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OPD covers are bad for your financial health

A typical health insurance policy, as you all know, provides cover against medical problems that normally require at least 24 hours of hospitalization. 

It doesn't provide any relief against OPD (Out Patient Department) treatments. It also excludes dental treatment, diagnostic tests, routine visits to a doctor, pharmacy bills, eye glasses and such other minor illnesses / injuries. 

Well, the issues may be minor, but the expenses certainly aren't. A family has to shell out decent amount of money every year on many day-to-day illnesses.

Therefore, just as we take health cover for major medical exigencies, wouldn't it be a good idea to buy OPD insurance too, so that we get a comprehensive medical cover?

The answer is... No.

And the simple reason for that is... Cost.

At present, OPD covers are prohibitively expensive. While you may get a cover of Rs.2 to 5 lakhs under a conventional medical insurance policy for a mere Rs.2,000-5,000, even a minuscule OPD cover of Rs.5,000-10,000 may cost you as high as Rs.5,000-7,000 or maybe even more. As you can see, there is no real financial relief in taking OPD insurance. Therefore, you might as well remain uninsured and spend it out of your own pocket, rather than first pay the premiums and then claim it back.

Cost apart, OPD covers come with a lot many limits, restrictions and exclusions. For example, no. of doctors' consultations in a year may be limited; amount spent on dental treatment may be restricted to a few thousand rupees; psychiatric treatments could be excluded; so on and so forth.

Given these serious problems with OPD insurance, you would do well to simply avoid such plans.

There is, however, one interesting advantage of an OPD policy... to save tax.

As you would be aware, u/s 80D we are allowed to deduct the amount of premiums paid on health insurance from our total income and save tax. The limit on this deduction is Rs.15,000. However, as regular policies do not cost much, for many tax payers this limit remains unutilized . So, for the balance amount they can buy an OPD cover and enjoy tax benefit. 

For example, suppose you pay Rs.7,000 in a year for the conventional medical policy and you fall under 30% tax bracket. Then, by paying Rs.8,000 as premium for an OPD cover, you would save around Rs.2,400 on your total tax outgo.

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