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Fixed Benefit Health Insurance

Team AckoJun 9, 2022

The financial health that a family makes over the years can quickly get wiped out in case of a medical emergency. Health insurance can ensure financial protection during unforeseen situations or even if you have planned the hospitalisation. When your health insurance plan pays a fixed amount during health insurance claims, you can rest assured of the well-being of your finance.

Insurers offer Fixed Benefit Health Insurance plans that pay a fixed amount and are not based on the medical expenses incurred. So, what is Fixed Benefit Health Insurance, and how does it impact your claim settlements? Read on to find answers about the fixed benefit policy in health insurance.

Fixed Benefit Health Insurance

What is Fixed Benefit Health Insurance?

When a health insurance plan pays a fixed amount for a pre-defined illness or a health condition, the benefit of receiving a specific sum is referred to as Fixed Benefit Health Insurance. Generally, the insurer pays the specified amount as a lump sum irrespective of the hospitalisation cost subject to terms and conditions of the policy.

For example, Mr A purchased a Critical Illness Health Insurance Policy with a sum insured of Rs. 25 lakhs. Mr A was diagnosed with a critical illness covered under the plan during the policy period. The insurer pays him a lump sum of Rs. 25 lakhs during such a situation irrespective of the actual or estimated medical expenses. Once the insurer pays the fixed sum to Mr A, the policy gets terminated.

Importance and benefits of choosing Fixed Benefit Health Insurance plan

Here are the benefits of Fixed Benefit Health Insurance plans.

  • Cover for a wide range of services: A fixed benefit medical insurance offers wide-ranging services such as critical illness cover, hospital cash policy, or personal accident cover.

  • Enhances the standard plan: The Fixed Benefit Health Insurance plan acts as an additional financial layer to cover medical expenses that are not covered by the standard plan.

  • No stipulation that governs the claim payout: No condition or requirement governs the claim payout. Medical expenses such as medicines and post-hospitalisation that are generally not covered by the standard plan are covered by the Fixed Benefit Health Insurance plan.

  • No documents are required to raise claims: Under this type of health insurance plan, you don’t have to submit several documents (discharge summary, doctor fees, etc.) when registering a claim. Based on the type of pre-defined illness or condition, a doctor’s diagnosis report or if the insured member has contracted the specified medical condition is enough to pay the sum in a lump sum.

  • Pays you the lump sum money upfront: When you are diagnosed with a pre-defined illness or condition, your insurer pays the entire sum insured upfront. Hence, you save a lot of time, and it ensures you get the money before availing of the treatment.

  • Avail treatment at any hospital: In case of a mediclaim, you may need to admit yourself to a network hospital for cashless hospitalisation. However, there is no such requirement in the Fixed Benefit Health Insurance plan.

  • Acts as your income substitute: The lump-sum amount comes in handy during the recovery period since it acts as an income substitute. With mediclaim insurance paying only for your hospitalisation expenses, the fixed benefit plan helps you during your recovery period.

How does the Fixed Benefit Health Insurance plan work?

The standard health insurance is excellent financial protection against unforeseen and planned hospitalisation. However, it has its limitations. It does not provide coverage for critical illness, and even if it does, the sum insured is less. A Fixed Benefit Health Insurance comes to your rescue during such dire needs.

A Fixed Benefit Health Insurance plan walks that extra mile for you if you are diagnosed with a critical illness such as a heart ailment or even cancer. The cost to treat such critical diseases is much more than the sum insured offered by the standard plan. The fixed benefit plan provides a one-time lump sum payment of the sum insured to fill this gap.

The plan works when you are diagnosed with a pre-defined illness or a listed medical condition. And your policy gets terminated upon the payment of the sum insured.

Pros and cons of Fixed Benefit Health Insurance plan

Here are the merits and demerits of a fixed benefit policy health insurance.

Pros:

  • Boosts your cash flow with a lump sum payment.

  • Helps in receiving timely treatment and thus increasing the chances of survival.

  • Serves as financial compensation during your recovery period.

  • Documentation is relatively lesser compared to the standard health insurance plan.

  • There are no sub-limits to avail of the coverage for the pre-defined illness.

Cons:

  • Premiums are relatively higher than indemnity-focused health insurance policies.

  • Eligibility is typically restricted to certain illnesses or conditions.

Why should you buy Fixed Benefit Health Insurance plans?

Although a regular health insurance plan offers broad coverage, it has limitations such as limited sum insured amount. Additionally, the insurer provides compensation after the hospitalisation and not before the planned or unplanned hospitalisation.

A lump-sum compensation, especially for treating critical illnesses, is a boon during such hard times. With a lump-sum payment, you can choose the type of medical treatment at a hospital of your choice. It also helps your cash flow and compensates for the loss of livelihood or earnings during treatment and recovery.

If you are looking for a health insurance plan that helps address financial needs in critical illnesses, you should consider buying the Fixed Benefit Health Insurance plan.

Key factors to keep in mind while choosing the Fixed Benefit Health Insurance

  • The plan is designed to pay a lump-sum amount and not provide wide coverage for other types of illnesses or hospitalisation.

  • Ideal health insurance plan if you want to enhance your standard health policy.

  • The payout the insurer compensates has no relation to the actual medical expenses.

  • Specific plans have comprehensive coverage but do not cover all illnesses or medical treatment.

Is there any difference between fixed benefit and indemnity-based health insurance?

Now that you are familiar with a Fixed Benefit Health Insurance plan let us find out the difference between indemnity-based health insurance and Fixed Benefit Health Insurance. While the latter provides the claim amount for medical expenses incurred for treatment up to the sum insured amount, the former pays the sum insured in a lump sum for pre-defined critical illness or medical condition.

In a nutshell

Your main aim in buying health insurance is to cover your family against the financial burden of medical treatment or emergencies. Reducing the financial impact should be your goal while securing your family with a robust health insurance plan. For broad coverage along with better compensation for treatment of critical illnesses, choose a regular health insurance plan and include the fixed benefit plan as an add-on. Or, you can buy them separately as per your requirements. 

Frequently asked questions

Here are some commonly asked questions about Fixed Benefit Health Insurance.

Does Fixed Benefit Health Insurance have a waiting period for critical illnesses?

It depends upon the type of insurance plan and the insurer. The terms and conditions differ due to these factors. Hence, check if there are any criteria related to the waiting period for critical illnesses.

Are there any sub-limits in Fixed Benefit Health Insurance?

Since the compensation is paid in lump-sum, typically, there are no sub-limits in Fixed Benefit Health Insurance.

Does Fixed Benefit Health Insurance have tax exemption?

As per Section 80D of the Income Tax Act, 1961, citizens are eligible for tax exemption for the premium paid towards Fixed Benefit Health Insurance.

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