What Is Health Insurance And How Does it Work? – Forbes Advisor INDIA

[ad_1]

Healthcare expenses are increasing at a rate higher than medical inflation, and that is why it is must for everyone to have a health insurance cover which not only helps you to save your emergency funds and saving of lifetime, in case any medical emergency occurs to you or your near and dear ones, but also supports you to deal with rising medical costs.

Experts believe that a health insurance policy must be a part of your financial planning and it should be purchased early when you are young and responsible to stay safe and secured. Investing in a health insurance plan at an early age also provides other numerous advantages such as better sum insurance coverage, lower premium rates, no medical tests and so on.

Here’s a guide which explains clearly all about health insurance policy , factors affecting health insurance, what are the different kinds of health plan which one can opt for and much more.

What Is Health Insurance?

Health insurance policy is an assurance which provides immediate financial help in case when any medical emergency arises. It is a contract between a policyholder and the insurance company which covers medical expenses that might occur due to illness, injury or accident. If you have a health insurance policy, then some or all the medical expenses will be borne by the insurance company, against which an insured is supposed to pay a certain amount known as premium.

There are two ways by which which the insurance company compensate for your medical expenses:

Cashless Treatment: Here, the policyholder is not supposed to pay anything to the network hospital. As the insurance company pays the hospital directly.

Reimbursement: Here, the policyholder is supposed to settle their medical expenses first and later ask for reimbursement from the insurance company.

Why Should I Have A Health Insurance Policy?

Purchasing a health insurance plan is something that we all avoid till the time we understand its importance. Before buying one, it is crucial to understand the various benefits of a health insurance plan as medical emergencies can knock anytime and could make a big hole in your pocket. Therefore, it is advisable to buy a health insurance policy at a very young age, where one can have the comprehensive coverage at an affordable premium cost, plus you also get the advantage of tax deductions on premium paid.

In a nutshell, one should purchase a health insurance policy because:

It facilitates you to get superior medical treatment without any worry of high medical costs.
Offers specialized coverage for critical illnesses.
Covers road emergency ambulance costs.
Offers an affordable premium for youngsters.
Provides cashless claim benefit, which allows you to take care of your health instead of worrying about hefty medical bills.
Protect your savings during medical emergencies.
Provides tax benefits under Section 80D.
Lastly, it safeguards you and your family and protects your savings.

Kinds Of Health Insurance Policies

There are basically two kinds of health insurance policies such as individual or self-plan and family floater policy. As the name suggests, individual policy would only provide coverage and benefits to the main policyholder. On the other hand, in case of a family floater plan, there is only one plan which provides coverage to your entire family such as spouse, dependent children, parent and parent-in-laws or dependent siblings.

One should select the plan, depending upon the factors such as your age, family medical history, children’s age, medical history and of course one’s budget. Let’s understand about each of these plans in detail:

Individual or Self Health Insurance Plan

An individual health insurance policy is issued under the name of a single policyholder, which means that the sum insured coverage and the benefits of the policy is totally dedicated to the insured and covers no one else. Here, the individual purchases the policy to maintain their own health which in turn provides financial help in case of their own medical emergency.

Family Floater Health Insurance Plan

Family floater policy is one policy which aims to provide sum insured coverage to individual and as well his family members. Rather than taking a single policy for each member of the family, the family health insurance plan is a better option, as it acts as an umbrella for the entire family. Here the sum assured coverage is shared by all the members who have been covered under the same plan.

However, it is advisable to have a separate plan for your senior citizen parent or parent-in-laws as it will prove to be a more affordable option. Similarly, if any member in the family has a huge medical history, then it is also better to buy a separate plan for them rather than covering them in the family floater plan.

Factors To Consider Before Deciding On A Health Insurance Plan

Step 1: Finding the Right Insurance Company

Here are some factors that you can use in deciding on the right health insurance company –

1. The Range of Plans Offered

Check out the different types of plans that a company offers as well as the plan USPs. Some companies offer a range of products to suit the varied coverage requirements that you have. Choose a company with a diverse range of plans so that you can find the right policy suiting your needs.

2. The Network of Hospitals

The network of hospitals is extremely important for availing cashless claims. The wider the network that an insurer has, the better it would be. This would allow you to locate the nearest cashless hospital with ease.

3. Claim Settlement Ratio

The claim settlement ratio points to one thing – what percentage of claims did the company settle in a financial year. A higher ratio indicates that the company is steadfast in settling its claims. A factor that works in favor of the insurer.

4. Claim-Based Loading

Some companies tend to increase the renewal premium if you made claims in the previous years. This converts to higher premium expenses. As such, avoid companies that follow this practice.

5. Premium Rate

Pricing policy is how much premium the company charges vis-à-vis its competitors. You can check the pricing policy by comparing similar plans across different companies.

