What is a Hospital Cash Insurance Plan?

A health insurance plan takes care of your hospitalization expenses. However, there are a few expenses during hospitalization which are not covered under most health plans.

Typically, you have to bear expenses for food and other consumables. Health insurance plans do not cover such expenses. Is there an insurance plan that can take away some burden of such expenses?

The answer is Yes. You can purchase a Hospital daily cash plan.

In this post, I will discuss Hospital Cash insurance plans in detail.

What is Hospital Daily Cash Insurance plan?

A hospital cash plan pays you a specific amount for each day you are hospitalized.

The number of days for which this benefit is paid is typically capped.

Hospital daily cash insurance plan can be useful in the following ways:

1. To cover ancillary costs (medical and non-medical) that are not covered under health insurance plan
2. To provide for loss of income during hospitalization

Second point may not apply to salaried professionals. Typically, you get paid medical leaves when you undergo hospitalization. Hence, there is no loss of income. For a self-employed person, hospitalization may result in loss of income.

Hospital Daily Cash is not an indemnity plan. It is a defined benefit plan. The payment from insurance company is not linked to your treatment expense. Moreover, any claim under this benefit does not reduce your Sum Insured (if you have purchase as rider or the benefit is part of base plan). This is explained with the help of an example later in the post.

What do I need to look at in a Hospital Cash plan?

You need to look at hospital cash policies from the following three aspects. Premium will also depend on these features.

1. Daily cash limit
2. Number of days of coverage in a policy year
3. Eligibility (or pre-conditions) for claiming the benefit

How can I purchase a Hospital Daily Cash plan?

There are two ways to purchase hospital daily cash policies.

1. As a standalone hospital cash plan (e.g. SBI General Hospital Daily Cash)
2. As a rider with your personal health cover (under a few plans, hospital cash benefit is part of the base plan)

Let’s pick up two plans and understand their features and eligibility for making a claim. I have picked up a standalone plan (SBI General Hospital Daily Cash Insurance Plan) and a health plan with rider (Max Bupa Health Companion plan)

SBI General Hospital Daily Cash Insurance Policy: Salient Features

1. Four hospital daily cash options of Rs 500, Rs 1000, Rs 1500 or Rs 2000 per day
2. You can choose coverage of 30 or 60 days. This means the insurer will pay benefit for only up to 30 or 60 days during a policy year.
3. There is no limit of number of hospitalizations.
4. You need continuous hospitalization of at least 24 hours. Clearly, daycare procedures are not covered. A few plans may insist on hospitalization for longer duration.
5. Twice the hospital daily cash for Accidental Hospitalization. Applicable for a maximum of 5 days per hospitalization subject to a maximum of 10 days per policy year.
6. Twice the hospital daily cash for ICU hospitalization. Applicable for a maximum of 7 days per hospitalization subject to a maximum of 15 days per policy year.
7. Convalescence benefit of 3 times daily hospital cash or Rs 5,000, whichever is lower, for completion of 10 consecutive days of hospitalization. Payable only once in a policy year.
8. You have to pay claim fee of 1 day benefit at the time of claim. Think of it as deductible. So, if you get hospitalized for 5 days, you are eligible for Rs 10,000 (Rs 2,000 per day X 5). However, you will get only Rs 8,000. SBI General will deduct Rs 2,000 (1 day benefit) from your claim amount. Do note this is charged per hospitalization. So, essentially, you are paying a much higher premium.

Max Bupa Health Companion Plan:  Hospital Cash Rider

Under Max Bupa Health Companion plan, you can purchase Hospital Cash benefit as a rider.

1. Hospital cash benefit rider is optional. You can purchase it by paying additional premium.
2. Hospital Cash benefit depends on the value of base Sum Insured under the plan. If the base Sum Insured (BSI) is 2-4 lacs, hospital cash benefit will be Rs 1,000 per day. If BSI is 5-12.5 lacs, hospital cash will be Rs 2,000 per day. For any higher Sum Insured, hospital cash benefit is Rs 4,000 per day.
3. Minimum 48 hours of continuous hospitalization is required. Daycare procedures are not covered.
4. Coverage of maximum 30 days in a policy year
5. Benefit is not linked to Base Sum Insured. claim under hospital cash benefit will not reduce your Sum Insured for the year. For instance, Sum Insured under the plan is Rs 10 lacs. You made a claim of Rs 4 lacs for hospitalization and Rs 20,000 for hospital cash benefit. If the insurance company settles both the claims, your remaining Sum Insured for the year will be Rs 6 lacs (and Rs 5.8 lacs).
6. Claim for hospital cash benefit will be accepted if the claim for corresponding hospitalization has been accepted by the insurance company.

