What is a Hospital Cash Rider in Life Insurance?

Definition:

A hospital cash rider is an optional benefit that you can add to your life insurance policy. It is a useful rider that provides a fixed daily benefit (amount) if you’re hospitalized. It is provided regardless of your medical expenses. Some insurers may offer an enhanced payout if you're admitted to an ICU.

Contents

• Key Takeaways
• How does Hospital Cash Rider work in Life Insurance?
• Real-Life Example Scenario
• Why does it matter to policyholders?
• Legal & Regulatory Guidelines To Know
• Exclusions
• Conclusion
• Frequently Asked Questions

Key Takeaways

• It acts as a daily cash cushion for the days that you’re hospitalized.

• It is a fixed payout and is not linked to your medical bills.

• It is ideal for indirect costs, such as travel, food, or lost income.

• It requires a small additional premium on your life insurance policy.

• It comes with limits on payout days and eligibility conditions.

How does Hospital Cash Rider work in Life Insurance?

• The rider is available as an add-on to your base life insurance policy, typically in term plans or comprehensive life plans.

• You have to pay a small extra premium for this benefit.

• In case of illness or accident that leads to hospitalization, you can claim a fixed per-day amount as a cash benefit.

• This benefit is unconditional and pre-defined, which means, you receive it regardless of your hospital bill amount being high or low.

• There is usually a waiting period, a maximum number of claim days, and a cap or limit on the daily benefit.

Real-Life Example Scenario

Let’s say, for example, Ravi, a 36-year-old software engineer, has a term life insurance policy with a Hospital cash rider offering ₹2000 per day. He is hospitalized for 7 days due to dengue. His main health insurance covers his hospital bills, but he still needs money for daily expenses like travel costs for his family, daily food costs, and household help.

Through the Hospital cash rider, Ravi receives ₹2000 in cash per day, which means he gets a total of ₹14,000 from the insurance company over seven days. This allows him some relief as he can now manage those daily unplanned expenses without any financial strain.

Why does it matter to policyholders?

Here are some of the advantages or reasons why Hospital cash riders matter to policyholders:

• Financial cushion: It acts as a financial cushion for non-medical expenses that arise during hospitalization, like food, commute for family members, and lost income.

• Fixed daily payout: It gives you fixed payouts every day of hospitalization, regardless of your actual medical bills.

• Out-of-pocket costs: Managing any hidden or out-of-pocket costs becomes easier. These are costs that may not be covered by standard insurance policies.

• Less stress: This rider can offer peace of mind when you’re hospitalized and not in the condition to work or manage extra costs.

• No new policy needed: It comes as an add-on benefit and hence, you don’t need to buy a new policy to receive this benefit.

Legal & Regulatory Guidelines To Know

• Transparency: Insurance companies are required to disclose rider benefits, exclusions, and claim procedures to comply with IRDAI norms.

• Policyholder rights: As a policyholder, you are entitled to a free-look period depending on the terms of your policy. Policyholders can cancel the rider if they are not satisfied with the terms.

Exclusions

Like any other insurance benefit, the hospital cash rider comes with certain exclusions. These are specific conditions under which the insurance company will not pay the daily cash benefit even if you’re hospitalised. Common exclusions include non-disclosed pre-existing conditions, cosmetic or elective surgeries, hospitalization due to self-harm, substance misuse, or war.

Conclusion

Understanding the Hospital Cash Rider is important as it helps you bridge the financial gap left by standard insurance policies. While your medical bills might be covered by your insurance policy, indirect expenses can pile up quickly. It ensures that you and your loved ones have added peace of mind when it comes to finances during a medical emergency, allowing you to focus on your recovery. This rider is worth a look for people who are considering buying or upgrading their life insurance policy.

Frequently Asked Questions

Below are some of the frequently asked questions on Hospital Cash Rider in Life Insurance

What is a hospital cash rider?

A hospital cash rider is an optional benefit that you can add to your life insurance policy. It acts as a daily cash cushion for the days that you’re hospitalised.

Do I need to submit hospital bills to claim the hospital cash rider?

The hospital cash rider offers a fixed daily benefit for each day you are hospitalized, regardless of actual expenses. Unlike regular health insurance, this benefit is not reimbursement-based.

Can I use a hospital cash benefit for personal items?

Yes. Since a hospital cash rider is given to the policyholder to meet daily expenses during hospitalization, it can be used for personal items or expenses as well, for example, travel or food. The expenses do not need to be strictly medical-related.

Can I buy the hospital cash rider separately?

No. The hospital cash rider is an add-on and thus cannot be purchased as a separate policy. It needs to be added to a base life insurance plan.

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