For instance, the Aarogya Sanjeevani policy offers uniform coverage features across all insurers. Its premiums, however, depend on the insurer’s pricing policy. Compare the premium of the plan across insurers to find the insurer that charges the least. Chances are, its pricing policy would be fair across all its plans.

6. Ease of Claim Settlement

Insurers have revolutionized their claim process and made it simpler. The following concepts are gaining traction:

AI-enabled claim processing
WhatsApp intimation
Digital documentation
Quicker approvals
App-based claim intimation and tracking, etc.

Such facilities speed up the claim process and make it hassle-free. Thus, look for insurers that provide such facilities for quicker claim settlements.

7. Reviews

Lastly, don’t ignore customer testimonials and reviews. Most insurers showcase their customers’ reviews on their websites. You can check them out. Alternatively, you can talk to your friends and relatives about their insurers. If they have made a claim, find out their claim experience to know which company follows the best practices.

Step 2: Finding the right plan

Once you have zeroed in on the right insurance company, the next, and also the most important, step would be to select the plan. With multiple insurers offering multiple plans, you have a lot of choices. However, choosing the right policy is important.

As such, here are some factors that would help you with the same –

1. Coverage benefits

The first thing that you need to check is the coverage benefits that are offered by different plans. While most plans offer the basic coverage benefits, look for plans that have unique features.

First, assess your coverage needs and then look for plans that offer those. For instance, if you are planning to have a child in the near future, look for plans that offer maternity coverage. Alternatively, if your family is complete, skip such plans.

Second, look for other additional features that might enhance the scope of coverage. For instance, sum insured restoration, high no claim bonus, value-added benefits, annual health check-ups, etc. are some of the features to look for.

Choose a plan which has the most comprehensive scope of coverage. This would minimize your out-of-pocket expenses during claims and give you better financial security.

2. Customization option

Look for plans that allow you to customize the coverage features as per your requirements. This is possible through add-ons that health insurance plans offer. The add-ons help you to opt for additional coverage features as per your needs and make customization possible.

3. Premium Amount

Of course, the premium amount is important. Check the premium charged vis-à-vis the coverage offered. To get a better idea, compare. Compare the premium across other plans of different insurers that have similar coverage benefits. See if the premium is competitive or inflated given the coverage.

Choose a plan with the most competitive premium rate for the same coverage benefits, even if it means selecting another insurance company.

4. Sub-Limits

Health plans might have sub-limits on different expenses like room rent, ICU room rent, AYUSH coverage, domiciliary treatments, etc. These sub-limits limit the scope of coverage and might result in out-of-pocket expenses. As such, choose a policy that has no sub-limits so that you can enjoy the maximum possible coverage.

5. Co-Payment Clause

Health insurance plans might have co-payment clauses for different reasons. Co-payments mean that in every instance of a claim, you are supposed to pay the specified part of the claim from your pockets. For instance, a co-payment of 10% means that 10% of every claim would be borne by you. Common co-payment clauses are applicable in the following instances:

If the insured is aged 61 years and above at the time of buying the policy
If you buy the policy in a city belonging to a lower Tier and avail of treatments in a city in a higher tier
In the case of specified illnesses and/or treatments

Look for health insurance plans that do not have the co-payment clause. Even if the clause is unavoidable, like in the case of senior citizen plans, opt for plans with a lower co-payment rate.

6. Waiting Period

The waiting period is when specific coverage is not allowed by the health insurance policy. Once the waiting period is over, coverage is allowed.

Health insurance plans impose waiting periods in various instances. These include the following:

First 30 or 60-day waiting period for the coverage of illnesses. This is also called the cooling-off period during which illnesses are not covered. Accidental injuries, however, are covered from day 1.
Waiting period for specific illnesses or treatments like hernia, fissures, hydrocele, tonsillectomy, cataract, joint replacement, etc. This waiting period is generally 24 months. In some plans, however, the tenure might vary.
Pre-existing waiting period ranges from 12 months to 48 months. This waiting period is for illnesses or medical conditions that you might have when buying a fresh policy. Complications arising out of existing conditions are not covered during this period.
The maternity waiting period might range from 9 months to 48 months.
Waiting period for the coverage of OPD expenses, bariatric treatments, etc.

Waiting periods are inevitable. However, you can find a plan where the period is low. This is especially relevant if you are looking for maternity coverage or if you have pre-existing conditions and you want coverage for them at the earliest.

7. Discounts Available

Health insurance plans allow various types of discounts to lure customers. Some of the commonly available discounts include the following:

Discount for buying a two or three-year policy
Discount for covering two or more members under the policy on an individual basis
Discount for buying the policy online
Discount for paying the premium in a lump sum rather than in installments
Discount for the existing customers of the company
Discount for maintaining a healthy lifestyle
Renewal discount if you have not made a claim in the last policy year
Discount for choosing a voluntary deductible
Discount for availing of treatments at a network hospital

Look for the available discounts. Choose a plan that offers the highest discount so that you can get the best deal on the premium.