Points to Note

1. You get tax benefit under Section 80D (just like health insurance) for premium paid for hospital daily cash insurance plans.
2. Requirement of continuous hours/days of hospitalization may vary across plans/riders.
3. Premium for rider or standalone hospital cash plan will increase with age.
4. Under some health plans, Hospital Cash Benefit might be a part of base plan i.e. you do not have to purchase a separate rider. The rider is inbuilt.
5. You can purchase hospital cash plan under both individual and family floater option.
6. The nature of the benefit ensures it cannot be cashless. You have to file a claim to get this benefit.
7. Like regular health insurance plans, these plans may also have waiting periods for pre-existing or defined illnesses.
8. If you have purchased hospital cash benefit as a rider (or part of base plan), the payment under hospital cash benefit may be subject to admission of hospitalization claim i.e. no claim under hospital cash benefit may be accepted if hospitalization claim is not accepted under the base plan.

What are the issues?

You can see the benefit is quite limited i.e. the benefit is available for only a few days.

You will have to file a claim. That means additional work is involved.

How expensive are Hospital Cash plans?

Let’s compare the premium for two types of plans.

For Hospital cash rider with Max Bupa Health Companion plan (35 year old male, Sum Insured: Rs 5 lacs), you need to pay an additional Rs 1,296. For this amount, you will get hospital cash benefit of Rs 2,000 per day for a maximum of 30 days. For the plan, maximum benefit during the year is Rs 60,000 (Rs 2,000 X 30). You are paying a premium of Rs 1,296 for the same. Cost of 2.16% of the maximum benefit.

For standalone plan with SBI General, you need to pay:

Consider case of Rs 2,000 per day and 60 day coverage, you are paying Rs 1,443 for maximum benefit of Rs 1.2 lacs (Rs 2,000 X 60). Cost of 1.2%.  I have ignored extra benefit for ICU and accidental hospitalization.

Though it may seem SBI plan is much cheaper, do understand Rs 2,000 will be charged per hospitalization claim under SBI plan.  There is no such charge in case of Max Bupa plan. Hence, SBI plan is not as cheap as it seems.

Do not just get fixated with premium. Focus on coverage and deductible too.

Standalone plan or Rider with Hospital Cash plan?

To be honest, I have compared just two plans. It is not correct to generalize the inferences.

On the premium front, there is not much difference.

Standalone plan seems quite loaded with features and provides better flexibility but in my opinion, rider benefit is good enough. You also need to understand that the amount involved in claim under hospital cash benefit may not be very high.

There is an additional aspect pertaining to claims that you must consider. Since you are likely to make claim under hospital cash benefit post hospitalization, you will have to fill in a claim form and send to the insurer along with supporting documents.

In my opinion, claim settlement will be much simpler if you purchase the plan as a rider. Your health insurer will have already processed all the documents for cashless treatment. Thus, claims process will be much simpler and swifter.

Personally, I wouldn’t want to open a new front with another insurance company if the amount involved is not very high.

My vote goes to rider along with a regular health plan.

This is just my preference. You may think otherwise.

PersonalFinancePlan Take

I prefer hospital cash rider over standalone hospital daily cash insurance plan.

However, before you decide which type of hospital cash plan to buy, you must think about whether you need a hospital cash plan.

You have adequate health insurance to take care of expensive medical treatment. To take care of non-covered costs and loss of income, you have adequate medical fund and emergency corpus.

For salaried professionals, there won’t even be any loss of income during hospitalization as most employers offer paid medical leaves. The same will also hold true for self-employed persons who have been able to build contingency in their businesses.

In such cases, purchase of a hospital daily cash insurance plan/rider may seem like stretching insurance too far.

However, those self-employed professionals whose income will suffer during periods of hospitalization may think about hospital cash plans.

Do note purchase of a hospital cash plan does not mean that you do not need a medical fund or an emergency corpus. You do because hospital cash benefit is quite small and is only for a fixed number of days.

Should you buy?

To be honest, I do not have a black and white answer.

You will for to decide for yourself.

Personally, I have not bought a hospital cash plan (or rider) and do not intend to purchase in the near future.

However, if you have decided to purchase a hospital cash plan (or rider), please keep the following points in mind.

1. Hospital Cash plan is merely to complement your regular health insurance plan. It is not a replacement for health insurance plan.
2. Hospital Cash plan does not do away with the need for medical fund or emergency corpus.
3. Hospital cash benefit is quite limited. You get the benefit for only a fixed number of days.
4. Understand the terms and conditions of the plan/rider before making the purchase.
5. Do not get fixated with premium. Focus on coverage and deductibles too.

And yes, if you have purchased hospital cash plan, do walk that extra mile to make the claim. I believe a lot of policyholders will not claim under this benefit because of additional work involved (especially in case of cashless hospitalization). Part of reason could be that the claim amount involved may be quite less. So, if you are lazy, don’t purchase a hospital cash insurance plan.