Life insurance company Tata AIA has launched a health plan that also offers investment opportunities in a single product. Tata AIA Pro-Fit is aimed at meeting healthcare-related expenditure with fixed benefit payouts for hospital expenses on the insurance side — and investment funds that can be redeemed for health-related expenses, on the other.
How will premiums be split for the two? The benefits of each arm are compared with existing products in those lines for a better understanding. But in general practice, for an individual, a standalone policy for health, term insurance and a separate and specific investment portfolio is desirable.
In Tata AIA Pro-Fit, ₹1 lakh in premium being paid by a 35-year-old male, for instance, would be split between health insurance cover, which may be around ₹40,000 — while ₹60,000 will be invested in any of the insurer-managed funds. A standalone health insurance costs ₹14,000–₹16,000 for a ₹1-crore cover, which implies a higher cost paid in Tata AIA Pro-Fit. But this difference can be reconciled. For the premium paying term of 12-15 years and the following policy term of another 15-20 years, the Tata AIA Pro-Fit premium is constant compared to health insurance premiums, which rise with policyholders’ age and medical inflation. Over a longer period, the costs may be comparable.
Also, a typical health insurance provides health covers that are reimbursement-based. That is, health costs borne by the care provider are reimbursed either in a cashless manner or repaid to the policyholder, to the extent of the bill. The paper trail and policy terms will curtail anywhere between 10 and 15 per cent from the claim in a practical scenario.
Amongst the primary differences, Tata AIA Pro-Fit allows one to claim a standard amount for care, regardless of the hospital bill. A total of 57 Critical illnesses, including cancer, cardiac arrest, stroke, or end-stage liver disease, are covered by providing a lumpsum amount on presenting a medical report. Similarly, 133 listed surgeries and a host of day-care surgeries are covered by a fixed benefit lumpsum payment.
Going by the earlier example, the policyholder can expect to receive close to ₹10 lakh for a major critical illness or ₹4 lakh for surgical procedures in the policy term per year. This indemnity feature allows one to spend the insurance amount accordingly rather than claim reimbursement on expenses that normally exclude non-surgical costs. This leeway extends to getting treated worldwide as well as an add-on rider. The treatment done overseas provides additional benefits up to ₹10 lakh for Critical Illness.
Tata AIG, the health insurance company from the sister concern, has a strong worldwide Medicaid feature similar to this policy. Other add-on features include hospital cash, cover for consultation expenses and day-care procedures. Pre-existing disease waiting period is similar to regular health insurance of 2-4 years, depending on the procedure. Pro-Fit also provides a lumpsum payment on total or permanent disability, which, going by the above example, can be close to ₹50 lakh.
The death benefits, though, are faint. ULIPs typically provide 10x annual premium as death benefit, which itself is fairly insubstantial. Tata AIA Pro-Fit may provide an even lower death benefit. The product is focused on insurance and investment.
The premium remaining after allocating for health insurance, death benefit, fund charges and other administration expenses (1-2 per cent), is then allocated to a fund of policyholder’s choice. The charges eating into investment is the primary drawback of ULIP investing, not specific to this policy, though. A policyholder, as with a ULIP, can allocate funds to any of the several equity, debt and balanced funds. The funds accumulated can be used for healthcare expenditure, which will attract no taxation as the ULIP is a health plan. Otherwise, amounts received from ULIPs are taxed at slab rate, if the total premium is above ₹2.5 lakh.
Overall, the fund simplifies healthcare ‘savings’ and insurance in a single fund. The fixed benefits paid for surgeries and critical illness are on the lower side when compared to standalone health insurance plans’ overall scope of ₹1 crore cover. But the cover is indemnity based, which allows a lot more freedom to spend the amount compared to getting reimbursed for expenses from health insurance. Policyholders looking for convenience can subscribe to the product, but the best protection is always from standalone products either in term, health or pure investment funds.