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Pros and Cons of Fixed Benefit Cancer and Other Critical Illness Plans

19 May 2022, 2:33 PM

A fixed benefit plan can be considered as a supplement to your existing plan and is meaningful when you are willing to enhance your existing health cover. By a fixed benefit health insurance plan, you would obtain a certain specific amount on the occurrence of a pre-defined event which has been insured.

Let’s understand this with an example:

Suppose you have a Fixed Benefit Critical Illness Plan of INR 10 lakhs and you are diagnosed with any of the listed illnesses. In this case, the entire amount of INR 10 lakhs would be paid to you on diagnosis of the critical illness, irrespective of the amount spent on treatment. You may choose to use that amount of INR 10 lakhs on treatment or loss of income or any other recovery expense, as per your wish and the health insurance company won’t even ask you a question about the same.

So, your health insurance investment should majorly include a mediclaim or a family floater health insurance policy and on top of that, you can plan for purchasing a fixed benefit health insurance plan for additional security. A regular medical insurance policy would provide wider coverage as your fixed benefit plan would cover only specific ailments or illnesses.

Difference Between a Regular Health Insurance Plan and a Fixed Benefit Health Insurance Plan

A regular health plan pays for the expenses that you incur when you are hospitalised. However, there might be instances where you have expenses like keeping a nurse at home, loss of income, etc. which is not taken care off by your regular health insurance plan. This is where a fixed benefit health insurance Plan comes handy. In case of a fixed benefit health insurance plan, the amount of the coverage is paid on diagnosis and the money can be utilised in whatever manner as you wish.

Why is a Fixed Benefit Plan Needed?

There has been a steep rise in the diagnosis of various critical illnesses among the Indian masses lately. This could be due to several factors such as environmental factors, lifestyle factors, hereditary factors, etc. According to the data of the National Cancer Registry Programme, nearly 38 lakh people in India were suffering from the dreadful disease cancer in the year 2012-14. Furthermore, a report by the World Life Expectancy also states that the major causes of deaths in India are due to critical illnesses such as heart diseases, lung diseases, stroke, cancer, etc. 

With advancements in the field of medical sciences, treatment and cure for critical illnesses are available; however, these treatments are highly expensive. It is unaffordable for an average middle-class Indian household to spend such a huge amount for the treatment of these critical illnesses. Insufficiency in the funds can lead to borrowing or mortgaging thus, increasing the trouble of the family. So, a Fixed Benefit Health Insurance is needed to overcome these enormous costs related to the treatment of the various dreadful critical illnesses.   

How does a Fixed Benefit Plan Work?

Fixed Benefit Cancer and other critical illness policy would offer you a lump sum amount as per the claim made by you irrespective of the actual expenses that have been incurred. You can consider it as a defined benefit health insurance plan which does not follow the principle of indemnity. You will have the complete authority to decide on how to utilise the claim amount obtained. 

This plan would act as an income supplement and can be in the form of a personal accident cover, hospital cash policy, or standalone critical illness cover. Fixed benefit health insurance plans include insurance products such as Critical Illness Insurance plans, Daily Hospital Cash plans, Standalone Cancer/Heart Insurance plans, etc. where there are fixed benefits that are payable to you. 

Suppose, you have purchased a fixed benefit health insurance plan which has a sum insured of INR 15 lakhs. During the policy period, if you are diagnosed with any of the listed critical illnesses which have been listed under the plan then your insurance provider would pay you INR 15 lakhs as the payout and then the plan would be terminated. 

Advantages of Fixed Benefit Plan over Regular Health Plans

Some of the major advantages of Fixed Benefit plans are mentioned below.

  1. Additional Coverage
    Fixed benefit plans would help in covering those expenses which cannot be covered in a general health insurance plan. Treatment for a critical illness is long and can lead to the loss of earning either temporarily or permanently. There would be various non-medical expenses such as kid’s educational expenses, household expenses, etc. You are free to use the lump sum amount obtained in any manner you want without any restrictions.
  2. No Restrictions
    Regular indemnity based medical insurance plans would have certain restrictions in the form of room rent capping, mandatory co-payment or disease-specific sub-limits, etc. However, you can get rid of such sub-limits in a fixed benefit plan and can utilise the entire amount as per your requirement.
  3. Immediate Payout
    You can obtain the payout immediately on the occurrence of the eventuality i.e. you can obtain the entire amount on the diagnosis of the critical illness. However, in cases where you obtain personal accident cover, you can obtain the amount only after death or disability.
  4. Basic Documentation
    Minimal documentation is needed in a fixed benefit plan. You would obtain the payout after the diagnosis of the illness and so, there is no need to maintain other medical bills and reports. You would only have to provide proof for the diagnosis of the illness.
  5. Cheap Insurance Coverage
    Fixed benefit health insurance plans are cost-effective. They tend to provide a financial backup at nominal premium rates.

Limitations of Fixed Benefit plan

Let us understand some of the disadvantages or limitations of the Fixed Benefit health insurance plans.

  1. Minimum Survival Period
    Fixed benefit cancer and other critical illness policy have a minimum survival period of about 30 days after diagnosis. You can only receive the lump sum amount if you outlive the survival period. If you are unable to outlive the survival period, then your family members would not be receiving the sum insured.
    So, if you have a critical illness and die within the first 30 days, then the health insurance claim would not be paid. This is why a fixed benefit plan is considered a survival benefit for health recoveries.
  2. No Pre and Post Hospitalisation Expenses
    The actual medical expenses which would be incurred by you such as pre-hospitalization expenses, post-hospitalization expenses, etc. would not be covered under this policy. With only a fixed benefit health insurance plan, any other expenses related to hospitalization would not be claimed.
  3. Limited Coverage
    Fixed benefit health insurance plans offer fixed coverage which is very limited. Even if there are several riders available the premium would be very high in such cases.

Key Things to Consider

Some important key points which you must keep in mind while purchasing fixed benefit health insurance plan are:

  1. Coverage for pre-existing conditions would be offered only after the completion of a fixed waiting period. You must know about this waiting period from the policy document.
  2. The premium for the fixed benefit health insurance plan is important but you must consider the inclusions and exclusions of the policy before the purchase.
  3. You must read the policy document carefully to ensure that all major critical illnesses are covered under the plan.

Conclusion

Hence, while purchasing health insurance policies your main objective is to obtain adequate coverage to avoid any financial hassles at times of distressful medical emergencies. In current times, critical illnesses can happen to anyone irrespective of the age. A regular health insurance plan would help in covering the medical expenses whereas the lump sum amount obtained from the fixed benefit health insurance plan would help in the treatment of the dreadful ailment along with the payment of the non-medical expenses.

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