Health insurance

What is health insurance?

Health Insurance

‘Health is our wealth’ is not just a saying but a way of life everyone should incorporate. In today’s day and age where health issues are common and medical costs rampant, one should focus on keeping his health and wellbeing in tip-top shape. That being said, one must also be prepared for any eventuality. There is a wise old saying ‘Hope for the best but prepare for the worst.

Having a health insurance plan is critical in today’s time. Everyone should be insured, be it bachelors, couples, senior citizens, or even children. Purchasing the correct health insurance plan can be of tremendous utility when the times get tough.

This page aims to talk about the most important aspects of health insurance and strives to ensure that all readers can make a prudent decision after reading this page. Topics to be discussed are:

  • Meaning of health insurance
  • Importance of health insurance
  • Popular health insurance plans
  • Health insurance types
  • Health insurance vs mediclaim
  • Health insurance claims process
  • Health insurance companies and their comparisons

Meaning of health insurance

A health insurance policy is a contract between a health insurance company and the policyholder. The health insurance company indemnifies the policyholder against health-related expenses for the exchange of a premium. Let us understand this with a simple example.

Example: Let us say Mr. Jatin has bought a health insurance plan with HDFC Ergo. He has opted for coverage of Rs 10 lakhs and paid a yearly premium of Rs eight thousand. Let us assume that Mr. Jatin meets with a minor accident and is hospitalized. His hospitalization expenses amount to Rs 5 lakhs. As Mr. Jatin has a health insurance policy, his entire medical expenses will be paid for by the health insurance company. Had Mr. Jatin not bought a health insurance company he would have to bear the entire financial brunt of the medical expenses.

Importance of health insurance

Peace of mind

A health insurance policy will provide you with peace of mind. You will not have to worry about any future medical expenses after purchasing a health plan. This peace of mind itself plays an important part in keeping you relaxed and healthy.

Medical inflation

Medical inflation in India is rampant at 15% per year. This number is more than double India’s general inflation rate of 6-7% per year. This means that medical expenses are growing at double to pace of general expenses in India. This is an alarming statistic and one should account for this before buying a health insurance plan.

Protects your savings

A health insurance policy will protect the policyholder’s savings. A policyholder will not have to tap into his savings to pay medical bills, the health insurance company will pay on behalf of the policyholder.

Protects your family

A family is already stressed when a family member is hospitalized. A health insurance plan ensures that the family members have at least one less thing to worry about (i.e medical bills). Further, it protects your family against massive financial jolts caused by extremely expensive hospitalizations.

Benefits of health insurance

Tax benefits

Buying a health insurance policy gives you various tax breaks under the Indian I.T Act.
A person can claim up to Rs 25,000 in tax deduction if he purchases a health plan for himself, his spouse, or his children.
He is also eligible for a deduction of Rs 50000 if he purchases a health plan for his parents (and the age of parents is less than 60 years) If the age of parents if over 60 years then the maximum deduction available is Rs 75000.
Further, if the policy payer himself is over 60 years of age and he is making policy payments for himself, his spouse, parents, and children then he is eligible for a deduction of Rs 1 Lakh.

Pre and post hospitalization

There are times when a person needs pre-hospitalization even before getting admitted to a facility. Similarly, a person may also need post-hospitalization after his treatment. Many health insurance companies provided coverage for both of these contingencies.

Free health checkups

Many health insurance companies provide their policyholders the benefit of free health checkups up either every year or every alternate year. This is done to ensure that the policyholder is up to date about his wellbeing.

Daycare coverage

A comprehensive health insurance plan should provide the insured with daycare coverage. Daycare coverage is when a person may need certain treatments from a hospital without getting admitted. Daycare treatments include Angiography, dialysis, radiotherapy, Eye Surgery, etc.

Cashless hospitalization

You can avail of cashless billing if you get admitted to a network hospital. Cashless treatment is where the insurance company will directly pay the hospital bills. The policyholder does not need to worry about billing and reimbursements. This is highly convenient and stress-free for a policyholder.

Domiciliary treatment

There are times when home hospitalization is required for a patient. There are many insurance companies that that understand this predicament and provide home hospitalization coverage, but only if it is deemed necessary and unavoidable.

Health Insurance Types

There are quite a few types of health insurance plans thus one should know about the differences between these plans before opting for one. Let us briefly learn about the various types of health plans:

Mediclaim

A Mediclaim provides coverage against certain predetermined illnesses up to a certain sum. It is a barebones insurance policy that can be taken by an individual that cannot afford a comprehensive health insurance plan. Critical illnesses are usually not covered under a Mediclaim.

Comprehensive health insurance

A comprehensive health plan is a holistic health policy that provides coverage for a broad spectrum of illnesses, including pre-existing illnesses and even critical illnesses. As the range of coverage is wide, the premium is also expected to be higher compared to a limited health plan like Mediclaim. It is always advisable to go for a comprehensive health insurance policy over Mediclaim.

Family floater health insurance

Under a family floater plan, the entire family can be covered under a single insurance plan. This is an ideal policy for people looking for decent coverage by paying a lower premium.
For instance, a family of three, husband, wife, and son can buy a floater policy having coverage of Rs 20 lakhs by paying a single premium of Rs 20 thousand. If any of the family members are hospitalized, the insurance policy will come into effect.

