Health policy

Policyholders of the personal accident and benefit-based health insurance plans can choose to receive the claim in regular installments or a lump sum amount or a combination of both. The Insurance Regulatory and Development Authority of India (Irdai) has issued draft guidelines for claim settlements. According to the draft guideline, the option of the settlement of claims in installments will offer an income; in the hands of the claimants for a reasonable period of time.

The specific purpose of the medical treatment

It is applicable in respect of a personal accident and benefit-based health products; and add-ons attached to indemnity policies; of both individual and group products. These policies offer a lump sum amount to the claimant/benefactors in case of an accident; (in case of personal accident policy) or diagnosis of a critical illness such as cancer or cardiac problem (in case of indemnity based health cover).

Unlike the regular mediclaim policy where money is paid for the specific purpose; of the medical treatment or hospitalisation; in case of these policies the policyholder can use the money as income replacement. The amounts tend to be large, Rs 10 lakh and upwards.

“This is a good option; because many a times families do not know how to handle the money. Also, if they do invest the lump sum, the returns they get are taxable. In this case, if they choose to get the claim on a monthly basis; then there is no tax on it. Also, in case of critical illness covers; your hospital treatment may be covered by the indemnity policy; and you may want to use the claim from the fixed benefit policy; to meet your monthly expenses. In that case, too the installment payout is useful,” says Nikhil Apte.

A policyholder shall have the flexibility

The installment option may be offered only beyond a certain threshold limit of the base sum insured, subject to the design of the product. A policyholder shall have the flexibility of choosing the settlement option of claims at the time of policy inception, on renewal, during the policy term or at the point of claims.

The policyholder will also be given an option of altering the mode of receipt of payment of a claim from lump sum to installments and vice versa during the policy duration any number of times till the point of claim. The option of the settlement of claims in installments will offer an income in the hands of the claimants. It is applicable to personal accident and benefit-based health products and add-ons