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

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?

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.

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.