Health insurance is an agreement between the insurance company and the policyholder where the insurance company agrees to pay the claim amount up to the sum insured in case of hospitalization in return for a premium to be paid by the policyholder. It can either be an employer sponsored or individual health insurance. Due to the sudden outbreak of Corona Virus pandemic there is a considerable demand for Health insurance in particular to the Corona virus covered health insurance.
There is a misconception among the people that if there is an Employer sponsored health insurance, then it is not necessary to take an individual health insurance. This misconception can hurt you badly at any time if the individual health insurance is not taken by you. There are many USPs of having an employer sponsored health insurance but at the same time there are equal numbers of disadvantages if you don’t purchase an individual health insurance.
Let us understand the need for individual health insurance despite having an employer sponsored health insurance:-
1. Insufficient Coverage
The coverage provided by the Employer sponsored health insurance would be quite low and is mostly dependent on your grade in the organization. The sum insured doesn’t depend on your actual needs and hence is not sufficient in case of hospitalization.
The Employer based health insurance plans are designed keeping in mind the most common illness and diseases. However some illnesses are not covered under the group health insurance products; these include critical illness and some kind of surgeries.
2. Coverage Period
You are covered under the Employer sponsored health insurance only till the period you are in the company. In the event of discharge or retirement or leaving the company, these plans are usually terminated and the coverage ceases to exist once you leave the organization.
The coverage under the group health insurance ceases to exist from the day you leave the organization. New organization in which you join might provide a different coverage from your previous organization.
3. No coverage after retirement
The Phase after retirement requires utmost health care and the need for health insurance is more after retirement. There would be a decrease in income due to the retirement and the health care expenses cannot be managed with the savings and pension, so a good individual health insurance comes into play after retirement. One needs to understand that higher the age, higher would be the health insurance premium. Some companies may even decline to cover the individual who had a history of serious illness.
4. Income tax exemption
The premium paid for health insurance is exempted under the income tax. The health insurance premiums paid for self and senior citizen parents is eligible for income tax deduction. In case of employer sponsored health insurance, income tax exemption cannot be sought.
5. Waiting Periods
If you are planning to take the individual health insurance after retirement, then you must think about it twice. Individual health insurance plans have a waiting period of at least 2-3 years for different illnesses and as the age increases there is a good chance to have at least a pre existing illness before taking the individual health insurance. There can be some instance where certain illness are covered under a group health insurance but to claim the coverage for illness you have to wait for a certain period in health insurance.
Insurance companies reward policyholders for no claims with increased coverage and penalise the customers with high age by charging high premium.
What should you do?
A very effective strategy would be to take both the plans- Employer sponsored health insurance and an individual health insurance. This was you can increase the sum insured or coverage available and also increase the number of illness covered. Having an individual health insurance enables you to higher coverage, no claim bonus, lifelong renewability and tax benefits which are otherwise not available under group health insurance.
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