LIC Health Insurance Arogya Rakshak No. 906 – Should you buy?

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LIC Health Insurance Arogya Rakshak No.906 is going to be launched on 19th July 2021. It is a health insurance product from LIC. What are the features, benefits, and eligibility to buy this product? Should you buy it?

LIC Health Insurance Arogya Rakshak No. 906

This is a Non-Linked, Non-Participating, Regular Premium, Individual, Health Insurance plan which provides fixed benefits in case of hospitalization and for various surgical procedures irrespective of actual cost incurred and the benefit is in addition to any other health insurance cover that insured lives may have.

In addition to these fixed benefits, this plan also provides Auto Health Cover Benefit in case of death of the original principal insured (PI).

What do you mean by defined benefit health insurance policies?

There are two types of health insurance plans usually health and life insurance companies offer you. One is indemnity and defined benefit plans. This product falls under the second category.

A normal health insurance policy that is offered by usually non-life insurance companies that pay for your hospitalization expenses is an indemnity product. It pays for your hospital bills up to the sum insured. This coverage also includes pre-hospitalization and post-hospitalization expenses and listed day-care procedures. Let us say you have purchased Rs.10 lakh health insurance. If you are hospitalized for at least 24 hours, then the health insurance company will pay you the actual cost of the bill up to the sum insured of Rs.10 lakh.

On the other hand, a defined benefit policy, on the other hand, pays a stipulated sum on an insured event. Both life and non-life companies can offer defined benefit plans. Let us say you have purchased Rs.10 lakh health insurance. If hospitalization happened, based on the feature of the plan, the insurance company will pay you fixed about (but within Rs.10 lakh) irrespective of how much is your bill amount.

LIC Health Insurance Arogya Rakshak No. 906 – Features and Eligibility

An individual can take the cover for himself/herself. This individual will be addressed as Principal Insured (PI) for the purpose of insurance under this plan. The Spouse, Children and Parents of PI can also be covered under the same policy. If both of the parents (father and mother) are alive and are eligible for cover, then either both of them will have to be covered or none of them will be covered. The PI will not have any option to choose one of them.

If the existing spouse and/or children and/or parents of PI are not covered at the inception of the policy, then they will not be covered subsequently under the policy. However, on marriage/remarriage, the spouse can be included in the policy. Similarly, children born/legally adopted after taking the policy can also be covered.

There shall be no restriction on the number of dependent children to be covered under a policy. The inclusion of additional members will be subject to payment of additional premium in respect of each of the additional members. The plan also offers a default provision for Insured Spouse/Parent to become Principal Insured on the exit of original PI from the policy.

This plan offers two additional riders like LIC’s New Term Assurance Rider and LIC’s Accident Benefit Rider shall also be available on the life of Original PI and/or Insured Spouse only. Now let us look at the eligibility criteria to buy this policy.

LIC Health Insurance Arogya Rakshak No. 906 - Features and Eligibility

You can pay the premium on a yearly or half-yearly basis. As it is a purely defined benefit plan, you will get any loan on such policies. Also, there will not be any paid-up or surrender values (in case if you wish to close the policy before the term of the policy). However, a nomination facility is available in this plan.

There are two waiting periods specified in this plan.

One is a general waiting period – There is no waiting period for Hospitalization or Surgery is due to Accidental Bodily Injury occurring on or after the Effective Date of Cover of the policy. However, there is a general waiting period, in the event of Hospitalization or Surgery, if the said Hospitalization or Surgery occurred due to Sickness. The general waiting period is 90 days.

The second one is the specific waiting period – Where LIC listed certain illnesses. The waiting period in such cases is 2 years.

LIC also listed certain exclusions (around 31). You have to carefully read those exclusions at first.

The benefits under this plan are payable in terms of Applicable Daily Benefit (ADB).

Applicable Daily Benefit means the amount of Hospital Cash Benefit in a Policy Year reckoned as follows:

a) During the first three years of cover starting from the Effective Date of Cover in respect of an Insured, the Applicable Daily Benefit shall be equal to the Initial Daily Benefit (i.e. the level of Hospital Cash Benefit) chosen by the Principal Insured. The minimum initial daily limit is Rs.2,500 and the maximum initial daily benefit is Rs.10,000 per day.

b) After the third year of cover, the Applicable Daily Benefit of the previous Policy Year shall be increased by way of ‘Auto Step Up Benefit’ and ‘No Claim Benefit’. Based on that the resulting amount shall be the Applicable Daily Benefit for that Policy Year.

