Health cover should be equal to 50% of your annual income

Published in Mint on 30 June, 2015, Written by Abhishek Bondia

If I have two separate accident policies from two insurance companies, in case of an accident can I claim from both?
—Shibani Bose

Unlike a motor insurance, accident insurance is a fixed benefit policy. The former is indemnity-based insurance. Indemnity policies have an in-built clause of principle of contribution. This clause implies that in case an insured has two policies, both policies will pay in proportion to their sum assured. However, the insured will not get paid more than the loss incurred. Under a fixed benefit policy, insurers’ liability is determined by the sum assured and not the related expenses incurred by the insured. So, if you have two separate policies, both insurers are bound to pay the claim as per sum assured.

My employer covers medical bills for my family and me. Do I still need health insurance?
—Gaurav Mehta

It depends on the coverage amount, your employment contract and expected time horizon with the employer. Most companies provide a coverage of Rs.2-5 lakh sum assured. While this is enough for minor surgeries and routine hospitalization, it can be insufficient for life threatening diseases. A thumb rule is to take a cover equal to 50% of your annual income.
Most companies provide medical insurance as a staff welfare scheme and are not bound to maintain the same. In case of a downturn, several companies cut down on this cover. Also, if you change jobs, it is not necessary that the new employer will provide this health coverage. If you buy an individual cover, then the waiting period will start from that day. Effectively the policy will be restrictive for a couple of years.
I recommend owning a personal health cover. A cost effective way to maintain a personal cover is with a top-up health insurance. A standard top-up insurance provides a cover of Rs.10 lakh with a Rs.3 lakh deductible. It will reimburse expenses up to Rs.10 lakh after deducting the initial Rs.3 lakh. Initial Rs.3 lakh can be reimbursed by the employer’s insurance. For a family of four with the eldest being 35 years old, the cover will cost about Rs.7,000.

If an insurer gives me a policy at a lower premium but with a lower insured declared value (IDV), will it matter at the time of selling my car?
—Rajiv Das

IDV of a car generally has no bearing on the resale price. IDV is arrived at by applying depreciation on the ex-showroom price of the vehicle. Each insurer follows a slightly different calculation for IDV depending on the make, model and year of manufacture.
Motor insurance premium is directly linked to IDV. Lower the IDV, lower the premium. In case of a total loss, for example, the car gets stolen, the insurer pays the IDV to the insured. So, if an insurer is giving you lesser IDV, it means you are being offered lesser coverage. I would always recommend that you select a higher IDV, if available.

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