Differecne between defined benefit health cover and indemnity based cover.

Over the past few days, various cell-phone users have been showered with telephone calls or SMSs, urging them to get a new ‘3in1’ plan from LIC of India. The plan give health, life with accident cover.
LIC Jeevan Arogya, a defined benefit plan, is similar to plan floated by private life insurers. These plans hand out a lump-sump total amount upon hospitalization of the individual person.
At present the vital matter is: should one go for this defined benefit plan from life insurance companies? To obtain an answer, you would have to 1st educate yourself about the two options available to you to furnish your healthcare associated expenses — insurance based health covers, typically offered by general insurers, and benefit policies like Jeevan Arogya, frequently from life insurance companies.
COVER -BASED HEALTH COVER
The mainly common mode of health insurance in the country are the indemnity policies, normally referred to as mediclaim. The policies normally cover expenses healthcare connected to hospitalization.
The claims are frequently settled by the insurer either on a cashless basis through tie-ups with hospitals or by reimbursing expenses after the bills are submitted.
Only hospitalisation-related expenses are permissible under such policies, which means numerous expenses, like commuting to the hospital, fall outside the purview of such health covers.
DISTINCT BENEFIT PLANS
Previously health insurance plans were the sole preserve of general insurance companies. Though several life insurance companies have also now in full swing offering health plans.
A several of these policies is in the nature of benefit covers, where the benefit is pre-decided. Specifically the insurance company pays a specific sum assured to customers when they create a claim. “The foremost plus point of benefit policies is that policyholders do not need to worry about claim settlement as they know upfront the amount that would be disbursed. Also the documentation system is simpler,”

A further advantage is that you can make a claim even if you have before now been reimbursed by an indemnity policy for the same treatment
In a benefit policy, the sum insured for the possible occurrence is paid no matter what is spent. However, in an indemnity policy, one is only reimbursed the actual cost.
An added advantage of predetermined benefit products is that in case of any eventuality, Policyholder can claim both from an indemnity based cover and a fixed benefit cover.
The benefit plans don’t be firm on the original discharge docs to settle the claim. In that sense, a benefit policy or plan can be used as a top-up cover to take care of recouping expenses or make good the deficit of revenue due to temporary break in service. The vital difference between these two health covers is the term. generally, indemnity plans have to be renewed per annum whereas defined-benefit plans are renewable after three years or more, depending upon the cover.
HOW TO CHOOSE
As you can notice both these plans function on different planes. An indemnity plans or policies take care of your hospital expenses either through a cashless facility or reimbursement, where the defined benefit plan pays you a particular sum despite your actual expenses. Hence what should you do? Get rid of indemnity plan? Or the other way around?
Ideally one should go for for a fixed-benefit plan along with an indemnity-based cover to absolutely address his or her health needs.

Accordingly, a benefit policy can be used as a top-up cover. While the indemnity plan would pick up your hospitalization bill and the benefit policy will take care of the recovery expenses.

CAN YOU MANAGE TO PAY FOR A COVER?
If you are already approaching fifties and are planning to buy a health policy, you may have to fork out a hefty premium for the cover. Too the pre-existing disease regulation will punch you exceptionally hard as reimbursement plans don’t cover pre-existing illness for first three to four years.
If you don’t have any financial constraint and can have the funds for the heavy premium, you can opt for a mediclaim. But you have to back it up with a emergency fund, which has to be built just for your healthcare expenses.
At present senior citizens are more contented funding their own expenses and do not want to depend on their kids to avoid financial burden.
Small and young savers can commence with an systematic investment plan and build a corpus over 20 years. That way they can benefit from the compounding effect even if the saving amount is you extremely small. If you are not a systematic depositor , invest the spare cash over a period of four to five months and direct that funds to building a healthcare fund. You can utilize your bonus or any supplementary savings to start of this corpus and make incremental contributions for a period of 4 to 5 months and freeze the money. That is a fine proposition only and only if you are not servicing an pricey loan.
Once you build the corpus, keep the asset allocations integral depending upon your age and risk appetite. You can afford to have a high exposure to equity in your late 20s and early 30s. But it has to acclimatize more of debt instrument as you come close to your 50s.
To conclude save the corpus in the type of fixed deposits and liquid funds, given their stability and protected nature. The money is intact and can be redeemed within 24 hours even in case of urgent situation without any penalty .