Group insurance

A group insurance policy is usually provided by companies to their employees. This insurance sometimes also extends to the employee’s family members.

ULIP plans

A unit-linked insured policy (ULIP) is a hybrid between health insurance and investment. The premium that you pay the insurance company gets invested into either debt or equity-based instruments, and the premium gets returned to the policyholder (with appreciation) upon policy maturity. Let us understand this with a simple example.

Example: Let us say Mr. Madan has bought a ULIP policy from Aditya Birla with health coverage of Rs 5 lakhs. He is paying a premium of Rs 30 thousand a year for the coverage. The company invests this premium into an equity mutual fund. Let us now assume that his policy term matures. Here, Mr. Madan will get all his paid premium back along with any appreciation. If this were a regular policy, Mr. Madan would not get his premium back. This premium back feature is a USP of a ULIP policy.

Health insurance claims process

The claims process is an integral part of purchasing a health insurance policy. You must be well versed in this process before purchasing a health plan. Let us understand the claims process in general. The claims process is generally classified into two, reimbursement claims and cashless claims.

Reimbursement claims

A reimbursement claim is when the policyholder will initially need to pay out of his pocket first, then he must apply to the insurance company to get his reimbursement.

Step 1: Inform your agent or insurance company

First and foremost you will have to inform your agent or your company about any hospitalization. Do not delay in intimating them as this could cause issues while settling the claim.

Step 2: Collect all documents

Ensure that all important documents are collected and managed properly. Relevant documents include:

  • Hospital bills and receipts
  • Medical certificates
  • Medical reports
  • Admission and discharge summary
  • Pharmacy bills and receipts

All of the above documents should be handled with care and a file should be made.

Step 3: Fill claim form and submit documents

Upon discharge, you will have to fill your claim form with the relevant information and submit it to your agent or insurance company. You must ensure that all the fields are populated with all honesty and there is no falsification. If there is any falsification it can result in claim-related complications on account of violation of principles of insurance.
You will also have to hand over the file of the original documents you have gathered. Ensure that you keep a xerox copy of the said file for your record.

Step 4: The insurance company reimburses you

If all papers are in order, the insurance company should release your claim within 15 days. If they fail to release your claim within 15 days, you should escalate your complaint to the grievance department of the company. If there is no resolution from their side, you can raise the issue to the IRDA via their Integrated Grievance Management System (IGMS)

Cashless claims

Cashless claims are handled in a slightly different way. This is where the insurance company directly settles the bill with the hospital. It does not need for the policyholder to make any payment to the hospital in the first place.

Step 1: Inform your insurance company or your agent

First, you will have to inform your agent or insurance company about the incident. This is critical as the agent/company may refer you to a network hospital where cashless claims are permitted. You should also keep in mind that cashless claims can only be handled in affiliated hospitals, so you will have to locate your nearest preferred cashless hospital before hospitalization.

Step 2: Present your cashless card

You will now have to present your cashless insurance card to the hospital admissions department. Upon presenting the card, the hospital staff will call your insurance company and validate the policy.

Step 3: Admission

Once your policy is validated, you will be granted admission into the hospital. You do not need to keep track of bills and hospital documents as the hospital will internally transfer the relevant documents directly to the insurance company. You can however request the hospital for duplicate copies. You can also request the insurance company for duplicate copies for your record keeping.

Step 4: Discharge

You will now be discharged once the treatment is completed. You do not need to apply for reimbursement to the insurance company as this was a cashless hospitalization.

Popular health insurance companies in India

Name

Claim Settlement Ratio

Premium Collected

Network Hospitals

Solvency Ratio

Star Health Insurance

99.9%

6717 crores

10200+

1.69%

Care Health Insurance (formerly Religare)

99%

2151 crores

15500+

1.53%

IFFCO Tokio General Insurance

82%

1315 crores

6400+

1.6%

Bajaj Allianz Health Insurance

99%

3139 crores

6500+

2.45%

Max Bupa Health Insurance

99.91%

1178 crores

5000+

1.64%

Manipal Cigna

99%

567 crores

6500+

1.84%

HDFC ERGO Health Insurance

99%

3624 crores

10000+

1.77%

ICICI Lombard

97%

2694 crores

6500+

2.2%

Future Generali

93.3%

382 crores

5100+

1.57%



Frequently asked questions about health insurance
  • What is a health insurance policy?

    A health insurance policy is a contract between an insurance company and a policyholder. The insurance company provides indemnification (financial protection) to the policyholder for a fee called as a premium.

  • Is it smart to buy health insurance when I'm younger?

    It would indeed be a prudent choice to buy health insurance when your younger as the premium would be cheaper. Also, there are a lot of other benefits of having a more mature health policy.

  • Can I get coverage if I have pre-existing conditions?

    Yes, you can. That being said, you will have to endure a waiting period for your coverage to start for those pre-existing conditions. Waiting periods usually range from 2-4 years.

  • Can a smoker buy a health insurance plan?

    Yes, a smoker can buy health cover. The premium will be slightly higher though.

  • Can I buy multiple health plans?

    Yes, you can. There are no limitations on the amount of health plans a person can buy.

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