We invest with the purpose of creating wealth and securing our future. But one of the most important things in your financial planning kitty is medical insurance. You need health insurance at all times for family and yourself because you never know when disease comes knocking at your door. Though life expectancy has increased over the years but the incidence of diseases has also gone up considerably. The increase in the average lifespan of individuals could be attributed to the advancement in healthcare industry. But improved healthcare services come at a cost and such costs are ballooning each day.
Though health insurance cover is recommended for individuals in all age groups but you should buy a cover early in life. Medial insurance is typically an annual contract between the insurer and individual/group for a particular health cover at a premium. Here we will take you through various aspects of medical insurance and things you should consider before buying a health insurance policy.
Types of health cover:
There are primarily two types of health policies: pure indemnity products referred to as mediclaim policies and defined benefit policies such as health insurance policies issued by Life Insurance Company or critical illness plans. In a mediclaim policy the insurer will pay for the cost of hospitalization while if you opt for a defined benefit plan then it will pay a lump sum only on a defined medical procedure. It is advised that even if you have taken a basic health plan, you should supplement it with a critical illness plan that covers maximum illnesses.
For instance, a critical illness policy will give you a lump sum if you contract a pre-specified illness, a hospital cash policy will give you daily allowance for the time you are hospitalized while a major surgical benefit policy will give you a lump sum on a pre-defined surgery. Such polices are seen as top-up policies.
What is sum insured?
Sum insured is the amount for which you want to cover yourself for medical expenses. There is no thumb rule to arrive at health insurance need. But you should review your health insurance need in every three years.
Most non-life insurance companies offer health insurance policies for a duration of one year, there are policies that are issued for two, three, four and five years duration also. It could be offered on an individual basis or on floater basis for the family as a whole. Life insurance companies have plans which could extend even longer in the duration. You can buy a plan from a sum insured of Rs5,000 in micro-insurance policies to even a sum insured of Rs50 lakh or more in certain critical illness plans. Most insurers offer policies between Rs1 lakh to Rs5 lakh sum insured.
What is waiting period for claims?
When you buy a new policy, generally, there will be a 30 days waiting period starting from the policy inception date, during that period you will not be able to make any claim for hospitalization from insurance companies. However, this excludes emergency hospitalization due to an accident. This waiting period will not be applicable for subsequent policies under renewal.
What is pre-existing condition?
It is a medical condition/disease that existed before you obtained health insurance policy, and it is crucial because insurer do not cover such pre-existing conditions, in first 36 to 48 month of your policy. It means depending on the policy you have bought pre-existing conditions can be considered for claim after completion of 36 or 48 months of continuous insurance cover.
Health Insurance policies may offer cumulative bonus (CB) wherein for every claim free year, the sum insured is increased by a certain percentage at the time of renewal subject to a maximum percentage (generally 50%). In case of a claim, CB will be reduced by 10% at the next renewal.
Minimum period of stay in hospital
In order to make a claim there is a minimum time for which you have to stay in the hospital, which is usually 24 hours. This time limit may not apply for treatment of accidental injuries and for certain specified treatments.
Pre and post hospitalization expenses
Expenses incurred during a certain number of days prior to hospitalization and post hospitalization expenses for a specified period from the date of discharge may be considered as part of the claim provided the expenses relate to the disease /sickness.
What all your medical policy covers?
A basic health policy will cover your hospitalization expenses. Hospitalization expenses include accommodation cost, surgical operations, nursing expenses, doctor’s fees and cost of medicines and diagnostic tests. The policy should fund your hospitalization expenses as well as day-care procedures. There are many ailments for which hospitalization are not required, thanks to technological advancement; these ailments come under day-care procedures. A good policy will cover all these or at least all the important day-care procedures.
You should understand the terms mentioned in your health policy to make a wise and informed decision.
If you read your documents carefully you will find some exclusion under health policies. These exclusions are:
a) Insurer may not cover you for pre-existing diseases.
b) Under first year policy, any claim during the first 30 days from date of cover, for sickness/ disease but this is not applicable for accidental injury claims.
c) In the first year of cover some diseases are not covered such as cataract, prostatic hypertrophy, Hernia etc. So you should know which those diseases are.
What is a floater policy?
