Safeguard Benefit/Consumables Cover in Health Insurance

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The pandemic, Covid-19, changed the world. Hospital treatments began to cost more, because of medical inflation. The rise in the usage of medical equipment like syringes, gloves, cotton, bandages, PPE kits, gowns, masks - also known as consumables - also contributed to tall medical bills and formed up a significant portion of it. What constituted approximately 3% of the expenses before, now stood at 25-30%!

Along with rising costs, the pandemic also caused a sharp surge in the number of hospitalisations. This led to more claims, hurting benefits like the No Claim Bonus of health insurance owners.

Seeing the growing concerns over skyrocketing hospital expenses, health insurance companies introduced an add-on known as the Safeguard Benefit or Consumables Cover to shield you from paying these exorbitant prices from your own pocket. You can get this benefit with your health plan - by paying a certain extra premium - and take care of many expenses that are otherwise not covered.

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This cover, under different names, is currently being sold by five insurance companies -

  • Protector Rider: Available as a separate rider with HDFC Ergo.

  • Protector Benefit: Available as an inbuilt benefit with ICICI Lombard.

  • Safeguard Rider: Available as a separate rider with Niva Bupa.

  • Care Shield Rider: Available as a separate rider with Care Insurance.

  • Future Secure: Available as a separate rider with Aditya Birla Active Assure Diamond.

Let’s Understand How This Benefit Works.

It has three components -

  • Covers Non Payable Consumables

    Consumables are expenses incurred by a hospital on supplies like cotton rolls, masks, swabs etc. Insurers consider these costs to be embedded within the charges applied by the hospital, and hence do not pay them if they are billed separately.

    For instance, as per insurers, cotton rolls, sanitizers used during a surgery should be included in the cost charged for the operation theatre or the surgery costs by the hospital, and not charged separately. These costs used to be less than 5% of the total bill and hence went unnoticed when deducted by insurers. This changed during the pandemic as hospitals needed more consumables in the form of PPE kits, sanitization, and waste management charges. In some cases, the cost of consumables in private hospitals went upto 10-30% of the total bill. When this amount was deducted, it became alarming for customers.

    Listening to the customers' needs, insurers introduced a new add-on to cover non-payable consumables like masks, gloves, housekeeping items, and sanitization under health insurance. This add-on now ensures that the deductions under a comprehensive health insurance are minimal.

  • Protects Your No Claim Bonus (NCB)

    The No Claim Bonus in health insurance is a reward given to you for every year you go without filing any claims. As a part of the bonus, the insurer will either -

  1. Increase your sum insured by a certain % without increasing your premiums, or
  2. Reduce your premiums by a certain %.

    However, when you do make a claim in a policy year, the NCB you have earned so far will reduce at the same rate it increases when there is no claim.

    A Safeguard Benefit offers you protection against this reduction. If you make single or multiple claims in a policy year up to a certain limit, with this benefit in place, your NCB will not get reduced or impacted. The limit might differ across insurers.

    For instance -

    Max Bupa, ICICI Lombard, HDFC Ergo

    The NCB will not be affected if you make single or multiple claims in a policy year up to Rs. 50,000.

    Aditya Birla Health Insurance and Care Insurance

    the NCB will not be impacted if the total claims in a year do not exceed 25% of the sum insured.

    Example: Gaurav has a health insurance policy with a sum insured of Rs. 10 lakhs. Every year he does not make a claim, he gets a No Claim Bonus of 10%. Now, Gaurav has not made any claim for the last 2 years and hence, his sum insured has increased to Rs. 12 lakhs. In the 3rd policy year, he gets hospitalised for high BP treatment. The hospitalisation expenses come up to Rs. 2 lakhs. He makes a claim for the same.

    Let’s see how the sum insured is affected -

    • Without the Safeguard Benefit: The sum insured will be reduced by 10% of the base sum insured.

    • With the Safeguard Benefit: The sum assured will not get affected.

  • Protection From Inflation.

    Medical inflation is rising at a rapid rate. India’s inflation rate stood at 14% in 2021 - the highest among Asian countries. Increased costs of fuel and medical supplies, newer diseases emerging every now and then, medical advancements - all contribute to growing healthcare costs. For instance, ultrasounds used to cost Rs 700 earlier and now cost Rs 1500.

    So, a health cover that might seem sufficient in today’s time might prove to be irrelevant in the future - looking at the way the prices are rising!

    A Safeguard Benefit is one of the ways by which you can cope up with inflation. It increases your base sum insured on a cumulative basis every year, based on the previous year’s inflation rate. The inflation rate is calculated on the basis of the average Consumer Price index (CPI) of the entire calendar year published by the Central Statistics Office. You won’t have to worry about upgrading your health insurance coverage.

    Consumer Price Index: Measures the price of consumer goods and how they're trending. It's a tool for measuring how the economy as a whole is faring when it comes to inflation or deflation.

    However, please note that if the Safeguard Benefit is not renewed, any accumulated amount under this benefit will lapse. The sum insured will roll back to the base policy sum insured as specified in the Policy Schedule.

    Diseases are on the rise, healthcare is expensive, and inflation is here to stay. These are some bitter truths of life. However, the silver lining is that you have health insurance and options like a Safeguard Benefit available to protect you. Do your research, and invest in it while you can.

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Wrapping Up!

That is all from our side today. Hope you now have enough clarity on what TPAs are, and their role in health insurance. TPAs operate differently in the case of both cashless as well as reimbursement claims - so, ensure you’re aware of all the steps involved to avoid any hassles while making a claim.