Hospital Cash Insurance Policy

A hospital cash policy, also known as hospicash insurance, is a policy wherein the policyholder in need of hospitalization is helped in the form of daily cash during the period of hospitalization. This help is provided directly by the health insurance company. In a hospital cash plan, the insured is given a pre-determined fixed amount every day. A hospital cash policy brings down the cost of treatment as it covers some of the expenses that are not covered by health insurance or mediclaim. Apart from this, in mediclaim, you choose the total sum insured but, in a hospital cash policy, you have to choose how much coverage you want per day.

For example, suppose you have taken a hospital cash policy, in which you are given Rs 1,000 per day during hospitalization. Now, whether you have to spend Rs 1,000 or Rs 2000 per day on hospitalization, according to this plan, you will be given the predetermined Rs 1,000. Overall, it is different from the regular health policy and it makes your health insurance a touch better. Hence, it is suggested that if a person has taken individual health insurance or group insurance, then they should also add a hospital cash policy along with it as it reduces the financial burden on the insured.

(Read more: Best cashless mediclaim policies in India)

As mentioned above, in a hospital cash policy, a fixed amount is given to the insured on a daily basis upon admission to the hospital. This amount can be used to buy equipment for tests or operations as such expenses are not covered in the mediclaim policy usually. Simply put, this money belongs to the insured and they can use it however they want. Some of the main benefits of a hospital cash plan include:

• Get rid of the hassle of small bills: The amount received under the hospital cash plan has nothing to do with the cost of treatment. During hospitalization, the nurses and doctors often require certain things related to treatment. Even if these things are small, they can add up to a large amount gradually. In such cases, the daily cash received from the hospital cash plan can help you to deal with these expenses.
• Tax savings: Apart from reducing the burden of medical expenses, the hospital cash plan also offers tax exemption under section 80D of the Income Tax Act, 1961.

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Some other benefits of a hospital cash policy are: 

• The hospital cash daily allowance policy can be renewed for life.
• During hospitalization, the minimum amount paid by the insurance company to the insured starts from Rs 500, while the maximum depends on the premium you pay. The average daily cash amount that people choose is between Rs 500 to 3,000.
• If the insured is admitted to the ICU, then they receive more benefits under their hospital cash insurance. Many companies double the amount they receive on a daily basis in such cases; however, depending on the policy, it can be several times higher too.

Like any other health insurance plan, a hospital cash policy also has a waiting period, however, it is kept short. Another condition with this policy is that you have to be hospitalized for at least 24 hours and only then can you get the benefit of hospicash. That is, no cash allowance of any kind is given to you under this policy for day-care procedures. Apart from this, the maximum limit of days of hospitalization is also prescribed in the hospital cash policy and is usually 30, 60 or 90 days. That is, you will be given a hospital cash allowance for the same number of days as mentioned in your policy even if you stay admitted longer than that.

It is well known that the cost of being admitted to the ICU is very high. That is why most health insurance companies double the limit of hospital cash when admitted to ICU. That is, if a person was getting a hospital allowance of Rs 1,000 per day for hospitalization, they will get Rs 2000 in allowance for admission in the ICU.

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A hospital cash policy is valid only for one year, after which you have to renew it like regular health insurance. This policy can be issued to an individual and/or family, where the family includes a spouse and dependent children.

Age requirements for hospital cash policies:

• The minimum age of an adult should be between 18 to 65 years
• Dependent (who are dependent on the insured) children should have a minimum age of 3 months or 91 days

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Hospital cash policy can be taken along with health insurance or separately. However, it is important to remember that a hospital cash policy cannot be availed from the date the policy is linked. In fact, the company stipulates a waiting period, which is usually 30 days. Following are some exclusions associated with hospital cash policy:

• If the insured has pre-existing diseases before taking the policy, then the hospital cash policy will not be beneficial.
• The daily allowance is usually not available for the cost of dental treatment. However, it depends on the terms and conditions of the insurance company.
• Expenses associated with pregnancy or delivery of the child are not covered in the hospital cash policy.
• Losses due to natural calamities are not covered in a hospital cash policy.
• The insurance company is not responsible for injuries caused by driving while in a state of nerves.
• Self-injury, suicide or attempted suicide are also not covered under hospital cash policy.

(Read more: What does health insurance cover)

You or the nominee who is making the claim on your behalf must inform the TPA or the insurance company about the hospitalization in the following situations:

• If you are going to be admitted to the hospital after planning, then inform the insurance company 48 hours before the admission.
• If you need to be hospitalized suddenly, inform your insurance company within 24 hours of your admission.

Not all insurance companies tie up with a TPA (third party administrator), in which case, you may need to contact the insurance company directly.

The claim is the most important part of this policy as it enables you to get cash benefits. It is not as simple as someone from the insurance company coming and giving you cash daily during your hospitalization or the cash being handed over to you at the time of discharge from the hospital. Rather, you have to go through a process for this. After discharge from the hospital, you will have to make a claim with the insurance company along with the complete hospitalization documents and discharge summary. The hospital cash will be transferred to your given bank account only after you submit solid proof of the number of days you were hospitalized.

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The exact amount of money one will need during the hospitalization cannot be calculated beforehand but one may be able to get a better idea after speaking to their healthcare experts. As expected, the higher the daily allowance, the higher the premium and vice versa. Since higher premiums can be hard on your pocket, a lower premium hospital cash plan can be added to a regular health plan. The advantage of this is that if the hospital bills are low, you will settle them under the cash plan, but if the bill is made more than the daily allowance, then you will only be burdened with the extra part of the bill. As such, you may not need to file a claim every time and can take advantage of the no claim bonus.

Caution while adding hospital cash plan to regular health plan:

• Find out all the conditions attached to the policy to ensure there is no problem during the filing of the claim.
• At the time of taking the policy, find out what all documents will be required for the claim.
• Ask about the free-look period option. In this, if you do not like the policy, you can cancel it within a certain time frame. However, this can happen only if you have not made a claim yet.

(Read more: Cashless health insurance)