To buy or not to buy Covid-specific health insurance

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The coronavirus-induced lockdown will always be etched in our minds. This was the time when crores of individuals and families were caught unaware with the fear of sudden illness, complications, hospitalisation and possibility of spending high amount in private hospitals.

In July last year, IRDA was quick to permit insurers to issue Covid Specific Insurance Plans. Two corona-specific products — Corona Kavach and Corona Rakshak — were launched by insurers under sand box regulations. Individuals and families without any health insurance cover, immediately rushed to buy these Covid insurance plans.

According to estimates, 128 lakhs lives were covered by COVID-specific policies with a total premium of over Rs 1,000 crore. Covid-specific policies were launched by many insurers like Acko, Aditya Birla Health Insurance, HDFC Ergo, ICICI Lombard, Bharti Axa, Go Digit, etc.

The Corona Kavach provides a Covid hospitalisation cover from Rs 50,000 up to Rs 5,00,000 for age group 18 -65 years for a period of 3.5, 6.5 and 9.5 months including a waiting period of 15 days. It covers 15 days’ pre-hospitalization, 30-day post hospitalisation and home care expense of 14 days (when treatment taken confined at home instead of hospitalisation).

It was promoted as a single premium product with relatively low cost compared to a comprehensive health insurance cover. The cover also includes any comorbidities arising due to Covid.

Similarly, Covid Rakshak offers a cover to individuals up to Rs 2,50,000 on benefit basis, requiring a minimum hospitalisation of 72 hours.

In the past, some insurers had introduced specific health policies to cover risks like malaria but the experience showed that product did not do that well in the market -the reason being that malaria comes for 25 days in a year and the policy period is for whole year. Maybe in near future, this product can be introduced for duration of three months.

Let us look at the pros and cons of buying Covid-specific policy compared to a normal health insurance policy, which also covers Covid.

From a financial planning perspective, health insurance is a must for every individual’s long-term plan. A comprehensive health policy provides cover for all risks like major critical illnesses, Covid, accidental hospitalisation.

The cover can be taken as per individual’s choice and requirement and for one, two or even three years. Pre-existing illnesses are also covered in such a policy with certain conditions. While talking to those who have such policy we find that majority feel that a comprehensive cover works out to be more cost effective given its overall benefits.

To understand this point, let us compare the costs which a healthy individual of 36 years will incur for considering different options .

A Corona Kavach of Rs 5,00,000 for 9.5 months (max tenure available) will cost Rs 4,000 approx and for 12 months, it will be available for Rs 5,400.

A comprehensive health insurance cover of Rs 5,00,000 will cost about Rs 9,500 in comparison, which will cover a large number of illnesses as well as Covid.

Similarly, insurers offer other disease specific covers for illnesses like dengue, etc., looking at the specific need when an outbreak or risk for a disease prevails. Taking disease specific cover may give you a feeling of health insurance coverage. In reality you may not be sufficiently covered for other ailments.

In India, majority population is dependent on private hospitals for treatment because of many reasons . With medical inflation touching 18-20%, the private medical care is a necessity but is very expensive.

According to latest Economic Survey, India has one-of-the highest level of Out-Of-Pocket Expenditures (OOPE) contributing directly to the high incidence of catastrophic expenditures and poverty.

The Survey also states about 65% of deaths in India are now caused by non-communicable diseases (NCDs) with ischemic heart diseases, chronic obstructive pulmonary disease (COPD) and stroke being the leading causes.

Hence, we find that under normal circumstance it is absolutely necessary for each and every one to have a comprehensive health insurance instead of disease specific coverage. By buying base health insurance policy of adequate sum assured you not just buy a long term cover but also buy peace of mind.

We also agree that the specialised products can be bought as a top up addition to the existing health cover. Short-term plans may give relief for the time being but health is not something we should compromise with and so should be health insurance, for a lifetime.

(The writer is director and founder, RIA Insurance Brokers. Views expressed are personal)