Life insurance company Tata AIA has launched a health plan that also offers investment opportunities in a single product. Tata AIA Pro-Fit is designed to meet healthcare related expenses through fixed benefit payout for hospital charges on the insurance side and on the other hand redeemable for investment funds for health related expenses.
How will the premiums be divided between the two? Compare the advantages of each arm with existing products in these series for a better understanding. But in general practice, separate health policies, term insurance and separate and specific investment portfolios are desirable for individuals.
For example, in Tata AIA Pro-Fit, a premium of Rs 1 lakh paid by a 35-year-old male will be spread over the health insurance cover, which may be around Rs 40,000, while Rs 60,000 will be invested in any of the following: Insurance company management funds. A standalone health insurance policy costs Rs 14,000 to Rs 16,000 with a sum assured of Rs 1 crore, which means Tata AIA Pro-Fit pays more. But this difference can be reconciled. For a premium payment period of 12-15 years and the subsequent policy period of 15-20 years, the Tata AIA Pro-Fit premium is constant compared to the health insurance premium, which increases with the age of the policyholder and medical inflation. Over longer periods, costs may be comparable.
Additionally, typical health insurance offers reimbursement-based health coverage. That is, medical expenses borne by the care provider can be reimbursed on a cashless basis or reimbursed to the insured to the extent of the bill. In practice, written records and policy terms will reduce claims by 10% to 15%.
One of the key differences is that Tata AIA Pro-Fit allows people to apply for standard care amounts regardless of hospital bills. A total of 57 critical illnesses, including cancer, cardiac arrest, stroke or end-stage liver disease, provide lump sum payout upon submission of medical report. Likewise, the defined benefit lump sum covers 133 listed surgeries and many day care surgeries.
Taking the previous example, the policyholder can expect to receive a major critical illness benefit of nearly Rs 10 lakh or a surgical benefit of Rs 4 lakh per annum during the policy term. This reimbursement feature allows one to spend the insured amount accordingly, rather than requesting reimbursement for expenses that typically do not include non-surgical expenses. This leeway extends to receiving treatment worldwide as well as additional riders. Treatment abroad provides an additional benefit of up to Rs 10 lakh for critical illness.
Tata AIG is the sister company’s health insurance company and has strong global Medicaid capabilities similar to this policy. Other add-ons include hospital cash, consultation fees and daycare programs. The waiting period for pre-existing conditions is similar to regular health insurance, 2-4 years, depending on the procedure. Pro-Fit also provides a one-time payment in case of total or permanent disability, which could be close to Rs 50 lakh as per the above example.
However, death benefits are minimal. ULIPs usually offer 10 times the annual premium as death benefit, which in itself is quite meager. Tata AIA Pro-Fit may offer lower death benefit. This product focuses on insurance and investments.
Premiums remaining after allocating health insurance, death benefit, fund fees and other administrative fees (1-2%) are allocated to the fund of the policyholder’s choice. Fees that erode the investment are the major drawback of ULIP investments, but they are not unique to this policy. Like ULIP, the policyholder can allocate funds to any equity, debt and balanced funds. The accumulated funds can be used for healthcare expenses and since ULIP is a health plan, it will not be taxed. Otherwise, if the total premium exceeds Rs 2.5 lakh, the amount received from ULIP will be taxed at a fixed rate.
Overall, the fund simplifies health care “savings” and insurance into a single fund. The fixed benefits paid for surgeries and critical illness are lower compared to the overall cover of Rs 1 crore in standalone health insurance plans. But the insurance is indemnity-based, allowing it to spend the amount more freely than if it were reimbursed from health insurance. Policyholders looking for convenience can subscribe to the product, but the best protection will always come from a standalone product, whether a term product, a health product or a pure investment fund.