Don’t count on the mediclaim relief yet

Lack of products for senior citizens and incentives for the sales channel almost neutralise the Budget sop

MUMBAI: The sunset club has received a welcome relief in this Budget. By allowing individuals paying mediclaim premium for their parents an additional deduction of Rs15,000 under Section 80D of the Income-Tax Act, Budget 2008-09 has offered a gift to the elderly. But, only on the face of it.

On the ground, the non-availability of enough products for older people, particularly senior citizens, who need medical insurance the most, and the lack of willingness among the insurance companies to sell such products to them mean that even if you want to buy a health cover for your aged parents, you may be unable to get them adequately covered.

And that, in turn, could put paid to your hopes of getting the full additional tax exemption available.

Currently, there are a number of products in the medical insurance space that allow entry till the age of 65.

One could go through any of the public sector general insurers, all of whom have
launched products for older people. National Insurance Company, for example, allows entry till 59 years and renewals till 80 years.

Among private players, ICICI Lombard’s Family Floater allows entry till 60 years and renewal till 70 years, while for Bajaj Allianz, the maximum age at entry is 55 years and the policy can be renewed till 75.

The income tax benefit thus helps those whose parents are still in the permissible age bracket.As per the changes introduced in the Budget, they can get a tax deduction of Rs15,000 on mediclaim payments made for his or her parents. This is over and above the Rs15,000 allowed to the individual on mediclaim covers for self.

According to Sandeep Shanbhag, director, AN Shanbhag NR Group, the effective additional deduction is Rs20,000 where one’s parents are senior citizens. “So, a person insuring himself, his spouse, children and parents could potentially get a deduction of Rs35,000,” he says.

But, what if your parents are senior citizens and without a mediclaim cover? A senior citizen, as per the I-T Act, is someone who, at any time during the previous year, has attained the age of 65 years or more. The options taper out for you in this case.

The PSU insurers do offer a few products, such as the Varistha Mediclaim of National Insurance Company, which allows fresh entry for people between 60 and 80 years of age with renewals till 90 years. In the case of Varishtha, though, the premium for the 76-80 age band will be loaded by 10% and 20% up to 90 years of age.

For the private players, though, there is neither any incentive nor an obligation to cover such liability.

All the same, it is one thing to offer a product, and another to actually sell it. One deterrent to insuring the elderly on the health front is the lack of incentives for agents.
“The higher age band is a segment that is more vulnerable. Claims would probably be on the higher side. As a result, public-sector insurers do not pay commissions to agents. So, there is no incentive for an agent who has a client aged above 55 years. It is a subtle way of arm-twisting and has been going around for quite some time,” said a distributor who did not wish to be quoted.

Besides, it is not unusual to come across people over 50 years who have been denied a mediclaim cover. Of course, the insurance companies have an explanation for every refusal.

A common grouse is the high cost of such covers where one is allowed entry at an older age.

An individual who had taken a cover for his parents said, “My 58-year-old mother and 65-year-old father had a mediclaim policy. Their premiums were increased by 100%, in spite of there having been no claim in the past. Why should they penalise the good customers?”

Amar Pandit, a certified financial planner with My Financial Advisor sees a genuine reason for such rejections. “If the insurance company feels that there is certain risk associated with the person being insured they can load (increase) the premium. If they outright reject a person, then the risk must be higher,” he says.

According to him, “If the person is insurable, he will benefit. But the chances are that the insurance companies will load the premium. They tend to load the premium for people above 55-60 years. In case it is Rs6,000 per annum, it will be increased to Rs15,000.”
Meanwhile, life insurance companies have also started launching health products, but the issues are much the same even here.

The Life Insurance Corporation’s Health Plus will not issue a fresh policy for people above 55 years and renewals are allowed only up to 65 years.

d_khyati@dnaindia.net