We have many goals in our life such as starting a business, buying a house, going on world tour, etc. To achieve these goals, we work hard & save money. Besides working hard to achieve our goals, we also need to ensure that we take care of our health. It is rightly said that “Health is wealth”. With the rising healthcare costs, adequate health insurance is essential.
Imagine a situation, what would happen if you don’t have adequate health cover and unfortunately you are hospitalized or get injured in an accident. Temporary or long-term hospitalization can wipe off most of your accumulated savings. Therefore, prudent financial planning should also include adequate health insurance cover for you and your family.
According to the finance ministry figures, overall headline inflation in India stood at 9.4% during April-December 2010—the highest in the last decade. With medical costs growing at over 10% for four years in a row, the burden of healthcare has become increasingly heavy on the middle class.
To buy an adequate health insurance cover, firstly you should consider your healthcare needs. These needs will vary based on your family, age and economic situation. Let’s look at the key points which we need to consider while buying a health insurance policy.
Sum insured: Sum insured is one of the most important factors in buying a health insurance plan. It is the maximum amount paid by the insurer in case of claim. For example: If an individual has taken a health insurance policy of Rs. 1 lakh sum insured, and he gets hospitalized and incurs Rs. 50,000 bill as hospitalization charges. In this case, the insurance company will pay him claim amount of Rs. 50,000. But if his hospitalization expenses were Rs. 1,25,000, then the insurer will pay the sum insured—Rs. 1 lakh and the balance Rs. 25,000 has to be borne by the individual.
You should also check whether there are any medical tests required for family members. Remember to ask the insurance company/agent about surgery limits, loading conditions in the policy and cashless service.
Individual health insurance or family floater: A health insurance policy usually covers hospitalisation and medical charges. The policy reimburses these charges with regard to the disease covered or surgery done while the insured was hospitalised. Various types of medical insurance are available in the market such as individual medical insurance, family floater and overseas medical insurance (if you are travelling abroad).
Generally, individual health insurance and family floater are the two major options available to you. For example: If your family includes four people—Husband, wife and two children—then you have an option to buy four separate policies of sum insured Rs. 1 lakh for each member of your family. These policies are called individual health policy.
You also have an option to buy a floater plan worth Rs. 4 lakh. As the name suggests, a family floater policy covers your family. The policy would cover all the four family members. Before buying the policy—individual or floater—you should check if the insurance company offers any discount on the policy.
Most first time buyers wonder whether to take an ‘individual’ insurance policy for each family member or a ‘family floater’ policy. The family floater plan offers flexibility in terms of utilising the overall insurance coverage among the family as a group. It is usually issued to people up to 60 years of age covering the following family members: Self, spouse and children (maximum two).
While buying a family floater policy, you need to check whether the basic premium will be as per the highest age of the family member or the youngest member.
Unit linked health insurance plan: Some health insurance plans provide health cover for your entire family (husband, wife and two children) plus investment option to you. You can pay one annual premium, part of which will be invested to give you returns, and the rest will be used to buy you a health insurance. The plan is usually a long-term plan with a ULIP component (investment in the form of units). No claim bonus is a major benefit in mediclaim policies, which is absent in unit linked health insurance policies. In a mediclaim policy, for every claim-free year, you normally get an increase in the sum insured of 5% for the same premium.
Critical illness plan: This plan works like a rider. It insures you against the risk of serious illness in return of a premium you pay for protection. These plans provide you the same security of knowing that a guaranteed cash sum will be paid if the unexpected happens and you are diagnosed with any one of these potential killers.
In case critical illness plan, the insured receives a lump sum amount (when claimed) within a few days of being diagnosed with a critical illness. The amount will be based on the most expensive immediate critical illness treatment i.e. major organ transplant, cancer, coronary Artery Bypass surgery, First Heart attack (myocardial infarcation), Kidney failure, multiple sclerosisi, stroke, Aorta graft surgery, paralysis, primary pulmonary arterial hypertension, etc.
Know what your health insurance plan cover
Room & boarding expenses: There are further limits to this benefit which varies from insurer to insurer.
Ambulance charges are normally covered up to Rs. 1,000.
ICU charges, doctor fee, anesthetist and surgeon fees, operation and other diagnostic and surgical material costs are covered.
