Medical Insurance for the Elderly

Whereas mediclaim cover for the younger people has become wide ranging and comprehensive, the insurance for the elderly is rather restricted .

Medical insurance policies for the elderly are a little tricky for most customers to understand. For one, very few of the insurers are offering it and among those who are offering, virtually every insurer offers a risk sharing option – where there is a co-payment on every claim. For most customers, this is a little difficult to grasp. Essentially, the risk of hospitalization is very high in case of the elderly, which prevents insurers from taking a 100% risk. Buyers need to be aware of this and also understand the fact that even a 20-30% of co-payment is not a bad idea, since it is this co-payment that helps keep insurance premiums in check. In the absence of co-payment, the premiums would have been very high and would not make any practical sense.

There are companies that offer life-long cover, but do not allow entry after a certain age. For example, if you are a customer of Apollo Munich and you keep renewing your policy every year, you are assured of cover for your entire life. However, if you are older than 65 years and have no previous insurance policy running, you will not be able to get an insurance policy from Apollo Munich. On the other hand, Max Bupa offers both life-long cover and an entry at any age.

The PSU companies offer a senior citizen’s policy, but they restrict the cover to Rs 1 lakh only, which is likely to be inadequate in today’s times. There are other companies which offer higher cover (even up to 5 lakhs) but insist on high co-payment (up to 50%), which again limit the cover.

There are also various sub limits on room rents, on individual surgeries, on pre existing conditions and others.

Apart from the restrictions the cost of insurance itself is very expensive for the elderly. Whereas in your thirties you can get a cover 60-70 times your annual premium, the multiple reduces to about 30-40 when you hit 50 and dips to under 15 in your sixties. By the time you reach your seventies, the multiple is in single digits. This low multiple combined with co-pay and several restrictions and exclusions implies that you have really very little leverage left and one may start wondering whether the indemnity insurance is worth it at all.

For those who have already reached this age, there is really very little that they can do except to go with what is available. However, those who are younger and are planning for the future, they would be well advised not to depend solely on the indemnity insurance (mediclaim) for hospitalization cover in their old age.

The logical alternative is to create a corpus which will grow in size and be available for medical needs during that time. There are several ways in which such a corpus can be built and here insurance companies do offer an efficient solution which builds corpus and saves on taxes. Although the corpus itself may grow at only 6-7% (or higher in case of unit linked solutions), the tax treatment enhances the returns significantly. The other advantage with these policies are that in the event of a hospitalization during the interim, one can draw on this corpus – in other words these policies are a combination of investment and fixed benefits and are particularly suitable for long term health care financing.

An Example -BSLI Saral Health Plan, a unit-linked health insurance plan which provides - Cover for hospitalisation expenses, Reimbursement of regular healthcare expenses, Critical illness cover, Terminal Illness and death benefit.

The other alternative is to have non-investment linked benefit policy. Here, you keep paying an annual premium for a fixed set of benefits that are paid to you in the event of hospitalization. These benefits are not linked to the actual expenses, but are fixed by the policy terms chosen, for which a certain annual premium is paid. The benefits are typically of the following kind

a) An amount per day of hospitalization (towards room rent) – typically ranging from 1,000 to 4,000 per day

b) An amount per day of hospitalization in ICU – typically about 50-100% higher than the per day room rent

c) An amount in the event of a surgery (depending on 5-7 grades of surgery) – typically ranges from 20,000 to 3Lakhs

d) A lump sum amount in case of diagnosis of a specified critical illness – typically varying between 1.5 Lakh to 10 Lakh

The fixed benefit policies may offer one or two or all of the above benefits. Some of the good fixed benefit policies available are –

Tata AIG Wellsurance, LIC Jeevan Arogya, Future Criticare, Aegon Religare Health Plan, etc.

The fixed benefit or the unit linked health insurance solutions are not substitutes for a mediclaim. They are useful as top up insurance to overcome the limitations of an indemnity policy and help fill the gap. As the age increases and the premiums of the

indemnity policies rise, their usefulness increases further.

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