My parents have a family floater health insurance policy of ₹8 lakh coverage. It has a co-payment of 20% and some limit on room rent. This policy was bought 17 years ago at a minimal premium of about ₹5,000. The premium has since increased to ₹38,000. They had made a claim only once, of less than ₹1 lakh. Is it advisable to port the policy in favour of a better one?
—Name withheld on request
Porting ensures that the history of an existing health insurance plan gets carried over to the new plan. The principal benefit of a long history with an insurer is the waiver of waiting periods in the policy. Since you have spent 17 years in the existing plan, the waiting periods in the current plan would be over by now. However, upon porting, the new insurer has to waive the waiting periods as well. So, switching to a better plan would not mean a loss of history for you.
If the new plan is more expensive than the existing one, then you should weigh the cost-benefits of the same. The clauses on room rent and co-payment could lead to a substantial deduction in the claim. If the increased premium enables better benefits, then it might be worthwhile to consider the new plan. For instance, a 20% copay would lead to a deduction of 20% in the claim amount. That means you are insured only for 80% of the medical expenses incurred.
If the premium increase in the new plan is up to 20%, then the increase is justified. Similarly, room rent capping can lead to a substantial deduction. Most hospitals increase the cost of the entire package with a change in room type. When the patient opts for a room that is higher than their eligible category, then the insurer deducts the entire claim proportionate to room rent eligibility. So, a plan with no room rent capping is better.
I have applied for a home loan from a private sector bank. Is it mandatory to take home and life insurance alongside? In case I have to take it, do I take it from the same bank?
—Name withheld on request
Most banks insist that borrowers buy a few insurances while issuing a home loan. Insurance helps the bank mitigate the default risk. For instance, if the borrower dies, the life insurance would pay off the loan. The bank would not have to reclaim the house or recover the money from the legal heirs. This also prevents the loan obligation from falling onto the legal heirs of the borrower. However, if you don’t buy these insurances, the bank may be okay with waiving this requirement in exchange for an increase in the interest rate.
While a few banks insist that these insurances should be bought through them, they cannot enforce this. You can buy the insurances from your advisor and ensure that the bank’s interest is noted in these policies. The life insurance policy needs to be assigned to the bank, and the home insurance should carry the name of the bank under the ‘bank clause’.
Abhishek Bondia is principal officer and MD at SecureNow.in
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Published: 21 Dec 2023, 10:08 PM IST