Day-care expenses such as include chemotherapy, radiation, dialysis, cataract, lithotripsy, tonsillectomy and so on.
Pre & post hospitalisation expenses which normally are 30 days prior and 60 days after hospitalization.
Cashless Hospitalization is offered by almost all non-life insurers.
Claim-settlement ratio of the insurance company
Read the fine print
Read the policy exclusions & the limitations in various covers before buying a health insurance plan.
Note the network hospitals covered in the insurer’s list of network hospitals for cashless claim.
Read the names of critical diseases being covered before buying a critical illness plan.
Other factors to check
Ayurveda treatments: Earlier, only allopathy was covered under health insurance policies while alternative medicine regimes such as homeopathy, ayurveda, unani and naturopathy treatments were left out. Even people having a comprehensive health insurance plan, had to pay from their own pocket if using these systems.
Now many insurance companies have started providing cover to such alternative forms of treatment, especially ayurveda. New India Assurance, Allied Insurance and Star Health have brought ayurvedic treatments under individual policies. Such claims are covered to the extent of 25% of the sum insured. Furthermore, they have to be availed of the treatment at a government hospital to be eligible for the claim.
Compare the waiting period: Individual health insurance policies bring pre-existing diseases into the ambit of coverage, post the completion of waiting period. Besides checking the health insurance premium being charged by various insurers, you also need to compare the waiting periods mentioned in the policies for covering pre-existing ailments. Some policies specify a waiting period of two years, while other policies have waiting period of four years. Also, check if certain conditions can be covered upon the payment of an additional premium. For instance, New India Assurance Company's individual mediclaim prescribes a waiting period of four years, but it offers to cover hypertension after two years, if the insured pays additional premium amount.
Other charges covered: Some policies also cover ambulance charges in their policies. The policy holder usually doesn’t have to bear the burden of the ambulance charges. Some health insurance policies provide up to 60 to 90 days of pre-hospitalisation and post-hospitalisation benefits, i.e. the cost of medical tests, medicines, scans, etc. This is usually provided under maternity benefits and treatments which do not require hospitalization.
No-claim bonus: A few health insurance policies provide a no-claim bonus. If there has been no claim in the previous year, i.e. if the person covered has not availed any hospitalisation benefit, then a bonus is declared; either by reducing the premium or by increasing the sum insured by a certain percentage of the existing premium.
Tax benefit: You can avail tax benefits under Section 80D of the Income Tax Act on the premium paid. Maximum deduction available on premium paid is Rs.15,000 for self, spouse and the dependent children. For the senior citizen, deduction available is Rs. 20,000. This means if you pay premium for your parents’ heath insurance policy, then you can avail tax benefits under Section 80D
Cashless facility: Make sure whether cashless facility is available in health insurance policy. Cashless facility means, at the time of emergency you don’t have to rush for arranging cash to deposit at the hospital. This facility is available to specific hospitals with whom the insurance companies have tie-up. Therefore, you need to check whether your nearby hospital has tie-up with the insurance company for cashless facility.
Renewal process: Many insurance companies do not renew policy beyond a particular age—say after 60 years. Select a policy that provides for renewal even at older age because at that time you will need it the most.
You should also consider that you keep your health insurance policy documents at a same place and the documents should be easily accessible to your family members because they would have to take care for claim settlement process.
Inform the TPA or insurer before hospitalisation.
In case of an emergency, intimate the TPA/insurer within 24 hours of hospitalisation.
Maintain all prescriptions, bills & payment receipts of medicines and ancillary expenses.
Ensure the bills & receipts have the correct name and dates.
How to claim?
The claim process is quite simple and easy provided your health insurance documents & paperwork are in place. You should walk into a network hospital & get the treatment done. The medical treatment bills should be paid through the health card. In case of hospitalization, you need to give the card number to the network hospital; you must pre-authorize from the TPA (intermediary between the insurance company & the hospital) & will process the cashless settlement after the verification of your policy details.
You should know the formalities required for cashless settlement as some insurance companies are required to be notified 48 hours before hospitalization. If you don’t opt for cashless settlement, you need to settle bills at the hospital and get them reimbursed later.
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