Now that you have found the best company and the most suitable plan, you might think that your work is done. It is not. You should keep in mind another aspect – choosing the right sum insured.

Step 3: How To Find the Right Coverage Amount?

An optimal sum insured is important to ensure that your health plan sufficiently covers your medical expenses. A low sum insured defeats the whole purpose of investing in health insurance and is a strict no-no.

Selecting the right sum insured is easier than you think. You just have to consider the following factors:

The number of members being insured under the policy
Whether you or any other member suffers from any pre-existing condition
The basic cost of hospitalization and medical treatments
The rising medical inflation

Most insurers help you calculate the ideal sum insured based on your income, expenses, existing coverage and members to be insured. You can also estimate the optimal requirement through a simple formula which is as follows:

Sum insured = 50% of your annual income + total hospitalization costs incurred during the last 3 years

For instance, say your annual income is INR 15 lakh and in the last three years you have incurred a hospital bill of INR 5 lakh. In this case, the optimal sum insured would be calculated as follows:

50% of INR 15 lakh + INR 5 lakh = INR 12.5 lakh

Step 4: How To Afford a Health Plan

The premiums of health insurance plans are affordable. Moreover, insurers offer you the facility of installment premiums wherein you can pay the premium monthly, quarterly or half-yearly. This makes the health plans affordable.

Furthermore, if affording a high sum insured poses a challenge, you can opt for super top-up health plans. Super top-up plans help in enhancing the coverage while keeping the premium low.For instance, say you want coverage of INR 15 lakh but the premiums are unaffordable. In such cases, you can opt for a comprehensive health plan of INR 5 lakh or INR 10 lakh and add a super top-up plan of INR 10 lakh or INR 5 lakh respectively.

The super top-up plan would help you enjoy an aggregate coverage of INR 15 lakh. However, the aggregate premium would be lower compared to buying a health plan of INR 15 lakh.

How To Purchase A Health Insurance Policy Online?

The simplest way to purchase a health insurance policy via online mode which can be done in minutes with a paperless process and no physical signatures.
All you have to get is full detailed information on various health policies as per your needs and requirements.
Review the best health insurance policies and compare them further and as per your needs and requirements to finally select the best one. Research them online to know more about the coverage, benefits and premium quotes at your convenient place and time.
Once you have finalized the policy, read the policy document carefully and complete the documentation process.
Once the documents have been uploaded, it is the time to make the final payment which can be done by credit card, debit card or by net banking. Insurance companies generally take seven to ten days to complete the full process and then handover the policy document to you.

Things To Avoid While Buying A Health Insurance Policy

Rushed Into Buying A Policy : Do not buy a health insurance plan in hurry. It is advisable to do proper research and then select the best health insurance policy for you or for your family. You can do your own research and compare the premium quotes online, before choosing a health insurance policy.

Choosing Insufficient Coverage: The premium cost is a major consideration while buying a health plan. Do not choose insufficient or restricted policy coverage in order to save premium cost. Rather go for a comprehensive coverage plan with considering the family size, medical history and your financial situation.

Hiding Health-Related Details: While purchasing a health insurance plan, disclose all the necessary details about your health, lifestyle habits or and pre-existing diseases. Hiding relevant medical history can cause major damage as insurance claims can be rejected on the basis of undisclosed medical information.

Not Buying A Separate Health Insurance Policy: Do not rely completely on medical coverage provided by your employers as it has only limited coverage. Also, when you leave the organization, the contract will be terminated on an immediate basis. It is crucial to buy a separate health insurance plan where the quantum of coverage is more and it will not be affected by the terms and conditions of your current employment.

Ignoring Terms And Conditions Of The Policy Document: Do not ignore or overlook the terms and conditions of the policy document. Whether it is related to coverage, premium costs, renewability conditions, discounts, sub-limits, free-look period, waiting period, co-payment clause or any sort of deductibles, everything is clearly mentioned in your policy document. If you still have any doubts, do not hesitate to reach the concerned insurance company for more clarity on your health insurance policy.

Buying A Policy For Just Saving Tax: Do not buy a health insurance policy just for the sake of saving tax on the premium paid. One should definitely know the tax benefits provided under health insurance premium paid, but the main aim of buying a health insurance plan is to get sufficient coverage which would financially help you and your family at the time of medical and health contingencies.

Frequently Asked Questions (FAQs)

What do you mean by waiting period in health insurance?

Waiting period is a very important factor in purchasing a health insurance policy. It refers to a duration which the insured has to wait for claiming the insurance benefits. It varies from one health policy to another.