Buying a health insurance policy

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Healthcare-related expenses are increasing by 12-15% every year in India. A major operation/surgery/illness can set you back by 5-10 lakhs. Consequently,buying health insurance for your family is of utmost importance.

 

According to an ICE 360° survey (Oct 2014) from people research on India’s consumer economy, among the top 20% of the households in India based on per capita income, percentage of households that are likely to be vulnerable if additional annual health expenditure is :

    • 1 lakh – 52% of households likely to be vulnerable
    • 3 lakh – 89% of households likely to be vulnerable
    • 5 lakh – 97% of households likely to be vulnerable

If “being vulnerable” because of sudden expenditure following an illness/disease/injury is not a risk you’re willing to take, and if you don’t have it already, you need Health insurance ASAP.

What are the important points while deciding which health policy to buy and for how much?

 
  • Room rent or ICU expenses.Some policies have a capping on Room rent or ICU expenses. The capping could be 1% for the former and 2% for the latter. If you have a policy with a Sum assured of 5 lakhs then the maximum room rent allowed would be ₹5,000 and maximum ICU charges allowed  would be ₹10,000.

The basis for charging Medical attendance, Surgeon fees, Specialist charges, Critical care physician fees, Nursing charges, etc is the room rent. Therefore, if you end up staying in a room that is more expensive than your policy allows, firstly you’ll bear the extra rental charges and secondly the excess miscellaneous charges as well.

As a consequence, your policy should not have a room limit clause.

  • Co-payment.For instance, if your policy has a compulsory co-payment clause (let’s say of 10%) then you will bear 10% of any approved claim. Here, if the approved claim is for ₹3 lakhs then you would bear ₹30,000 and the insurance company will take care of the rest. Furthermore, the co-pay clause will apply to every claim.Therefore, the policy you buy should not have a co-pay clause.
  • Waiting period.There could be a waiting period of up to 48 months for any existing illness or disease. The lower the waiting period for any pre-existing condition(PED), the better. Does it mean if an individual has a PED like Diabetes and does not disclose the same at the time of buying the policy, then the same would be covered after 48 months?

No. As a matter of fact, you need to disclose all pre-existing conditions at the time of buying the policy. Don’t let an agent misguide you into not disclosing PED’s “since it would be covered anyway later on”. From an agent’s perspective, non-disclosure of PED’s would mean faster clearance at the underwriting stage. To summarize, disclose all PED’s of your family members.

The insurer can and will void/cancel your policy anytime if they find that you had not disclosed the PED.
  • Make a list of major hospitals in your area, including multi-specialty hospitals and critical illness specialty hospitals like those in Cancer care, etc.

You would want your health insurance provider/TPA to provide cashless facilities at these major hospitals. Check out their website.

Don’t get swayed by terms like “No-Claim bonus”, “Sum Insured restore”, “Discount” etc.

Above all, the most important reason to buy a Health insurance policy is to protect yourself from the risk of incurring a major health expenditure.
  • Shortlist 4-5 policies based on the above criteria.Read their ‘policy wordings’ to understand what it includes/excludes and what are the terms and conditions of the policy. You can download the policy wordings from the IRDAI website here.
  • How much should my base policy be for?That depends on the number of family members that the policy will cover and which city you live in. If you intend to include your parents in the base policy then it must be for at least ₹10 lakhs. Same applies if you live in a major city like Mumbai,Bengaluru,Chennai, etc. Insurers base a health insurance premium on age rather than on claims. If you decide to request an increase in sum assured later, the 48-month clause applicable to PED  will apply to the increased amount.
  • Fill up the proposal form yourself .Give all details of pre-existing illnesses, previous or other policies, past illnesses or surgeries, etc.
  • Buy a super top-up policy from your base policy insurer.If you have a ₹10 lakh base policy, go for a super top-up of at least₹20 lakhs. You should buy the super top-up almost immediately after buying your base policy. Subsequently the coverage for both starts at almost the same time. The advantages of the super Top-up are that the premiums are comparatively much cheaper; if your medical expenditure goes above the ₹10 lakh covered by the base policy, then the super top-up would cover any expense incurred above that.

There’s nothing called a “best health policy” or a “best health insurer”. Check out health plans of public and private insurers. Freefincal has a great eBook on health insurance which can be downloaded here.

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