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Fixed benefit or Indemnity? Depends on your needs

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Fixed benefit or Indemnity
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Fixed benefit or Indemnity? Depends on your needs

Indians are traditionally known to be savers. The culture of saving is ingrained since childhood, which means that many individuals choose to reserve some portion of their earnings for future expenses. However, there is one expense that has the ability to drain your entire savings in a flash. Unforeseen medical costs. A single case of hospitalisation may set you back by a few lakh rupees. This is where health insurance can come in handy. By paying a fixed premium amount annually, you could avoid additional expenses pertaining to healthcare. Life insurers as well as general insurers offer an array of health insurance policies to choose from. Depending on the age, risk profile, and family medical history, you could opt for customised insurance products. Within health insurance there are two broad categories, fixed benefit and indemnity. Fixed benefit products offer a lump-sum amount on diagnosis of an ailment. Indemnity covers offer reimbursement for the exact amount spent on the treatment. Here, you can avail the cashless option, if available, where the insurer directly credits the amount to the hospital. If cashless is not available, reimbursement is provided. If you are looking to buy medical insurance, Standard Chartered offers an array of health insurance plans to choose from.

How is fixed benefit different from indemnity?

Fixed benefit health plans offer protection against a predefined list of illnesses. This could be cancer, cardiac ailments, or major surgical procedures. On diagnosis of the ailment, the amount is paid out. However, pre-existing diseases have to be disclosed in advance. For instance, if you have opted for a Rs 10 lakh fixed benefit cover for cardiac procedures, the insurer will pay the entire amount if you are diagnosed with a heart disease.

Indemnity plans, on the other hand, offer reimbursement against hospitalisation expenses. This includes the costs incurred pre and post hospitalisation such as diagnostics, testing, and medication. Within the cover, there could be sub-limits for each cost-head such as room-rent, ICU charges, ambulance, and consultation fees. For instance, if you have a Rs 5 lakh insurance policy with an ICU sub-limit of Rs 2,000 per day, the insurer will not pay any amount incurred for ICU charges above that amount.

Within indemnity plans, customers could be required to pay for certain expenses out of their own pocket. In fixed benefit, however, since there is a lump sum amount given out as a claim, policyholders can choose where to spend the amount. Due to this reason, fixed benefit plans could cost higher than indemnity covers.

The terms and conditions and conditions of each product will be different. You can browse an array of health plans and understand their key features on the Standard Chartered insurance platform.

Which one to choose?

Both indemnity and fixed benefit plans cater to the health insurance needs of policyholders. Your choice could vary based on whom the policy is intended for, the present state of health of the policyholder, their age, and lifestyle. Here, there are three factors to consider:

  1. Risks: Fixed benefit plans will pay a claim only if a doctor certifies the diagnosis of a disease, mostly critical illnesses. Indemnity plans will pay for hospitalisation, typically for a day or more, on producing the relevant bills. If you want a cover to pay a fixed amount for critical illnesses, fixed benefit could be the right fit. However, if you are looking for a hospitalisation cover, an indemnity plan could be chosen. Standard Chartered insurance solutions could offer detailed insights into these products.
  2. Savings: Fixed benefit covers offer protection against sudden expenses incurred due to high medical costs. There are no sub-limits and the entire policy amount is paid out. This could be beneficial if hospitalisation occurs at large private hospitals. For instance, the daily room rent for a private air-conditioned room at Breach Candy Hospital in Mumbai is Rs 8,000. Fixed benefit insurance could be beneficial for unplanned hospitalisation such as accidental injury, organ failure, and neurological disorders.
  3. Location: Hospital costs based on the location and type of hospital. Metro cities are more expensive than smaller towns, and private hospitals more expensive than government hospitals. So, a resident of Thrissur, Kerala could opt for a lower sub-limit under indemnity plans while a Mumbai resident could opt for a higher sub-limit. Depending on the chosen sub-limits, the policy premium differs. However, if you want financial support to tide over emergency hospitalisation for say a heart surgery, fixed benefit products could serve the purpose.

Health insurance premiums can increase depending on the prevalent medical inflation and previous year’s claims payments.

As healthcare expenses are on the rise, it could be a prudent decision to buy health insurance. And as your family responsibilities increase, the health cover could be topped up periodically. The earlier you purchase, the lower the premiums could be.

Disclaimer:

This article is for information and educational purposes only. It is meant only for use as a reference tool. It has not been prepared for any particular person or class of persons. The products and services mentioned here may not be suitable for everyone and should not be used as a basis for making investment decisions. This article does not constitute investment advice, nor is it an offer, solicitation, or invitation to transact in any investment or insurance product. The value of investments and the income from them can go down as well as up, and you may not recover the amount of your original investment. Prior to transacting, you should obtain independent financial advice. In the event that you choose not to seek independent professional advice, you should consider whether the product is suitable for you. You should refer to the relevant offering documents for detailed information.

Standard Chartered Bank, India having its principal place of business at Crescenzo Building C-38/C-39 G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400051 is a licensed Corporate Agent of ICICI Prudential Life Insurance Company Limited (IRDAI Reg No. 105) for life insurance products; Royal Sundaram General Insurance Co. Limited (IRDAI Reg No. 102) and ICICI Lombard General Insurance Company (IRDAI Reg No. 115) for general insurance products and Niva Bupa Health Insurance Company Limited (IRDAI Registration no. 145) for standalone health insurance products vide corporate agent number CA0028. All insurance products are underwritten by the respective insurance companies. Participation of Standard Chartered Bank clients in any insurance scheme is purely voluntary and is not linked to the availment of any other banking products or services from the Bank. The benefits/ features of the products are indicative only. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding a sale. Insurance is the subject matter of solicitation.