With something as important as health insurance, you cannot just pick the first policy that you come across while searching online. You need to clearly understand how the policies work along with the related jargons to choose the best.
So, if you are planning to purchase health insurance and want to make the right buying decision, here are some of the most important things that you should know about-
How Do Health Insurance Policies Work?To start with, you first need to understand how a basic health insurance policy works. As you might know by now, health insurance helps you keep yourself financially protected against expensive healthcare costs. When you purchase health insurance, it has a fixed annual coverage amount. The insurance provider will bear your healthcare expenses up to this maximum coverage amount in a year.
For instance, if the coverage of your health insurance is Rs. 10 lakhs and you were admitted to a hospital for some reason, and the bill was Rs. 2 lakhs, the insurance provider will take care of your hospital bill.
However, your coverage amount for the year will be reduced to Rs. 8 lakhs as you have already used Rs. 2 lakhs.
While there are now many different types of health insurance policies, and they all have their terms and conditions, this is the basic working of health insurance. Now that you have got the basics, let us have a look at some of the most important health insurance jargons-
1. PolicyholderThe person named in the insurance policy contract is the policyholder. So, if you have purchased an individual plan for yourself, you will be the policyholder. In case if you have purchased a family floater plan which covers your entire family, you will remain the policyholder while the members of your family will be the beneficiaries.
Similarly, a lot of people purchase health insurance for their parents. In such cases, you will be the sponsor of the policy and your parent/s will be the beneficiaries. In the case of group health insurance offered by your employer, the employer is generally named as the policy sponsor.
2. Policy PremiumThe next important thing you should know about health insurance is the premium. This is the amount that you are required to pay quarterly, bi-annually, or annually against the coverage of the policy. For instance, if you are required to pay Rs. 50,000 annually for a family floater plan against a coverage amount of Rs. 10 lakhs, this Rs. 50,000 is the premium of the policy.
The premium of the policy depends on several factors such as the coverage amount, type of policy, age of policyholder/beneficiaries, insurance provider you have selected, and more. While a cheaper premium will help you save money, you should never choose a policy based on the premium alone. You should check the features and benefits of the plan in detail before making a decision.
3. Coverage AmountAs mentioned above, this is the maximum amount that your insurance provider will pay for your healthcare expenses in a year. In individual health insurance plans, you have the entire coverage amount to yourself. But in family floater plans, all the family members included in the policy will share the coverage amount.
So, if you have included your spouse and dependent children in the policy and your spouse uses Rs. 2 lakhs from the coverage amount, the coverage of the policy will be reduced to Rs. 8 lakhs. All the people included in the policy can use this Rs. 8 lakhs coverage.
4. ClaimIf you have purchased health insurance and need medical care for some reason, you are required first to pay the bills and then get the same reimbursed from your insurance provider. When you apply for reimbursement of your medical expenses, this process is known as filing a claim.
However, most insurers nowadays offer cashless claim health insurance benefits. With cashless claims, you are not required to pay the medical bills and then get it reimbursed from your insurance provider. The insurance provider will directly pay your bills at the hospital as per the terms and conditions of the policy.
5. Network HospitalThe cashless facility is generally only available at hospitals which are included in the network of your insurance provider. Insurance providers that offer cashless facility have their own network of hospitals all over the country. It is only at these network hospitals that you can use the cashless claim facility.
If you are admitted to a hospital which is not in the network of your insurance provider, you will have to use the reimbursement facility. This is the reason why it is recommended that you should always select an insurance provider that has an extensive list of network hospitals with at least a few of them close to your residence.
6. Co-PaymentIf you are trying to understand the health insurance features better, one of the most important things you should know about is the co-payment clause. A large number of health insurance policies have a co-pay clause where the insurance provider will only pay a certain percentage of the hospital bill, and you are required to pay the rest.
In other words, you will be sharing your healthcare expenses with the insurance provider. Such policies are generally offered at a lower premium. So, if you do find a policy which is considerably cheaper as compared to similar policies from other providers, make sure that you do check whether it has a co-pay clause.
7. DeductibleThe next in this list of health insurance terms is deductible. The deductible is very much similar to co-payment. But while in co-payment there is a certain percentage of the bill that the insurance provider will pay, with the deductible, there is a certain fixed amount. Insurance providers generally have the deductible clause for the entire year of the policy or for a particular event.
With this clause, the insurance provider will deduct the deductible amount from your healthcare bill before paying the claim amount. The policyholder is then required to pay the remaining amount. Many policies with this deductible clause have high coverage amount and lower premiums. People end up purchasing such policies to save money but are then required to share the hospital bill with the insurance provider.
8. Cumulative BonusJust like you have NCB or No Claim Bonus with vehicle insurance, you have a cumulative bonus with health insurance plans. With this facility, you get a bonus for every year you do not file a claim with the insurance provider. But there is a significant difference between the NCB of vehicle insurance and the cumulative bonus of health insurance.
With NCB, the premium of the policy reduces every year you do not file a claim. With health insurance, the premium is not reduced, but the coverage amount is increased. As per the current rules of the IRDAI, the coverage amount can be increased by 5% for every no claim year. However, the bonus can never be more than 50% of the initial coverage amount of the policy.
9. Waiting PeriodWhen you purchase health insurance, there are generally a few benefits that only come into effect after a certain duration. For instance, in a lot of health insurance plans, there is a waiting period of 3-4 years only after which the policy will cover the pre-existing health conditions.
So, for instance, if you have an existing condition like high blood pressure or diabetes, the insurance policy will only cover costs related to these conditions after the waiting period of 3-4 years. However, there are now health insurance policies that do not have any waiting period and cover existing conditions from day one.
10. Free Look PeriodIt is mandatory for health insurance policies in India to have a free look period of 15 days. This is one of the most important health insurance features and allows you to cancel your health insurance without any deductions in the premium. Even after purchasing the policy if you want to cancel the same for some reason, you can do this within 15 days from the date when you received the policy documents.
If the policy is cancelled within the free look period, the insurance provider will have to refund 100% of your premium. However, this feature is only available when you first purchase the policy and not when you renew an existing policy.
Right Way to Purchase Health InsuranceThe only correct way to purchase health insurance is by first thoroughly understanding the different types of policies, how they work, and the terms related to them. By selecting a plan that you have just come across online, there is a high possibility of buying something that might not be the best fit for your needs.
As health insurance is one of the most important purchases of life, it is essential that you give some time to the selection process, do your homework, and then start browsing through the available options. Alternatively, you can also get in touch with a reputed insurance provider that offers many different types of health policies to discuss your requirements.
The insurance provider can then recommend a health insurance policy that perfectly meets your insurance needs. Remember the health insurance terms listed in this post as they will make it easier for you to discuss your requirements with the provider.
Learn more about different Health Insurance Plans here.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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