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\u201cRising healthcare costs are one of the biggest financial risks individuals face during retirement. Combining retirement and healthcare protection addresses both longevity and medical needs within a single framework,\u201d says Sumit Shukla, managing director (MD) and chief executive officer (CEO), Axis Pension Fund.<\/p>\n
How the product works<\/p>\n
Subscribers must buy the super top-up policy to enrol. Their contributions follow the investment pattern prescribed for the central government NPS scheme, so they do not get the wider investment choice available under the All Citizen Model.<\/p>\n
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Subscribers must pay the first-year premium upfront. The initial contribution includes this premium, annual maintenance charges of Rs 200 plus applicable taxes, and at least Rs 1,000 towards investment. From the second year, subscribers may authorise payment of renewal premiums from their NPS Swasthya corpus.<\/p>\n
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Insurers determine premiums. PFRDA has specified entry-age cohorts of 18-40 years, above 40 to 60 and above 60 to 70 years for premium quotes, but actual prices depend on the insurer.<\/p>\n
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\u201cNPS Swasthya is particularly useful for people who want a dedicated financial cushion for medical expenses in addition to their existing health insurance,\u201d says Shukla.<\/p>\n
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The product does not replace regular health insurance. It\u2019s a super top-up cover, so subscribers are responsible for the deductible before the policy pays up.<\/p>\n
Check the deductible and cover<\/p>\n
The standard family floater covers the subscriber, spouse and up to two dependent children, but excludes parents. Entry is permitted from age 18-70. Renewal may continue up to age 85, subject to premium, policy terms and applicable law.<\/p>\n
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The standard sums insured are Rs 1 lakh, Rs 5 lakh, Rs 10 lakh and Rs 30 lakh, with corresponding annual aggregate deductibles of Rs 10,000, Rs 50,000, Rs 1 lakh and Rs 3 lakh. The deductible applies cumulatively to eligible insurance expenses during the policy year, rather than separately to each claim.<\/p>\n
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\u201cThe key is whether the customer has sufficient savings or other health cover to meet it when required,\u201d says Arun Ramamurthy, co-founder, Staywell.Health.<\/p>\n
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The standard policy has a 30-day initial waiting period except for accidents, and a 12-month waiting period for pre-existing diseases and specified diseases or procedures. Fresh underwriting at renewal cannot be imposed unless the sum insured increases.<\/p>\n
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\u201cThe waiting periods are relatively attractive, particularly the 12-month waiting period for pre-existing diseases,\u201d says Ramamurthy. Subscribers must still check the final policy terms and exclusions.<\/p>\n
Withdrawals reduce retirement savings<\/p>\n
Unlike a conventional NPS account, NPS Swasthya allows partial withdrawals for eligible outpatient and inpatient healthcare expenses without a minimum waiting period or a restriction on their number.<\/p>\n
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Withdrawals are capped at 25 per cent of the subscriber\u2019s own contributions to the NPS Swasthya account. The hospital, healthcare provider or other eligible entity receives the money directly. The money does not pass through the subscriber\u2019s hands.<\/p>\n
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\u201cThe 25 per cent withdrawal facility provides liquidity in healthcare emergencies without requiring a subscriber to exit the scheme altogether,\u201d says Vishwajeet Goel, head of Pensionbazaar.<\/p>\n
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The ceiling applies to contributions, not the accumulated corpus. If a subscriber contributes Rs 5 lakh and the corpus grows to Rs 10 lakh, the ceiling is Rs 5 lakh.<\/p>\n
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A large medical expense may therefore exceed the amount available through partial withdrawal.<\/p>\n
Large bills may prompt premature exit<\/p>\n
When a single eligible inpatient healthcare expense exceeds the partial withdrawal limit, subscribers can opt for premature exit. The accumulated NPS Swasthya corpus first pays the eligible inpatient expense. Any balance moves to an NPS scheme under the All Citizen Model, while the insurance policy already in force continues for the remaining policy period.<\/p>\n
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The NPS Swasthya account closes, and the subscriber loses its special healthcare withdrawal facility. \u201cThe guidelines do not clearly state whether someone who closes the account in these circumstances can later open another NPS Swasthya account,\u201d says Goel.<\/p>\n
Consider separate products<\/p>\n
The combination of retirement savings and health cover can simplify financial management, but may reduce flexibility.<\/p>\n
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\u201cIdeally, NPS and a super top-up should be kept apart because each product can be chosen independently,\u201d says Vishal Dhawan, founder and CEO, Plan Ahead Wealth Advisors.<\/p>\n
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Insurance and retirement needs can change with age and life stage. A standalone super top-up could allow investors to change features or add covers as their requirements evolve.<\/p>\n
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The bundled product, however, can help maintain insurance when cash flows are disrupted, as subscribers may authorise payment of renewal premiums from the NPS Swasthya corpus.<\/p>\n
Investment choice is limited<\/p>\n
The central government investment pattern offers less flexibility than the All Citizen Model.<\/p>\n
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\u201cThis can be a disadvantage for investors who want to be more aggressive, particularly through higher equity exposure,\u201d says Dhawan. Risk-averse investors who would have chosen a conservative allocation may find the limited choice less restrictive.<\/p>\n
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Healthcare withdrawals also draw on money intended for retirement. \u201cDo not depend on this product completely for all your health insurance needs,\u201d says Dhawan. Investors should retain adequate base health insurance and use other available health covers before drawing from retirement savings.<\/p>\n
Compare costs before choosing<\/p>\n
Compare premiums with standalone super top-ups once insurers launch their offerings. \u201cIt is too premature to compare the cost with standalone super top-ups,\u201d says Goel. Insurers will determine premiums, which will vary by age cohort and underwriting.<\/p>\n
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\u201cAn apples-to-apples comparison is necessary because pricing varies by age, cover, deductible and insurer,\u201d says Ramamurthy. Subscribers should therefore avoid assuming that the bundled product will be cheaper for everyone.<\/p>\n
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NPS Swasthya can add protection against large medical expenses for subscribers who already have a base health cover. Those who want comprehensive cover from the first rupee or insurance for elderly parents will need separate arrangements.<\/p>\n
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\u201cIt could work well for NPS subscribers who already have some base health cover and want additional protection against large medical expenses,\u201d says Ramamurthy.<\/p>\n
Top 10 key features of NPS Swasthya<\/p>\n
Combines a National Pension System (NPS) investment account with mandatory, legally separate super top-up health insuranceEntry age for the insurance product is 18\u201370 years; renewal may continue up to 85Family floater covers the subscriber, spouse and two dependent children; parents are excludedCovers of Rs. 1 lakh, Rs. 5 lakh, Rs. 10 lakh and Rs. 30 lakh have corresponding annual deductibles of Rs. 10,000, Rs. 50,000, Rs. 1 lakh and Rs. 3 lakhInsurance has a 30-day initial waiting period, except accidents, and 12-month waits for pre-existing and specified diseasesInvestments follow the central government NPS investment patternHealthcare withdrawals are capped at 25 per cent of own contributions, with no waiting period or frequency limit; providers receive payment directlyInitial funding includes the first-year premium, Rs. 200 annual maintenance charges plus taxes, and Rs. 1,000 for investmentRenewal premiums can come from the corpus with subscriber authorisationPremature exit is allowed when a single eligible inpatient expense exceeds the withdrawal limit; any balance moves to regular NPS<\/p>\n
(Source: PFRDA Operational Guidelines for NPS Swasthya)<\/p>\n
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