Complete Guide on The Basics of Health Insurance

Rising medical costs and unexpected health issues make having a Health Insurance policy essential, regardless of age. However, selecting the right plan involves more than just a quick search online and a few mouse clicks. When buying a Health Insurance policy, you must consider several factors, including coverage options, waiting periods, premiums payable, terms and conditions, and more. This article highlights some critical components you must understand when choosing a Health Insurance policy. Also read: What is General Insurance?

Health Insurance policies provide financial coverage for various healthcare-related expenses in exchange for paying regular premiums. Your maximum financial coverage under the policy is the total cost your insurer will bear to cover your medical expenses within the policy term.For instance, consider that your maximum coverage is ₹ 50,000, and you get hospitalised twice a year. Your medical expenses come up to ₹ 25,000 and ₹ 35,000, respectively. Here, your insurer will pay ₹ 50,000 on your behalf under your Health Insurance policy, but you must bear the remaining ₹10,000.The example mentioned above is rudimentary of how a Health Insurance policy works. In reality, plenty of options are available, and the terms and conditions usually vary depending on your insurer.

Even though Health Insurance policies are different, their terminology is mostly consistent across each policy. Before opting for a Health Insurance policy, here are some important terms to familiarise yourself with.

Policyholder

This refers to the person who owns a Health Insurance policy and pays the required premium. So, if you buy a Health Insurance policy in your name, you are the policyholder. Details, such as your name, age, date of birth, and so on, are essential for insurers to issue the policy to you.Let's say you opt for a Family Floater plan designed to cover your family's medical expenses. In that case, you remain the policyholder while your family members covered under the contract are called beneficiaries.However, let's assume you buy a Health Insurance policy for your parents. Here, you will be the sponsor of the policy and will be liable to pay policy premiums while your parents are the beneficiaries.If you have an employer who offers you a Health Insurance plan, then your employer is the sponsor and pays your policy premium.

Policy premium

Premiums are regular payments that the policyholder must make to avail of the benefits of their Health Insurance policy. However, premiums can vary depending on certain factors, and it is not uncommon to find two people paying different premiums for the same Health Insurance policy. It is because pricing is based on various factors, such as the insured person's age, pre-existing ailments, sum insured, co-pay clause, geographical location, etc. Some insurance providers may even use specific algorithms to decide your premium.You can also pay premiums quarterly, bi-annually, or annually, depending on the arrangement with your insurer. It is essential to keep up to date with your premium payments, or else your insurer can terminate the policy, which would cause a loss in coverage.

Sum insured

One of the most important elements of a Health Insurance policy is the sum insured, which refers to the maximum financial coverage you and your beneficiaries get within a specific period.The sum insured mentioned in a Health Insurance policy is subject to the type of policy, number of beneficiaries, age of the beneficiaries, underlying health conditions, certain top-ups , and so forth.For instance, the sum insured in a Family Floater Insurance plan is higher than that of an individual Health Insurance plan since additional members' expenses get covered under the same policy. Simply put, your family members under the policy can access a single sum insured amount in a Family Floater Health Insurance plan.It is vital to carefully assess your needs and medical obligations while choosing an appropriate sum insured. For example, if you or other beneficiaries under your Health Insurance policy are prone to illnesses and take regular trips to the hospital, a policy with a relatively higher sum insured amount may be suitable.Similarly, with senior citizens, choosing a higher sum insured is recommended as they typically need more medical attention than younger people.It is important to consider the sum insured amount carefully to ensure that it adequately covers your unplanned and expected medical expenses. However, opting for a higher sum insured leads to higher premium costs.

Claim

A claim is a process wherein the policyholder informs the insurer about medical costs to claim compensation. For the claim process, you must submit documents related to medical expenses, such as medical bills, hospitalisation costs, etc., within a specific timeframe. After verification of the papers, the insurance provider approves and reimburses the claims.There are two types of claims–cashless claims and reimbursement claims. In cashless claims, your insurer will settle your medical expenses directly with the hospital. However, this only applies if you have been treated at a hospital that is part of the insurer's network.In reimbursement claims, you first need to clear your hospital bills and then submit them to your insurer, who reimburses them after verification. This type of claim works in both network and non-network hospitals. Some tips to make filing a claim seamless:

• You must inform your insurer before hospitalisation in planned events or within 24 hours of hospitalisation in case of medical emergencies to avoid any hassles during the claim process.
• Maintain copies of every document you receive from the hospital, including doctor recommendations and diagnostic reports. Do the same for every document you submit to your insurer while requesting a claim, as it may help you out later if your claim gets rejected and you need to re-submit it.
• Ensure you submit all reimbursement claims within 30 days from the hospital discharge date. This would result in a smoother claim process.
• Opt for an insurer with an extensive hospital-network list to help you avail cashless claims.

Co-payment

Co-payment , or co-pay, is a clause in your Health Insurance policy that you must be careful about. As per the clause, you agree to pay a fixed percentage of the claim amount or a fixed fee if you avail of any medical services. Your insurer pays for the rest. It is a way in which you and your insurer share the financial liabilities of your medical expenses. Few Health Insurance policies have a mandatory co-pay clause, but if they do, the co-pay percentage typically ranges between 5% and 20%.

Cumulative bonus

A cumulative bonus is a monetary benefit for not making any claims during a year. Your coverage amount increases every year you do not file a claim. Under the current rules of the Indian insurance regulator – IRDAI – insurers can increase the coverage amount by 5% for every no-claim year. However, the bonus can be at most 50% of the initial coverage amount of the policy.

