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What is Health Insurance?

Health insurance is a type of non life insurance that covers your medical expenses arising out of hospitalisation of the insured following a sickness or accident. A health insurance policy is a contract between an insurer and an individual /group in which the insurer agrees to provide specific insurance cover at a particular “premium”.

According to Wikipedia, Health insurance is an insurance that covers the whole or a part of the risk of a person incurring medical expenses, spreading the risk over a large number of persons. At a more basic level, it is an insurance policy which covers an individual/family against medical and surgical expenses where the policyholder chooses a limit of coverage under an insurance plan and he/she will be reimbursed the expenses incurred for treatment due to an injury (due to an accident or sickness) or illness.

The most common form of health insurance policies in India cover the expenses incurred on Hospitalization (following a sickness or accident), though a variety of products are now available which offer a range of health covers, depending on the need of the insured. The insurance company usually provides health insurance in three forms:

  • either direct payment to hospital (cashless facility) or
  • reimburses the expenses associated with illnesses and injuries (against hospital bills and receipts) or
  • disburses a fixed benefit on occurrence of an illness.
The type and amount of health care costs that will be covered by the health plan are specified in advance.

The insured’s Age is a major factor that determines the premium, the older one is the premium cost will be higher because they are more prone to illnesses. Similarly if one is having a pre existing medical condition (like hyper tension, diabetes etc), it becomes difficult and expensive to get a suitable coverage. Claim free years can also be a factor in determining the cost of the premium as it might benefit the insured with certain percentage of discount. Recently health insurance companies are also classifying cities into zones and premiums are dependent on your place of domicile. This could mean that staying in a Metro or Tier I city will push premiums up for the insured.

Yes, an individual is permitted to have multiple health insurance policies, but at the time of claim, can make a claim only under any one of the policies, as per their choice. Some salaried individuals normally have a policy provided by their employers, and may choose to have their own individual/family floater policies as well since the employer’s policy may not cover the family members. Given this scenario, there is also a Top Up insurance plan where the insured can have a top up policy over and above the base policy they currently have.

Everyone should buy health insurance for themselves and their family members without exception, irrespective of their social standing and according to their needs. Buying health insurance protects a family financially from sudden, unexpected expenses as a result of hospitalization (or other covered health events, like critical illnesses) which would make a major dent into household savings or even lead to increased debt. Everyone is exposed on a daily basis to various health hazards and lifestyle illnesses and medical emergencies can strike anyone without any prior warning. Importantly, cost of healthcare is also increasingly expensive, with emphasis on technology, new procedures and more effective medicines that increase the costs of healthcare. This makes Health insurance a relatively affordable option to avail.

Family Floater is one single policy that takes care of the hospitalization expenses of the insured and his/her entire family. The policy has one single sum insured, for the entire familywhich can be utilised by any/all insured persons in any proportion or amount subject to maximum of overall limit of the policy sum insured. Quite often Family floater plans are better than buying separate individual policies and it assumes that all members of a family rarely fall sick/have an unfortunate accident at the same time. Family Floater plan isan ideal option for families where the members are still young.

Insurers have arrangements with their network of hospitals across the country in partnership with their Third Party Administrator (TPA). If the policyholder takes treatment in any of these network hospitals, the TPA will make arrangements for the payment from the insurer directly to the hospital and there is no need for the insured person to pay hospital bills. This is known as Cashless Treatment/Settlement. Expenses beyond sub limits prescribed by the policy or items not covered under the policy have to be settled by the insured direct to the Hospital. Note that Cashless Treatment is only available at Network Hospitals. The insured can take treatment in a non network hospital but will need to settle the bills and then seek reimbursement from the insurance company.