Auto Step Up Benefit – Under this benefit, an amount equal to 15% of the Initial Daily Benefit shall be added to the Applicable Daily Benefit of the previous policy year. Such increase in the Applicable Daily Benefit shall be effected at the end of every third policy anniversary during the Cover Period and shall continue to be added until Applicable Daily Benefit attains a maximum amount of 1.5 times the Initial Daily Benefit. Thereafter this amount in each Policy
year in future shall remain at that maximum level attained i.e. no addition shall be made under this benefit.

No Claim Benefit – In the event of every three claim-free policy years, an amount equal to 5% (five percent) of the Initial Daily Benefit shall be added to the Applicable Daily Benefit at the end of the third claim free year; where ‘Claim free policy years’ shall be construed in respect of the policy as a whole, that is, there are no claims in respect of any of the Insured(s) covered under the policy during the immediately previous three years. There shall be no maximum limit for this benefit throughout the cover period.

# On hospitalization:-

In the event of Accidental Bodily Injury or Sickness first occurring or manifesting itself on or after the Effective Date of Cover and during the Cover Period causing an Insured’s Hospitalization to exceed a continuous period of 24 hours within the Cover Period, then subject to the Benefit Limits and Conditions as mentioned in policy documents, Waiting Period and Exclusions as mentioned, the Daily Benefit is payable, regardless of the actual costs incurred-

a) In case of Hospitalisation in the general or special ward (i.e. a non-intensive Care Unit ward/room) of a Hospital
The Applicable Daily Benefit in a Policy Year (as detailed above), for each continuous period of 24 hours or any part thereof (after having completed the 24 hours) provided any such part stay exceeds a continuous period of 4 hours of Hospitalization necessitated solely by reason of the said Accidental Bodily Injury or Sickness, shall be payable.

b) In case of Hospitalisation in the Intensive Care Unit of a Hospital
Two times the Applicable Daily Benefit in a Policy Year (as detailed above), for each continuous period of 24 hours or part thereof (after having completed the 24 hours) provided any such part stay exceeds a continuous period of 4 hours of Hospitalization in the Intensive Care Unit of a Hospital during any period of Hospitalization necessitated solely by reason of the said Accidental Bodily Injury or Sickness shall be payable.

c) Combined stay in Non-ICU and ICU ward/room
During one period of 24 continuous hours (i.e. one day) of Hospitalisation, if the said Hospitalisation included staying in an Intensive Care Unit as well as in any other in-patient (non-intensive Care Unit) ward of the Hospital, the Corporation shall pay benefits as if the admission was to the Intensive Care Unit provided that the period of Hospitalisation in the Intensive Care Unit was at least 4 continuous hours.

There are certain conditions to it like

  • hospitalization should be within India.
  • LIC will pay you to the maximum of 30 days of hospitalization expenses (if the hospitalization happened during the first year) or a maximum of 90 days of hospitalization expenses from second year onwards,.
  • The total number of days for which LIC pay you the benefit during the policy period is restricted to 900 days.
  • As hospitalization of 24 hours is mandatory to get the daily cash benefit, day care treatments are not covered here (except for hemodialysis and radiotherapy are Day Care Procedure).

# Major surgical benefit:-

If you are undergoing any specified Surgery within the Cover Period in a Hospital due to Accidental Bodily Injury or Sickness first occurring or manifesting itself on or after the Effective Date of Cover then, subject to Benefit Limits and Conditions, Waiting Period, and Exclusions, a percentage of the Major Surgical Benefit Sum Assured shall be payable, regardless of the actual costs incurred. Where, Major Surgical Benefit Sum Assured is equal to 100 (one hundred) times the Applicable Daily Benefit (taking into account the Auto Step-up as well as No Claim Benefit) for that Policy Year in respect of each Insured.

The annual limit is 100% of MSB but the lifetime maximum benefit limit throughout the policy period is 10 times of MSB.

Along with this, LIC also offers the benefits like ambulance benefit of lump sum Rs.1,000, premium waiver benefit for a year, if MSB is exhausted in that year, then MSB restoration of next year MSB claim can be added (subject to the 10 times of MSB during the policy period).

# Day care procedure benefit:-

In the event of an Insured, due to medical necessity undergoing any specified Day Care Procedure, within the Cover Period in a Hospital or Day Care Centre due to Accidental Bodily Injury or Sickness first occurring or manifesting itself on or after the Effective Date of Cover in respect of that Insured and during the Cover Period then, subject to Benefit Limits and Conditions as mentioned below, Waiting Period, and Exclusions, a lumpsum amount equal to 5 (five) times the Applicable Daily Benefit, shall be payable, regardless of the actual costs incurred.