Deductible

Deductibles are the portion of medical expenses you must pay before your policy coverage kicks in. It is similar to co-payment. However, unlike co-payment, where you pay a certain percentage of the claim amount every time you avail of medical services, you pay a fixed amount as deductible for the entire year of a policy.Simply put, the insurance provider will reduce the deductible amount from your healthcare bill before paying your claim amount. Usually, policies with a higher deductible clause have high coverage amounts and lower premiums.

Waiting period

Some Health Insurance policies may require you to wait for a certain period, known as the waiting period before you can file a claim. Most plans come with a waiting period that typically lasts for 30 days. However, some policies may have a longer waiting period. For instance, in Health Insurance plans that deal with pre-existing diseases, you may have to wait between one and four years before certain policy benefits kick in. There may be some exceptions to the rule. For example, the waiting period may be waived if you require hospitalisation after an accident.

Free-look period:

Yet another important feature of a Health Insurance plan is the free-look period, where you can cancel a newly purchased Health Insurance policy without paying any penalty. Insurers provide you 15 to 30 days to cancel the policy if you feel the terms do not match your requirements. If you cancel the policy within the free look period, your insurer refunds your money but may deduct some charges for processing and stamp duty. However, this feature is only available when you purchase a policy rather than renew an existing one.

Top-ups:

Top-ups are supplementary benefits that enhance your existing Health Insurance policy by increasing your total coverage limit. These covers are ideal for additional medical expenses where you have exhausted your sum insured.Top-ups are usually cost-effective for increasing your maximum financial coverage instead of increasing your base sum insured amount by paying a higher premium. It is because you need to pay certain deductibles before availing of the benefits of your Top-up plan. For example, if you have a Top-up policy with a deductible of ₹ 2,000, and you incur medical expenses worth ₹ 7,000, you first need to pay ₹ 2,000 from your pocket, and then your Top-up policy covers the remaining amount.

• Individual Health Insurance : Provides medical coverage for a single person's hospitalisation and treatment expenses.
• Family Floater Health Insurance : An economic policy that provides financial cover for multiple family members under a single sum insured.
• Senior Citizen Health Insurance : Tailored for individuals over 60 years, the policy mainly offers coverage for age-related health issues.
• Group Health Insurance : Offered by employers or organisations to extend health coverage to their employees.
• Critical Illness Insurance : Pays a lump sum if diagnosed with a specified critical illnesses like cancer, cardiac conditions, etc.
• Maternity Health Insurance : Covers pregnancy-related expenses, including pre- and post-natal care and delivery charges.
• Personal Accident Insurance : Provides financial support in case of accidental injuries, disabilities, or death due to accidents.
• Top-up and Super Top-up Health Insurance : Extends coverage beyond a set threshold once the basic policy is exhausted.
• Unit-Linked Health Plans (ULHP) : It combines Health Insurance with investment options to grow savings while maintaining coverage.

• Financial protection : A Health Insurance policy covers planned and unplanned hospitalisation expenses, easing your financial burden during medical emergencies.
• Access to quality healthcare : Choose the best hospital and access specialists, diagnostic tests, and treatments through your insurer's network hospitals.
• Tax friendly : Health Insurance premiums are tax deductible and can reduce your taxable income by up to ₹ 25,000 (below 60) or ₹50,000 (above 60).
• OPD treatment : Some plans offer coverage for outpatient treatments, doctor's consultations, and medications for an extra premium.
• Free annual check-ups : Many plans provide complimentary yearly check-ups, aiding early detection of health issues.
• Preventive care and wellness : Coverage for vaccinations, screenings, and wellness programs promotes early detection and better health outcomes.
• Family coverage : Health Insurance includes spouses, children, and dependents, ensuring comprehensive protection for the family.
• Peace of mind : Assured protection against medical emergencies grants peace of mind and lets you focus on your well-being.

• Assess your needs: Consider your medical history, age, and your family's health needs. Determine the coverage required for hospitalisation, pre-existing conditions, maternity, etc.
• Check coverage and benefits: Evaluate the coverage offered, including hospitalisation expenses, pre- and post-hospitalisation , critical illnesses, OPD expenses, etc.
• Find out about network hospitals: Check the list of network hospitals associated with the insurer. Ensure there are quality healthcare providers in your vicinity.
• Evaluate sum insured: Choose an adequate sum insured considering medical inflation and potential future healthcare expenses.
• Check premiums: Compare premiums for different plans. Choose a plan that fits your budget while providing adequate coverage.
• Ask about the co-payment and deductibles terms: Understand co-payment (the portion you pay during claims) and deductibles (the pre-defined amount you pay before insurance kicks in).
• Check waiting periods: Be aware of waiting periods for pre-existing conditions, specific treatments, or maternity coverage.
• Assess claim settlement ratio: Research the insurer's Claim Settlement Ratio to gauge their efficiency in settling claims.
• Read the exclusions: Understand the policy exclusions, which are conditions or treatments not covered by the plan.
• Go through reviews: Read reviews and feedback about the insurance company's customer service and overall reputation.
• Know the renewal terms: Check the maximum age limit for plan renewal to ensure coverage for the desired period.
• Understand portability options: Check if the plan allows easy portability to another insurer without losing accrued benefits.
• Ensure policy terms: Read and understand the policy document, terms, and conditions before purchasing the policy.

• You need to consider several factors before buying a Health Insurance plan.
• Knowing basic terms can put you in a better position to understand the various types of policies available to you.
• Some important terms you should know are policyholder, premium, sum insured, claim, deductible, co-payment, and waiting period.
• Read up on the benefits of opting for policies with deductibles and co-payment clauses.
• You can also contact a reputed insurance provider to discuss your requirements and plan accordingly.