Some key things one should consider before buying a health insurance plan are:

  • Cashless Hospital Network of the Insurer – Number of hospitals and their presence across India.
  • Room Rent Limits
  • % Co Payment for claims
  • Waiting periods across all coverages
  • Exclusions under the policy
  • No Claim Bonus for claim free years
  • Claims Settlement Ratio and Reputation of the Insurance company

Health insurance policies are available from a sum insured of ₹5,000 in micro-insurance policies in smaller towns and villages to even a sum insured of ₹100 lacs or more in certain plans. Most insurers offer policies between ₹1 lac to ₹15-20lac sum insured and most persons option for health insurance these days are increasing their levels of coverage given the cost of healthcare. Also room rents and other expenses payable by insurers are increasingly being linked to the sum insured opted for, it is advisable to take adequate cover from an early age, particularly because it may not be easy to increase the sum insured after a claim occurs. Also, while most non-life insurance companies offer health insurance policies for a duration of one year, there are policies that are issued for two, three, four and five years duration also. A Hospitalization policy covers, fully or partly, the actual cost of the treatment for hospital admissions during the policy period. Such policies may be available on individual sum insured basis, or on a family floater basis where the sum insured is shared across the family members. Another type of product, the Hospital Daily Cash Benefit policy, provides a fixed daily sum insured for each day of hospitalization. There may also be coverage for a higher daily benefit in case of ICU admissions or for specified illnesses or injuries. Salaried persons, are also opting for Top Up plans which offer increased sum insured at a relatively lower cost which is ideal if the employer offers health insurance as part of their employee benefits plan. There are also Critical Illness benefit policyies which provide a lumpsum amount to the insured in case of diagnosis of a specified illness or on undergoing a specified procedure. This amount is helpful in mitigating various direct and indirect financial consequences of a critical illness. There are also other types of products, which offer lumpsum payment on undergoing a specified surgery (Surgical Cash Benefit), and others catering to the needs of specified target audience like senior citizens.

Insurance companies have treatment arrangements with network hospitals all over the country as part of their network which they manage with the help of a Third Party Administrator(TPA). Under a health insurance policy offering cashless facility, a policyholder can take treatment in any of the network hospitals without having to pay hospital bills as the payment is made to the hospital directly by the Third Party Administrator/Insurance Company. Expenses beyond the policy limits or sub-limits under specific plans of the insurance policy or expenses not covered under the policy have to be settled by the insured directly with the hospital. Cashless facility, however, is not available if one takes treatment outside the hospital network.

In India, Health insurance comes with attractive tax benefits as an added incentive. There is an exclusive section of the Income Tax Act which provides tax benefits for health insurance, which is Section 80D and insureds who have made premium payment by any mode other than cash can avail of an annual deduction of ₹15,000 from their taxable income for payment of Health Insurance premium for self, spouse and dependent children. For senior citizens, this deduction is higher at ₹Rs. 20,000.One can also claim a deduction of an additional ₹15,000 is they are paying health insurance premium on behalf of their parents, assuming their parents are senior citizens.

As important as knowing what your health insurance policy covers, one must also read and be aware of the exclusions (what is not covered) under the health insurance plan. Generally, pre-existing diseases (definitions and waiting periods differ across insurers and plans) are excluded under a Health Insurance policy. Further, the policy would generally exclude certain diseases from the first year of coverage and also impose a waiting period. There would also be certain standard exclusions such as cost of spectacles, contact lenses and hearing aids, dental treatment/surgery (unless inpatient), congenital diseases, external defects, venereal disease, intentional self-injury, use of intoxicating drugs/alcohol, AIDS, expenses for diagnosis, x-ray or laboratory tests not related to the disease requiring hospitalization, treatment relating to pregnancy or child birth etc. These are some of the key exclusions, read your policy for the detailed list.

Your domestic health insurance will not cover once you are out of your home country. You need to have overseas health insurance while travelling abroad. You have to check with your company regarding this and then act accordingly.

On cancellation the cover will not exist from the date of cancellation. Also as elaborated in your policy, the premium will be refunded to you on the basis of short period cancellation rate.

There is no restriction for repetitive claims for hospitalization including its pre and post expenses provided the coverage amount is available.

Normally insurers offer no claim bonus in the form of enhanced sum insured.

Yes, you can use domestic health insurance policy across the country, no matter where you bought it.

One can buy the policy online using the credit/debit card or we can send an executive to your convenient place and you can sign up filling the proposal form and providing a cheque payable to the insurance company only.
Note: Please do not pay the premium by cash.

Co-pay is that part of your hospital bill amount, which you have to bear for applicants over 60 years. Co-pay can be up-to 20-30%

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