Understanding Defined Benefit Plan
Health insurance covers your unfortunate medical expenses. Your hard-earned money can be utilized for better. The cover you buy also includes pre and post hospitalization expenses and other benefits. On the other hand, defined benefit plans policy work the same.
Defined benefit plans are the type of health insurance plan where a predefined payment will be made to the policyholder on the occurrence of predefined events irrespective of how much expenses have been incurred as hospitalization expenses. Thus, the sum assured is not dependent on your hospitalization expenses — no need to furnish hospital bills or any other bills to claim the benefit.
Under the defined benefit plan, we have
- Critical illness plan
- Hospital Daily cash plan
- Any other health insurance plan which makes pre-defined payments to the policyholder on the occurrence of a pre-defined event irrespective of whether and how much expense has been incurred on treatment.
1. Critical Illness plan:
Generally, health problems are unexpected and unseen. They create a financial burden for the families. In such cases, the family need not worry or struggle to meet the cost of hospitalization. A critical illness plan will help you.
A critical illness plan provides coverage against specific diseases where such illness may require multiple visits to the hospital for a specified period. Thus, in addition to hospital costs, it also includes doctors consultation fees and the cost of medicines.
Why buy a critical illness plan?
Even if you already have other insurance plans, it is always advisable to have a critical illness plan. Healing these diseases take your time and money. If you’re a sole earner of your family, then it becomes even more challenging to diagnose the disease because you need to skip the work to take treatment. Hence, you will have hit on your monthly income, and paying for treatment will become a financial burden for you.
It’s better to have a critical illness plan so that you do not need to dip your savings and drain it.
2. Hospital daily cash plans:
As the name indicates, these plans provide a fixed amount each day when you are hospitalized, irrespective of the number of expenses. This plan is a defined benefit, which means that the pays are predetermined and fixed.
For example, if you are agreed on Rs 800 as hospitalization expenses, then if you incur more or less, the company will pay you Rs 800 as hospitalization expenses. The coverage depends on the allowance you choose in the plan. The daily allowance will start from Rs 500. The hospitalization must be minimum for a period of 24 hours to avail the benefits.
Why buy a daily cash plan?
- This plan provides liberty to the policyholder to use money granted as hospital expenses. He can either use this money to meet the additional costs or can compensate this to his loss of monthly income.
- The amount granted can be used to settle hospital expenses so that policyholders can avoid claiming on health policies and can preserve the no claim bonus.
- This plan covers additional expenses, such as traveling and household expenses.
Even with an emergency reserve, you create to meet hospitalization expenses, the cost of hospitalization may exceed and can cause a financial crisis to you. So, the best solution is to have health insurance, which helps to meet various medical expenses and saves money as well. One can choose a critical illness plan and thereafter a Hospital Daily Cash plan to meet incidental costs during hospitalization. But the most essential takeaway is to adopt a healthy lifestyle to keep the ailments away.
“If you have to forecast, forecast often.”
–Edgar R. Fiedler