Health insurance is an element of one’s financial planning as it protects you from rising medical expenses.

Health insurance is provided by both non-life (general) insurance companies and the life insurance companies. It is available under direct purchase as well as through the employer under group policies.

Though it is quite known taht health insurance is bought on an yearly basis, many people do not know several aspects such as what the features that you need to look out for and whether you should combine investment options and health cover.

Pure health policy
It is one of the most basic health policies. It covers the hospitalisation expense of an individual as per the sum assured.

If one has an individual health policy for Rs 1 lakh, he can get a cover upto the limit of the sum assured, that is Rs 1 lakh in this case. If Rs 20,000 has been used in the same financial year, he can claim for the rest of the Rs 80,000 in subsequent illness subject to some pre-agreed conditions.

Family floater policy
The family floater policy has enhanced the penetration power of health insurance companies to bring in the whole family under a single policy cover. The entire insured family is covered up to the sum assured.

Suppose a family of three members — husband, wife and a child — has purchased a family policy of Rs 5 lakh. Any of the three members individually or collectively can use the policy up to a limit of Rs 5 lakh. If one member has used Rs 1 lakh for hospitalisation bill payment, the remaining Rs 4 lakh cover can be used for the rest of the year. From the next year, the full amount cover would be available again to all the members.

Money-back health policy
This policy is a combination of health insurance and investment. A part of the premium paid by the insured is invested into funds selected at the time of policy commencement. The money is accumulated in the account of the insured and returned after the end of policy Let’s see some basic differences between pure health policy and money back health policy.
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Which health insurance to opt for?
The cost associated with a money-back health policy is very high. If the purpose of individual is to cover health risk, it is better to opt for a pure health policy. If the purchaser wants to earn some return from the health policy, the money-back policy is one of the options available, but one needs to give it a second thought.

The return from a unit-linked health plan like money back health policy (MBHP) is very low compared to other investment products available in the market. There is another better option available to an investor. He can buy a pure health policy to cover the risk and simultaneously invest in public provident fund or fixed deposits out of the money that he has set aside to buy the money back health policy.

The return of such a self-customised investment would be far greater than money back health policy and health risk will be covered too with less cost as well.

Things that need to look out for:
* Premium, cumulative bonus, coverage of pre-existing diseases and maximum renewable age are the four features that help to zero in on the best product.

* Maximum renewable age is the most important feature as it helps you keep the health insurance in force for the maximum period in your life.

* If the renewable age for the two products is same, lower threshold for pre-existing disease coverage should be the deciding factor. A healthy person should out for a policy which higher cumulative bonus for claim-free years.

* Provided all three factors are same, you shou-ld opt for a policy has lower premium pay out.

Investment vs health cover
If the purpose of individual is to cover health risk only, it is better to opt for a pure health policy. For investment, he could invest in PPF or fixed deposits or MFs for higher returns.

(The write is the CEO of Apnapaisa.com)