The annual daycare benefit is restricted to 3 and throughout the policy period, you can take this benefit up to 30 times.

# Other Surgical Benefit:-

In the event of an Insured due to medical necessity, undergoing within the Cover Period any Surgery not listed under Major Surgical Benefit or Day Care Procedure Benefit, in a Hospital due to Accidental Bodily Injury or Sickness first occurring or manifesting itself on or after the Effective Date of Cover in respect of that Insured and during the Cover Period then, subject to the Benefit Limits and Conditions, Waiting Period, Exclusions, a Daily Benefit equal to 2.5 (two and a half) times the Applicable Daily Benefit, shall be payable, regardless of the actual costs incurred for each continuous period of 24 hours or part thereof provided any such part stay exceeds a continuous period of 4 hours of Hospitalization.

You can avail a maximum of 15 days in a year (in the first policy period) and from the second year onwards it is 45 days. During the whole policy period, the maximum limit is set as 450 days.

# Medical Mangement Benefit (MMB)

In the event of an Insured undergoing inpatient hospitalization within the Cover Period due to the following major medical conditions first occurring or manifesting itself on or after the Effective Date of Cover in respect of that Insured and during the Cover Period then, subject to Benefit Limits and Conditions as mentioned below, Waiting Period, and Exclusions, a lump-sum of 2.5 (two and a half) times of Applicable Daily Benefit shall be payable, regardless of the actual cost incurred- Dengue, Malaria, Pneumonia, Pulmonary Tuberculosis, Viral Hepatitis A.

Hospital Cash Benefit will be paid over and above the Medical Management Benefit based on the length of stay in the hospital. In a year you can avail two times and throughout the policy period, 20 times.

# Extended Hospitalization Benefit (EHB)

In the event of an Insured undergoing a single period of continuous inpatient hospitalization in excess of 30 days within the Cover Period, due to Accidental Bodily Injury or Sickness first occurring or manifesting itself on or after the Effective Date of Cover in respect of that Insured and during the Cover Period then, subject to Benefit Limits and Conditions, Waiting Period, and Exclusions, a lump sum of 10 (ten) times of Applicable Daily Benefit shall be payable, regardless of the actual costs incurred.

Extended Hospitalisation Benefit would be payable in addition to any applicable Hospital Cash Benefit, Major Surgical Benefit, Other Surgical Benefit or Day Care Benefit payable for the same event of inpatient hospitalization.

You can avail once a year and during the whole policy period, the restriction is 10 times.

Along with all these benefits, LIC offers you the Health Check-Up benefit also, when LIC will pay you the actual costs subject to a maximum of one-half of ADB once in every 3 years.

# Review of the premium

The premium will not remain constant like how your life insurance. The premium will be revised once in 3 years. In the case of typical indemnity health insurance, the premium will raise at every 5 years based on the age slab the oldest member of the health policy will be. LIC clearly mentioned this as below.

The premiums rates under the Base plan are guaranteed for a period of 3 years from the Date of Commencement of Policy in respect of each insured life covered under the policy at inception. Based on the experience of the portfolio under this plan, the Corporation reserves the right to revise the premium rates any time after the completion of 3 policy years starting from the Date of Commencement of the Policy, the premium rates for future years will be subject to applicable revised rates. However, such revised rates shall be guaranteed for a further period of at least 3
years.

The installment premium on each review will be based on age at entry i.e. age as on the Date of Commencement of Policy/age at the time of inclusion into the policy, as the case may be. The installment premium for both the optional riders is, however, guaranteed throughout the term for which cover is provided.

This feature is one more red flag for those who feel LIC is providing a red carpet to their insurance need.

LIC Health Insurance Arogya Rakshak No. 906 – Should you buy?

As I mentioned above, LIC Health Insurance Arogya Rakshak No.906, is a defined benefit plan. Here, irrespective of the cost of the hospitalization, the insurance company will pay you the amount as a lump sum.

The biggest drawback of this policy is that it will not offer you a typical cashless benefit feature of health insurance. Hence, to avail of the claim, at first, you have to pay the bill and then apply for claim settlement with LIC (Even though Quick Cash facility is available, it is subject to a lot of restrictions like 50% of eligible Major Surgical Benefit amount and etc.). Hence, be ready to have emergency health corpus ready (even though you have this policy) as this policy will not help you in an emergency but help you after the emergency is over.

