8 key concepts to understand before you buy health insurance
8 key concepts to understand before you buy health insurance
Various studies point out that 1 in 4 women and 1 in 5 men are affected by critical illnesses such as heart ailments, cancer, diabetes or kidney related diseases before reaching the age of retirement. Some of these illnesses not only require high medical and hospitalisation costs to be met but can also result in loss on income and additional financial burden due to lifestyle changes. Health insurance helps mitigate some of the financial risks and uncertainties associated with such medical emergencies. Here are some of the key concepts related to health insurance that one should be familiar with to help choose the right coverage and product.
1. Sum Assured/Sum Insured
Health insurance is a contract where the insurance company provides a cover to the insured against the payment of premium. The amount of cover purchased is called Sum Assured. This is the maximum amount up to which claims can be made by the insured during the term of the policy (which is typically 1 year). For e.g. if you purchase a health insurance policy for Rs, 3,00,000 Sum Assured, then you the maximum amount you can claim for hospitalisation and other medical expenses as provided by the product would be limited to Rs. 3,00,000. If the hospitalisation and related treatment costs are higher than this amount, then the differential will have to borne by the insured. What can or cannot be claimed is governed by the product benefits and terms and conditions.
2. Individual vs. Family Floater
A family floater policy covers all family members (Insured, his/her spouse and children) under one single policy. The Sum Insured floats over the entire Family and a consolidated premium needs to be paid. There is a limit on the no. of children that can be included and age before and beyond which they are not covered which varies across products. Parents of the insured are typically not included in a family floater policy.
An individual policy, on the other hand, provides health insurance coverage to only the individual for whom the insurance has been purchased.
While a family floater may turn out to be cheaper than taking 2 or more individual policies, the associated cover provided is at a family level. For e.g. if you take 2 Individual policies with a Rs. 200,000 Sum Assured each for yourself and your spouse, then both of you are covered for Rs. 200,000 each. However, if you take a family floater with a Rs. 200,000 Sum Assured then this limit applies to the two of you together.
3. Cashless hospitalisation
This is a facility provided by health insurance companies under which a person can get the required treatment while the medical expenses are settled by the insurance company directly with the hospital if the hospital comes under its network subject to the treatment being one that is covered under your plan and up to a maximum of your Sum Assured. You may, therefore, also want to compare the associated network of hospitals of each insurer when comparing products to meet your needs.
4. Maximum Renewal Age
This is the age to which the company would continue to provide you with health insurance on payment of premiums. A product that offers a higher maximum age of renewal should be considered favourably as it allows you to remain covered under a health insurance plan especially at ages when it matter the most.
5. Exclusions
Most products come with a set of defined exclusions. These are a set of conditions, ailments or diseases or causes of medical conditions that are not covered under the product terms and conditions. Any costs associated with an excluded medical condition will not be covered by your health insurance product. While exclusions vary across products the following are most common and are excluded under most products:
Expenses arising from HIV or AIDS and related diseases, use or misuse of liquor,
intoxicating substances or drugs as well as intentional self injury
War, riots, strike, nuclear weapon, induced treatment
It is important to review the exclusions clause of products at the time of comparing health insurance products or at the time of purchasing one to ensure that you know what would be available under your health plan.
6. Critical Illness cover
A Critical illness cover is generally available as a top-up or rider with your health insurance policy. As the name suggests, these plans cover you for certain specific critical illnesses that are pre-defined as being covered under the plan.
Under these plans, the insured is paid the Sum Assured as a lump sum amount within a few days of a critical illnesses being diagnosed. Once this lump sum is paid, the plan ceases to exist. The differences between a Health Insurance policy and a Critical Illness plan are:
Health Insurance plans cover costs related to hospitalisation on account of any medical condition or injury while Critical Illness plans cover only pre-specified illnesses
Both Health insurance as well as Critical illness plans are bought for a specified Sum Assured (the maximum benefit payable by the insurance company) and are typically sold for the duration of one year and need to be renewed every year.
In case of Health insurance, you will be covered for any medical treatment or hospitalisation expenses as long as they are within your Sum Assured limit and the policy can continue for the remaining part of the year with a reduced cover (Sum Assured minus expenses claimed). On the other hand, your critical illness will pay you the entire Sum Assured once any of the specified diseases are diagnosed. You are then free to utilise this amount as per your financial needs which could be a lot more than those just related to hospitalisation.
A combination of a health insurance policy with a critical illness rider helps you meet your hospitalisation expenses for both critical illnesses or even other diseases/accidents through the health policy and can provide you with a meaningful financial protection you may require in case of a critical illness.
7. Waiting Periods
Most health insurance policies have a waiting period of that may vary from 30-90 days, during which no claims are permissible. However this doesn't include any accidental emergencies which are usually covered from day 1. The waiting period varies with product and company and is a feature that you should compare at the time of purchasing health insurance.
In addition to this generic waiting period, there are also certain specified diseases that are not covered for specific waiting periods. These waiting periods as well as the specified diseases to which these periods apply vary across companies and products and range from anywhere between 1 to 4 years.
8. Pre-existing disease cover
Any disease or ailment already in existence at the time of purchasing a health insurance policy is termed as a pre-existing condition. All pre-existing illnesses at the time of taking the policy are generally excluded from the health insurance cover. However, in some products pre-existing illnesses may be covered after a specified waiting period. What this means is that if you continue with an insurance product (i.e. keep renewing your policy) for the specified period then certain pre-existing illnesses may be covered on the completion of the waiting period. This waiting period varies by product and insurance company.
It is always important to carefully review the products' benefits, terms and conditions and associated features get complete information on available choices and compare before you buy.
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