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10 points you need to know before you buy Health Insurance

Health Insurance

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Health Insurance article in Advisorkhoj - 10 points you need to know before you buy Health Insurance
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The healthcare cost inflation in India, based on some estimates, is in the range of 20 – 25%. A serious illness in the family can cause severe financial distress. Health or medical insurance in India is an essential need to safeguard our health and financial well being. Many people do not buy health insurance because they are covered under the under the group health insurance plan of their employers. This may be a costly mistake because the group health insurance plan of your employer may not provide comprehensive coverage for all your healthcare need. You should check if your employer’s health insurance plan covers all your dependents. You should also check the nature of illnesses your employer’s health insurance plan, particularly if you or your family members are suffering from any known medical conditions or if you have a family history of such conditions. If your company’s group insurance is not adequate for your needs, then you should buy additional health insurance to protect your family’s healthcare needs. There several things that you should be aware of when buying a health insurance or Mediclaim policy, which we will discuss in today’s blog.

  1. If you have a family or dependents to take care of, you should always ensure that your entire family has health insurance cover. When planning for your family’s health insurance, you should factor in the ages of your family members, if anyone is suffering from chronic ailments and the family medical history (e.g. history of cancer, heart ailments, diabetes etc). You should note that most health insurance or Mediclaim plans will have a waiting period for pre-existing medical conditions. If you are planning to start a family, you should estimate the cost of maternity and make sure that it is covered in your Mediclaim plan.

  2. Your lifestyle and that of your family members will have a big impact on your health insurance. Lifestyle related issues like smoking, drinking, obesity etc will definitely increase your health insurance costs.

  3. You should choose the right amount of health insurance cover or sum insured. Sum insured is the maximum amount of cover for medical expenses in one policy year. Your premium is directly linked to the sum insured. A hospitalization for a serious illness can cost 5 lacs or above. You may have to face a financially stressful situation if your sum insured falls short of the costs you incur in a medical emergency. You always err on the side of caution in determining how much cover you need. You should determine your sum insured based on a number of factors like where you live (usually medical expenses are higher in metro cities), your family situation including known medical conditions and your past experience with medical expenses. As a thumb rule, the cost of bed per night should usually be 1% of the sum insured. You can find out how much is the cost of bed per night in a hospital of your choice and estimate how much sum insured you need. This is just directional. You should ensure that the sum insured is adequate to cover your needs in a medical emergency, based on the factors discussed above.

  4. Make sure the empanelled hospitals in your Mediclaim policy, are the ones that you will be comfortable with, both from a quality and convenience perspective. Insurance companies have tie ups with empanelled hospitals to settle the claims of patient cashless for the insured. You should do your own due diligence on the empanelled hospitals, with regards to their reputation, specialties, doctors on payroll, equipment and facilities, distance from your home, etc. While cashless is a great benefit for the insured, you should understand that emergency hospitalization under a Mediclaim or health insurance plan is not always cashless. Cashless admission in many hospitals only works during fixed hours when the insurance desk is open. Further, authorization for cashless claims depends on the policy terms and conditions and processing time taken by the third party administrator or the health insurance company. You should do your homework and consult an experienced health insurance advisor if required.

  5. Depending on your family situation, you should determine whether you need individual Mediclaim or a family floater plan. An individual plan will only cover only the insured, while a family floater plan will cover the entire. Some family floater plans cover parents also. The cover for the entire family will be limited to the sum insured in a family floater plan. If you have a healthy family, the probability of many of your family members getting hospitalized in the same year is low. Therefore, if you have a family, it makes more sense to buy a family floater plan because the per person premium will be lower compared to what it would be if you buy multiple individual Mediclaim policies. However, if a family member has a pre-existing medical condition that puts him or her at a higher risk of hospitalization, then that family member can consume a significant portion of the sum insured of a family floater policy every year, putting the other family members at risk from a health insurance perspective. Therefore, if a family member has pre-existing medical conditions then you should buy an individual Mediclaim policy for him or her and a family floater plan for the rest of the family.

  6. You should determine whether you should opt for co-payment. In a co-pay option the insured agrees to pay a percentage of the health insurance claim. The percentage of co-pay is in the range of 10 – 25%. The insured must first pay his or her share of the claim and then the insurance company settles the balance amount up to the limit specified in the sum insured of the Mediclaim policy. If you opt for co-pay, then your Mediclaim premium will be lower. For example, if you opt for 20% co-pay then your Mediclaim premium can be lower by up to 20%. So the insured stands to gain by opting for co-pay if there is no hospitalization in the policy term. However, if there is a hospitalization then the insured has to pay his or her co-pay amount, thereby incurring higher expenses. If you are young and healthy with no medical conditions, you should opt for co-pay because you will save on the cost of Mediclaim premiums. Over a period of time, this cost saving can be quite substantial. However, if you are a senior citizen with known medical conditions, you should not opt for co-pay. The cost of hospitalization for a serious illness can be quite huge, and the co-payment amount will also be quite substantial.

  7. You should read very carefully, the exclusions in the health insurance or Mediclaim plans. If you or your family members suffer from a medical condition that is not covered by your Mediclaim policy, your claim will be rejected and you may get hit with a huge bill. Check your family’s medical history and make sure that your health insurance policy covers the illnesses in your family’s medical history. Some diseases are hereditary and therefore it is prudent to ensure that they are covered in your policy.

  8. You should compare different Mediclaim plans before buying. A a large number of health insurance products are available in the market. These plans have a wide range of premiums, limits and features. If you buy your Mediclaim policy without adequate research and comparing with other policies, you may end up buying an expensive policy or worse, a policy that is suited for your needs. Some important plan features that you should compare are:-

    1. Treatment wise limits and co-pay policy

    2. Day wise Cash limit

    3. Maximum renewal age

    4. Network of empanelled hospitals

  9. If you already have a Mediclaim policy and want to increase your cover, then instead of buying a new Mediclaim policy, buy a top up of the additional cover required by you. This will significantly reduce the cost of your Mediclaim premiums. Such plans get triggered only after you have exhausted your base cover. This will help you save costs while ensuring that you have adequate health insurance. However, if your current Mediclaim policy is not best suited for your needs, then you should buy a policy that addresses all your healthcare related requirements at the lowest cost.

  10. Health insurance is a complex financial product. If some of you feel that you do not have the necessary expertise or cannot devote sufficient time in selecting the right health insurance plan, let that not put you off from buying health insurance. You can consult with an experienced health insurance advisor and discuss specific concerns discussed in this blog with your advisor. Your health insurance advisor can work with you to understand your specific health insurance needs and help you select the right Mediclaim plan.

Conclusion

You should educate yourself about Health Insurance in India, whether it is offered by your employer or you buy it yourself. If you have a good health insurance plan that covers a wide variety of your medical needs, you will be free from health related financial concerns.

(Insurance is the subject matter of the solicitation. For more details on the risk factors, term and conditions please read sales brochure of the respective companies carefully before concluding the sale and/or contact an IRDA Licensed Insurance Advisor/ Insurance Broker)

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Dwaipayan Bose

An alumnus of IIM Ahmedabad, Dwaipayan is a Finance and Consulting professional, with 13 years of management experience, mostly in MNCs like American Express and Ameriprise Financial, both in India and the US. In his last role, he was the Chief Financial Officer of American Express Global Business Services in India. His key interests are building best in class organizations, corporate governance and talent development

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