The second biggest drawback of this policy is that the premium revision once in 3 years. Hence, if you feel the same premium you have to pay throughout your policy period to get the benefit means you are wrong. LIC has the right to increase the premium once in 3 years and you have no option but to accept it BLINDLY if you wish this policy is the best for you.

I know that in the case of indemnity policies also, the premium will increase based on the age of the oldest person of that particular family floater policy. Hence, in no way this product is a different product than the typical health insurance when it comes to premium.

Hospitalization cost is increasing day by day and in such scenario, buying such defined benefit policies may backfire you. The whole concept of benefit depends on “INITIAL DAILY BENEFIT”, which is capped at Rs.10,000 a day. Hence, the maximum daily benefit you can expect is Rs.10,000. Even though there are certain benefits like NCB or Auto Step Up Benefit, they are kind of peanut. The reason is NCB will increase at the rate of 5% (it will continue throughout the policy period) and Auto Step Up Benefit will increase at 15% (but there is a limit like once it reaches 1.5 times of the initial daily benefit, then this benefit will stop). Hence, Auto Step Up Benefit is a kind of eyewash, and NCB increment at 5% in no way helpful to match the growing hospitalization expenses.

Instead of such limited offering health cover, it is always beneficial to go for pure health insurance products offered by health insurance companies where the benefit is based on the billed amount (subject to the sum insured).

With a lot of restrictions on benefits and that also with limitation on benefit amount, I am not sure why LIC is offering this product. There are many expenses during hospitalization, which we can’t predict, and if our health insurance restricts such costs, then obviously it is a huge burden on the policyholder.

If I am the buyer of health insurance, I will go for pure health insurance which offers me indemnity cover than defined benefit cover. I know many LIC agents may push you to buy this product as LIC is offering a high commission to them (first year 35%, 2-10 years 6% and thereafter 5%), but look at your own requirements and how it will benefit and accordingly take a call.

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22 Responses

  1. Dear Basawaraj,
    A person hospitalised person for 5 days and 5 lakh is not just for admission but surgery also that also is paid by LIC as MSB.. ICU, etc.
    Merely don’t be bullish. Please read all details once again. You are misguiding people.

    1. Dear Arun,
      I am not sure why it is angering you 🙂 Anyhow, I can’t control your anger. Now, regarding this plan, do think it covers Rs.5 lakh expenses (when I say again hospitalization, it may be ICU or Surgery). What is the cost of the difference between owning normal health insurance of Rs.5 lakh to this policy? How much benefit an individual get in case the billed amount is Rs.5 lakh (in both cases)? Can you elaborate more?

  2. What’s the best medical insurance plan available now which can cover myself(46 years) and family ? Taking in to consideration all like premiums, ease of cash less treatment, and more hospital.choice?

  3. Dear Basu Sir,

    This Plan main attractive features is Auto cover to the member for 15 years after death of PI without any premium. I agree with you that in this plan we have to first pay all bills & claim .But in Health Insurance generally what I experienced The Hospital charges you more than what actual cost for the service. But in this plan you got all benefit not the hospital.

    1. Dear Jiban,
      But that auto-cover is also restricted. The cover will continue only up to 15 years from the death of PI. Hence, I don’t consider this feature as a great add on (considering the inflation rate of hospitalization)

  4. Dear Basu Sir, Thanks for narrating Arogya Rakshak Plan. But I feel you have not understood concept of Health Insurance which offers defined benefits. I have Mediclaim Policy from Star health as well as Jeevan Arogya of LIC. I find LIC’S Jeevan Arogya as addon Policy. You know well that nowadays Hospitals are more interested in knowing Mediclaim Policy Cover than assessing Health Condition of patient. Once they come to know about Cover, they try to exhaust entire limit. They also make family members to coughup some more amount over that. In this Condition LIC’S Jeevan Arogya or Arogya Rakshak can be of help to family as well as patient. I do appreciate time taken by you explain Arogya Rakshak in detail. But your opinion shows only LIC Pays commission to Agents. But as an analysts, you know well about commission rate offered in Mediclaim Policy for subsequent years which is much more than LIC Arogya Rakshak. But it is a fashion for analysts to highlight commission rate in all reviews which creates negative opinion about analysts including you. Off course, I do feel commission rate on Mediclaim as well as Health insurance Policy has to come down so that Policy is available to needy people at lower premium. All of us must raise our voice in this direction to reduce commission rate as well as GST to help citizens to have Mediclaim/Health Insurance at decent price.

