The rising cost of private medical care in the country means that hospitalisation can burn a huge hole in your pocket and significantly impact your financial health too. Purchasing health insurance is a smart way to keep your finances protected. When you buy health insurance, you get into an agreement with the insurance provider wherein the insurer agrees to compensate the medical expenses.
As health insurance is one of the most important purchases in life, one should thoroughly understand the good and the bad before making a purchase. To help you make an informed decision, some key advantages and disadvantages of health insurance are listed below-
1. Keeps You Financially ProtectedAs mentioned above, the biggest benefit of purchasing health insurance is that it prevents erosion of your long-term savings. You might be saving and investing for goals such as buying a property or child's education, but you or someone in your family suffering from a medical emergency can require you to liquidate your assets.
If you are still unable to manage the expenses, you might also go ahead and borrow money from family, friends, or take a loan. All of these things can put a huge dent on your current financial health as well as long-term objectives. Having health insurance can help you avoid such outcomes due to the rising cost of quality healthcare.
2. Availability of OptionsGone are the days when insurers only used to offer basic health insurance plans. Modern insurance providers now offer a wide range of health insurance policies. For instance, most insurers now offer individual policy and family floater plans. You get to protect yourself with an individual plan, but with a family floater plan, you can insure the health of your entire family.
Apart from these two popular options, you can also find other types of health plans like ULHP (Unit Linked Health Insurance), critical illness plan, group health insurance, personal accident plan, and hospital cash benefit plan. The availability of so many options ensures that you can select a policy that best meets your requirements.
3. Cashless HospitalizationOne of the biggest benefits of health insurance is cashless claims. Most top insurers nowadays have an extensive list of network hospitals all over the country. In case if you are suffering from a health problem and get admitted to one of the network hospitals, you’ll mostly be able to take advantage of cashless hospitalisation.
This facility eliminates the traditional claim reimbursement process where you were first required to clear the hospital dues and then get it reimbursed from the insurer. With cashless treatment, the insurer will directly pay your medical bills to the hospital. Thus, you will not be required to bear the high treatment costs from your pockets. In case if you are admitted to a non-network hospital, you will be able to use the reimbursement claim facility here.
4. No Claim Bonus (NCB)Health insurance plans also come with a bonus element known as NCB. Health plans are generally renewed every year by paying the insurance premium. But if you do not file any claim for the entire year, you will be entitled to receive NCB. This NCB benefit is also available with vehicle insurance plans. However, there is a major difference between NCB of vehicle insurance and health insurance.
With motor insurance, the NCB reduces the annual premium. But with health insurance, the NCB provides you with a higher sum assured at the same premium amount. So, if the coverage of your health insurance plan is Rs. 5 lakhs and you do not file any claim in a year, the coverage will be increased to Rs. 5.5 lakhs (10% of coverage) in the next year without any increment in the premium amount.
5. Availability of Add-Ons or RidersThere are also many different types of add-ons available with health insurance policies. While the add-ons slightly increase the policy premium, they help in significantly enhancing the scope of the plan. Even if you are purchasing a basic health insurance policy, such add-ons can make your health insurance more beneficial.
For instance, a lot of health insurance plans exclude several critical illnesses such as cancer or heart diseases or do not cover treatments arising from an accident. You can go ahead and purchase a critical illness or accident cover add-on to make sure that your policy covers such exclusions as well.
6. Tax BenefitA large number of people in India end up purchasing health insurance just because of the tax benefit it offers. While the tax benefit shouldn't be the reason why you invest in health insurance, it still is a significant advantage. Under Section 80D of the IT Act, an individual below 60 years can claim a tax deduction of up to Rs. 25,000 for the premiums paid against a health insurance policy. If you are above 60 years, the deduction limit is up to Rs. 50,000.
If you have also purchased health insurance for your below 60 years parent/s, there is an additional tax deduction of Rs. 25,000. In case if the age of your parent/s is above 60 years, the deduction available is up to Rs. 50,000. So, if you are below 60 years and have purchased a health policy for yourself, as well as, for your above 60 years parent/s, the total tax deduction you can claim in a financial year is up to Rs. 75,000.
7. Peace of MindAnother significant benefit of health insurance is the peace of mind it offers. Purchasing health insurance brings in an immense feeling of safety, especially if you have purchased a family floater plan. You experience a certain sense of security, knowing that yours, as well as your family's health, is fully protected.
Having a health plan eliminates the need for you to worry about healthcare costs and allows you to choose the best medical care for yourself and your family. Quality care can also accelerate recovery, allowing you to get back to your healthy self sooner than expected.
1. Premium Increases with AgeTalking about the cons, one of the most important of them is the link between health insurance premiums and age. Your age plays a crucial role in deciding the premium of your policy. There can be a significant difference in the premium amount when you purchase a health policy when you are 30 years old and when you buy one after crossing 50 years.
In fact, it can also be challenging to find a health insurance policy once you cross 60 years. As the chances of you suffering from a health condition increase considerably with age, the insurers make up for the increased risk by charging a higher premium. This is the reason why it is said that you should prefer purchasing health insurance when you are still young.
2. Waiting Period for Existing Health ProblemsMost of the health insurance plans also have a waiting period of up to 2-3 years for pre-existing diseases. If you are already suffering from a health condition such as blood pressure, diabetes, thyroid, etc. at the time of purchasing a policy, any medical costs arising from these conditions will not be covered until the waiting period is over.
This is one of the biggest disadvantages of health insurance policies as it requires you to bear the healthcare expenses even when you have purchased health insurance. This is another reason why you should purchase a health insurance policy when you are young and healthy. However, there are now insurance plans that come with a lower waiting period.
3. Co-Pay ClauseIn order to prevent false claim filing, many of the insurance policies also have a co-pay or deductible clause. If the policy you have purchased has a co-pay clause, you will be required to share your medical expenses with your insurance provider. The co-pay is generally defined in percentage of the total healthcare bill.
For instance, if your policy has a co-pay clause of 20%, you will be required to pay 20% of your hospital bill, and your insurer will pay the rest. Such clauses are now generally found in cheap health plans that attract people with their low premiums. Before purchasing a policy, you should always thoroughly check the policy document to check the inclusions, exclusions, and other clauses.
Should You Buy Health Insurance?Now that you know health insurance pros and cons, it shouldn’t be difficult for you to make a decision. While there are a few disadvantages, you can see why health insurance is still a must for everyone irrespective of the age. As a matter of fact, the younger you are when you purchase health insurance, the more beneficial it is.
So, start browsing through all the different types of health insurance plans available to select one that best suits your requirements. Make sure that you select a feature-rich policy from a reputed insurance provider so that you can protect your health in the best way possible.
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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