How is the 1 Crore health cover cheaper than 25 lakh cover?

• Introduction
• What is the catch? How are 1 Crore plans so cheap?
• Things you should keep in mind while buying a 1 Crore cover
• Adequate 25L cover or Bumper 1 Crore Cover: A step-by-step approach

We have been receiving questions on our forum, social media, about 1 Crore health insurance with unbelievable premiums. People want to know if there is a catch, some fine print they are missing. Whether they should buy such plans or not.

For people who are not aware, here’s an indicative list of health insurance premiums at various coverages you will find if you search for health insurance online. Special emphasis on the last row.

Premiums displayed above are of health insurance plans by Max Bupa, as on 10th December 2020

You see, premiums steadily rise until a 25 lakh cover, and then - surprise, surprise! You see a dip! For the 1 Crore cover - You get a 400% cover, for a 37% lower cost!

How’s that even possible, we thought 😮! So, the Beshak team decided to do what it does best - go deep.

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Mostly, these 1 Crore covers are combo plans: Most of these plans are a combination of Base Plans + Super Top Up plans. So essentially, you’re purchasing a 5Lakh + 95 Lakh cover - but from the same insurance company, in one go. Since super Topup plans are usually cheaper, you get an overall price advantage. Having two plans will not have any concerns at the time of claims, because both the plans are from the same insurance company. The only hitch you should know is that if there are deductions (due to financial limits) in such plans they will be deducted twice.

The low price, mostly comes down to ‘utilization:’ This is very similar to your mobile company giving you an internet quota of 10 GB per day - knowing very well that the average utilization is only around 2 GB per day. While there is an opportunity for you to use all the 10 GB in a day, every day - it is very unlikely that you would.

And it’s the same logic that drives the 1 Crore health insurance plans too. While everyone has the opportunity to use up to 1 Crore towards health insurance expenses every year - it is very very rare that bills go that high. And, by promoting such an enticing offer - the insurer is able to garner interest amongst a larger number of customers for that plan.

While it is a promotional tactic, it makes sense in the long-run: The truth is, at today’s costs - you are less probable that you would utilize anything beyond 10 lakhs, per year. Any premiums paid for a cover over 10 Lakhs today, is a bonus for the insurer. No extra service.

But, in 20 - 30 years - healthcare costs will rise, and you should have a cover of at least 25 lakhs. By anchoring your expectation with the premium of this 25 Lakh cover, the insurer is making you feel like the 1 crore medical insurance policy ‘costs much lesser’. In effect, they’re ensuring that more customers find these plans investment-worthy.

So - If you’re thinking about having enough coverage for your old-age when you’ll need it most, you should get the 25 lakh cover - or even better get a 1 Crore cover, for cheaper!

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The price advantage can be temporary: An important thing to note is that insurance companies can apply for an increase in health insurance premiums every year (after 3 years of the product launch). If the regulator approves such an increase, you’ll end up paying more premiums. (Read this post on the recent hikes in health insurance premiums)

Understand that the product could be withdrawn/ revised: Another thing we have experienced and is critical for you to know - Insurers can always withdraw a certain product (with IRDAI’s approval, of course) and migrate you to a much more expensive product.

So, while today, these might seem like low-premium high-cover policies - this might not be the case forever.

• Compare plans carefully: The 1 Crore cover plans are designed differently than your base health insurance plans. There will be differences in features and limitations - and you must be extra careful to understand all these details before purchasing the policy. Pay special attention to room-rent limits, as they can also attract proportionate deductions and compromise your claim payment, drastically.

Here’s a comparison of some popular base plans and the 1 Crore plan offered by Max Bupa (which has the most striking drop in premium amongst other players offering 1 Cr cover)

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1. Assess your health insurance requirement: - You need to ensure that you buy an adequate cover for your old age, today. For instance, if you are 30, you will need a cover of at least 25 lakhs by the time you’re 60 years old, factoring in inflation of 5 percent per year.

In case you are not able to afford such a high cover today, just get the maximum cover you can afford right now, and upgrade it as soon as you can. This is very important, as you might not be able to upgrade your health insurance later if you develop a disease or get hospitalized.

2. Remember, it is very easy to downgrade your cover: - In case it becomes unaffordable to you, later on. But, upgrades are difficult, might need new medical tests and documentation. So, plan accordingly.

The 1 Crore cover seems like an exciting option, for a reasonable cost. But, you must carefully weigh in all the financial limits and take the low premiums of these 1 Crore health insurance plans with a pinch of salt. Health insurance premiums are subject to hikes, and in a few years the premiums might be revised and increased or entire products canceled, and you won’t have control over that.

The key to benefiting most from such covers is clearly understanding ‘what you’re paying’ and ‘what you’re getting for it’. Also always be prepared for a downgrade, if it becomes necessary sometime down the line.

We hope this article clarifies the pros and cons of this mysteriously inexpensive cover and gives you some direction on how to approach it.

If you still have questions to ask, please post them on the Beshak Insurance Forum - before you make a purchase. Insurance experts from across the country can help you make the right decision.