    1. Dear Satyanarayan,
      I agree that hospitals may inflate the bill to a certain extent if they find you have health insurance. However, it is wrong to say that hospitals are in rush to exhaust your sum insured coverage limit. Above that, if you are skeptical of such practices to happen, then you may opt-out of cashless benefit and can manage. I am unable to understand how the peanut (what this policy offers you) will help you?

  5. Dear Basu,
    There are pros and cons in both indemnity & defined benefits plan.One must give emphasis on priority and as such all the goodness are not available in either of the choices.LIC has made some definite improvisation in this plan to its earlier version so as to make it more beneficial to its customers particularly in rural areas where tied up hospitals are not available for cashless procedures.From a broader angle it seems much suitable to some segment of people, that you surely agree.

    1. Dear Mishra,
      Check with the respective insurers about what commission they pay to agents. However, I always insist on online buying of health insurance. Hence, no question of disclosing the commission. Above that, if I share commission structure, why it is irritating YOU? Am I shared false information?

  6. Dear Basu Sir,

    Indemnity plans are for shorter span and you cannot imagine the same premium till your 80 years.

    But LIC Will take care of you till 80 years with same premium , with enhanced benefits every 3 years without paying a single paisa extra.

    Indemnity policy is good if you have short vision.(1or 2 years)

    But Lic is superb if you want to protect your healthcare expenses upto 80 years.

    No indemnity policy can ever compete with lic.

    1. Dear Mohit,
      I agree that the premium will shoot up as you grow older in indemnity plans. However, what you are pointing about the benefits from LIC under this plan is peanut after few years. Even though there is an option of NCB at 5%, it hardly matches the cost of inflation of hospitalization. Also, the benefit what LIC may provide after 5-10 years may not be even possible to fund for your one-day medicine expenses. Hence, just because LIC is offering it does not mean we have to buy it blindly.

  7. Dear Basawaraj,
    You are trying mix matters and have prejudised mindset about LIC products and commission.
    Unexpected from a blogger like you ..
    If you want to know the real beauty of LIC plans.. sit and talk to experts. And be ready to know it..

    1. Dear Arun,
      Let me know what point I am mixing here 🙂 Please share with me the real BEAUTY of LIC plans. I am ready to share with you all. Rather than just pointing because you have affection with LIC, come up with valid points and let us discuss.

  8. Dear Basavraj, good that you are one of the earliest analyser of this plan.. but as you very wrongly opined about it in a very hurried manner.. first of all it is defined plan. Its earlier version got Golden peacock award. You cant compare it with indemnity plans which come with very high cost. This plan can be combined with any other indemnity plans.
    The total plan is wonder in itself Do you think all indemnity are cashless for all hospitals?
    You as CFP hope you opine rightly..

    1. Dear Arun,
      Thanks for your kind words. Regarding this plan, may I know the cost difference between the same sum insured indemnity plan to defined benefit plan? When it comes to health insurance, one must look at the cost of hospitalization. It is raising at an alarming rate in India. Whatever such plans offer is in no way helpful. Above that cashless is a big issue. Now coming back to your point that whether all indemnity plans offer cashless, even if one pay the bill, we can get the claim settlement easily by sitting at home (which I myself experienced two months back when I was admitted due to Covid). They have a dedicated team to handle claims at priority. Is there any such setup from LIC? Do we all know the situation of buyers of Jeevan Saral (which was also once received the Golden Peacock award)? Just because the product is awarded means we can buy blindly?

  9. It is an add on policy of Medical insurance segment. Like Horlicks + milk(Horlicks as Mediclaim and milk as any Health insurance)
    Actual treatment cost will bear Mediclaim co. and loss of income may cover up from Health insurance. Through this type of advise I am eligible myself 35% commission. After all both insurance premiums will be treated as U/S 80D.
    Pl don’t mind.
    Thanks.

    1. Dear Partha,
      How much income (milk) LIC will compensate? A real loss or some peanut benefits? If a person is earning around Rs.1 lakh a month and he is hospitalized for 5 days and hospitalization cost is around Rs.5 lakh and because of hospitalization, he is unable to do his job, then LIC will compensate the whole Rs.1 lakh? Above that what is the cost of covering Rs.1 lakh? Can you elaborate rather than just giving us a rosy picture?

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