It is a policy which covers all members in your family under one umbrella, which means each family member is covered for the sum insured chosen under a single policy. The insurer will charge less premium compared with the total premium paid for separate individual policies for all members of a family. It means less paperwork and will have a single window for any claim process. If you have a family, you could consider a family floater plan but ensure that the sum insured is huge enough to protect your entire family. A floater policy treats the entire family as one unit so if the cover amount is inadequate, a single claim within the family may mean the rest of the family members are left with little cover.
Why sub-limits in a health plan important?
There are several clauses in the form of sub-limits which has to be understood before buying a health insurance policy to avoid paying from your own pocket otherwise the sole purpose of buying health insurance will be defeated.
In order to limit liability, insurers put certain restrictions on the benefits, the most common restrictions are sub-limits and co-payment. A sub-limit breaks the sum insured into smaller fractions. The most common sub-limits are room rents, doctors’ fees and diagnostics.
Most policies have a cap on the room rent that the insurer will pay. Anything over that will have to be borne by you. For example if you have a sum insured of Rs 1 lakh and the insurer has capped your room rent at 1% of the sum insured then your room rent cannot exceed Rs 1,000. If at all the amount exceeds the specified limit, then you have to pay the balance from your pocket.Several hospitals have standard surgery/treatment packages which are defined in terms of the room that is selected. If you opt for a room which has higher rent, than what is permitted as per the sub limit, you will have to pay the additional charges from your own pocket.
These sub-limits may also be applicable to certain diseases. Sub-limits clause is restricted to common ailments such as cataract, piles, tonsils, sinus, hernia, kidney stones, and so on. The list of ailments under sub-limits and restriction in treatment costs varies from company-to-company.
There are sub-limits on specific treatment as well. You need to check the list of ailments which come under the sub limits clause and the amounts specified against each of them. Even though your sum assured may be high, it may happen that the due to the sub limit clause you won’t be able to claim your entire hospitalisation expenses.
Sub-limits in health insurance policy may also come in form of a co-payment clause. Co-payments happen in certain reimbursement covers and refer to the portion of claim that a policyholder agrees to bear while the insurance company undertakes to chip in with the rest. Under co-payment, you need to bear a certain percentage of the claim amount. This clause is usually a part of policies for senior citizens, but some insurers may also have a disease- or city-specific clause. It is advisable to choose a plan with no disease or expenditure-specific sub-limits. Such a policy might be expensive but you will be assured on the higher cost of expenses.
Post hospitalisation clause: Some of the policies categorically mention that after discharge from hospital, any additional costs related to that ailment will be paid subject to a ceiling.
If you want your claim to be smoothly processed, it is better to go through the sub-limit clause and select only those policies, which does not contain such clauses. Ideally the premium for policies without sub limits may be slightly higher than those which contain those limits.
What is portability?
The latest regulations allow portability of medical-insurance policies. At the time of renewal one can carry over the cover to another insurance company, through written communication (at least 45 days before the renewal is due) to the insurer requesting the shift and specifying the new insurance company.
How to claim: There are two ways to make a claim on your basic policy. You can either pay the bills and get them reimbursed later or directly opt for the cashless mode. Insurance companies have tie-up arrangements with a network of hospitals in the country. If you take treatment in any of the network hospitals, there is no need for the insured person to pay hospital bills. The Insurance Company, through its TPA will arrange direct payment to the Hospital. Expenses beyond sub limits prescribed by the policy or items not covered under the policy have to be settled by the insured direct to the Hospital. The insured can take treatment in a non-listed hospital in which case he has to pay the bills first and then seek reimbursement from Insurance Co. There will be no cashless facility applicable here.
Did you know of the tax benefit?
Under section 80D of the Income-tax Act, the premiums you pay qualify for tax deduction up to Rs15,000 and an additional Rs 15,000 if you buy health insurance for your parents or Rs. 20,000 if your parents are senior citizens. If you are a senior citizen yourself, you can claim up to Rs 20,000 for premiums paid for your own policy. So total deduction can be claimed up to Rs. 40,000
Your employer may offer a basic health insurance policy but still buy a basic insurance policy and top it up with a critical illness plan. Mostly insurers offer to renew the cover till a certain age. But insurers are offering lifetime renewability of policies. Ask the insurer if you can renew your policy all your life. Also, do not forget to review your insurance cover and increase it if required to take care of increasing healthcare costs.