Insurance plans can come in both individual and family floater variants.
Comparison of Health Insurance Premium
Let’s compare the health insurance premium of health insurance plans.
You can see PSU bank health insurance plans are much cheaper. At a young age, the difference is not so stark. However, as the age increases, you can see the gap widening.
I have emboldened the two options. As I understand (but I am not sure) Apollo Munich Easy Health plan is same. At the age of 65, you pay Rs 23,466 per annum for a personal cover while you pay Rs 5,579 per annum for group health cover. If these are indeed the same plans, you can notice the difference in premium for the same coverage.
Just that PSU bank health insurance plans have low premium, this also does not mean that these plans are better or inferior to other health insurance plans.
You need to understand/compare the features and coverage under these plans before making a decision.
Who can find these plans useful?
Since the premium does not depend on the age, elderly or senior citizens can find these plans very useful. As we found out in the previous section, personal health covers (individual or family floater) for the elderly can be really expensive.
Benefits of PSU Bank Health Insurance Plans
- The premium is quite low as compared to personal health insurance plans.
- With most PSU banks, the premium does not depend on the age.
- No medical examination is required before issuance. I do not consider non-requirement of medical checkup before policy issuance as a positive.
- You can port from group health insurance cover to a personal health cover from the same insurance company later, if you so desire.
- Under a few plans, you can also purchase an additional critical illness and personal accident covers along with the group health plan.
Issues with such Health Insurance Plans offered by Public Sector Banks
- The premium depends on the negotiations between the bank and the insurer. It is quite possible that the premium goes up significantly the next year. By the way, this can happen with a personal plan too.
- The tie-up between the bank and the insurer may not be renewed and the bank may (or may not) offer you the cover from another insurer.
- Maximum Sum Insured may be limited. Hence, you cannot opt for a higher Sum Insured even if you want to. For instance, in PNB plan, the Sum Insured is capped at Rs 5 lacs while under Canara Bank plan, it is capped at Rs 10 lacs.
- There may be a limit on the entry age. Canara Bank Apollo Munich Plan limits the maximum entry age to 65. However, such limit is there in personal plans too.
- Though the health insurance plans provide lifelong renewability, many health insurance plans have restriction on the entry age. It is quite possible that if the bank group insurance plan is discontinued for some reason (or premium increased substantially), you may not be able to purchase a new health plan from any other insurance because you have crossed the maximum entry age. You could have ported from group plan to personal cover with the same insurer. However, for porting, you need to approach the insurer at least 45 days in advance. And I don’t expect banks to tell you about this development until you contact them for policy.
In any case, practically, portability works only for young and healthy individuals. Insurance companies are likely to reject porting requesting if you are old or have a serious illness.
- Plans offered by most PSU banks may have room rent sub-limits or co-payment clauses. For instance, PNB Oriental Royal Plan has daily room rent sublimit of 1% of Sum Insured. So, if Sum Insured under the plan is Rs 3 lacs, daily room rent sublimit will be Rs 3,000.
- As I understand lifelong renewability is mandatory as per IRDA Health Insurance Regulations. However, going by the information available of bank websites, it appears renewal age may be capped in some cases. PNB plan allows renewal up to 79 years while Canara Bank plan allows lifelong renewability.
Insurers issue such plans at very low premiums without any health checkup. Essentially, they are issuing you a policy based on self-declaration of good health. The insurance company will start looking into everything once you make a claim.
Here is the declaration from Canara Bank
I doubt you will be issued the policy if you don’t confirm. By the way, you are asked similar question when you purchase a personal health cover. Hence, I wouldn’t worry too much about it.
- For PNB and BoB, the premium is for the family of four i.e. self, spouse and 2 children.
Even if the family size is smaller, the premium remains unchanged. If you have more than 2 children, you will have to purchase separate cover for them.
- For PNB and BoB plans, you cannot purchase cover for your parents.
- If you want to get your parents covered, you will have to ask them to open accounts with the bank (or one of them can) and purchase health plans subsequently. For instance, your father can open an account with PNB or Bank of Baroda and subsequently purchase a plan that covers him and your mother.
- Under Canara Bank plan (from Apollo Munich), you get more options. For instance, you can purchase individual plans for self, spouse and kids. Alternatively, all of you be part of the same family floater. You can also purchase parents’ plan where you and your parents/parents-in-law will be covered in a family floater. This family floater will be different from the one covering self, spouse and children.
Points to Note
- PSU Bank Health Insurance/mediclaim is available in both individual and family floater variants.
- It is not that these PSU bank health plans are meant only for the elderly and the senior citizens. Anyone can purchase these plans. You can even get your spouse and kids covered under the same plan.
- A few insurers allow you to include your parents in your plan.
- Insurance is a contract. It can be worded in any manner. Hence, a lot depends on the terms and conditions negotiated between bank and the insurance company. For instance, not all plans will have room rent sublimit. Canara Bank plan does not have room rent sublimit. Hence, you still need to due diligence while selecting the plan. Understand terms and conditions before signing the dotted line.
- Premium paid towards PSU bank health plans is also eligible for tax benefits under Section 80D.
- For health insurance premium to be eligible for tax benefits, the premium should be deducted from bank account (or credit card account) of the tax payer. PSU banks may allow you to purchase individual plans for your kids and spouse. However, these banks may not allow you to purchase plans for your parents (as in PNB and BoB insurance). In that case, your parents will have to open account with the bank and subsequently purchase health insurance. Since the premium has been deducted from your parent’s account, you will not be eligible for tax benefit under Section 80D.
- A few PSU banks (Canara Bank) may allow you to include your parents as part of your family floater. In that case, you will get tax benefit for premium payment.
- Since the Sum Insured is capped at Rs 5 lacs under most PSU bank plans, you can opt for individual plans of Rs 5 lacs each for your parents (instead of a family floater of Rs 5 lacs each).
I am not aware of any major complaints against these insurance plans. At some level, the deal sounds too good to be true. However, once you have entered into an insurance contract, the channel does not really matter. The insurer needs to settle any genuine claims (or any claim as per terms and conditions of the insurance plan).
Policies are issued in good faith and based on self-declaration. No medical is required. Hence, you can expect the insurance company to examine your case in detail once you raise a claim. And that is fair too. By the way, no insurance company will give money on the platter (even if you have purchased a personal plan).
These PSU bank health insurance plan (mediclaim) can be particularly useful for your parents or the elderly. A personal individual of family floater) health insurance at that age can cost a bomb. In fact, many do not purchase health insurance plans because of the high cost. These PSU bank health insurance plans present a credible alternative and are worth considering.
With the PSU banks, there will be many options available. Every bank has a tie-up with a different insurer. Do not merely focus on the premium. Understand all the terms and conditions and scope of coverage before choosing the plan.
If you are young and can afford, opt for a personal health cover. There is not much difference in cost either. A personal cover gives you greater flexibility and choice.