What is Health Insurance ?
Health Insurance also known as Mediclaim in India provides you the cover against the medical care costs arising from disease or accidental injuries. Health insurance is a crucial financial product that every individual must have irrespective of their age. It allows you to focus on getting the best treatment without bothering about the financial costs of the same.
Depending on the terms of the health insurance policy it covers all or part of the medical costs of treating the disease or injury including doctor's consultation charges, medicine and nursing costs. Treatment can be sought in any recognized nursing home or hospital across India. This policy however usually does not cover routine medical expenses like outpatient care, and daily medicines.
Health insurance in India can be bought both as an individual or a family or as a group. Group Health Insurance is bought by either an employer or an association for its members. In this article we will be covering only health insurance for individuals.
How does health insurance work ?
To purchase health insurance, you need to pay an annual fee to the company for this coverage known as "premium. You choose the amount of coverage that you want, by paying a high or low premium. The higher the premium the more the coverage. Lets say, you choose a coverage of Rs 500,000 for the year. If during the course of the year,you incur some medical costs due to disease or injury – the insurance company will reimburse you up to the maximum of Rs. 500,000. This Rs. 500,000 can be used in one time or through multiple claims in one year. "
This payout by the insurance company can be claimed in two ways :
- After the charges have been paid by your upfront. Claimed as a reimbursement where in you bear the costs first and then file a claim to the insurance company and its paid back to you.
- Cashless settlement – where if the treatment is sought in a hospital which is associated with the insurance provider , the insurance company pays the hospital directly.
What are the Different Kinds of Health Insurance?
Individual Mediclaim Policy
This is the plain vanilla mediclaim or health insurance policy for an individual protecting this person from the expenses incurred due to disease or injury.
Floater Policy
A floater health insurance policy covers your entire family under one policy with one sum insured and one premium. It covers all the expenses as covered under mediclaim only the cover is now extended to the family instead of one person. This cover can be used by any member of the family any number of times. The advantage of this policy is that saves money by spreading the cover across family members.
Critical Illness Policy
Insurance companies define certain specified illness or diseases as "critical". If you have a critical illness policy, then the insurance company will pay you a lump sum payment if you are diagnosed with a critical illness as defined by the insurance company.
Some of the diseases/conditions which are usually deemed critical are Cancer ,Heart Attack, Kidney Failure, Major Organ Transplant, Stroke,Paralysis and Heart Valve Replacement Surgery.
(For a more comprehensive list check with your insurer)
Unlike other general insurance policies, these policies come with multiple options in terms of sum assured and term of the policy. For example ICICI Lombard provides critical cover for 5 years for a Rs. 12,00,000 coverage. These policies are also available with disability coverage to ensure that you are also covered for loss of income during that critical period.
Overseas Mediclaim Policy
An Overseas Mediclaim Insurance policy provides cover for medical expenses incurred abroad for treatment of illness and diseases contracted or injury sustained during the insured period of overseas travel. Anyone who is traveling abroad for business or pleasure or for educational purposes should have this policy.
Student Medical Insurance
Student Medical insurance covers the cost of health care while studying abroad. It is an essential requirement of many foreign universities for its overseas students. Students are generally advised to buy it in India as it is substantially cheaper than buying it abroad.
Tax Saver
This is a new class of insurance launched to take full advantage of the income tax benefit under section 80 D of the Income Tax Act 1961. The premium is fixed at Rs 15,000 for all plans. For Senior Citizens aged 65 and above, the premium is Rs. 20,000 This plans includes reimbursement of OPD expenses upto Rs. 10,000. This includes diagnostics tests, dental treatment and related expenses. This insurance is suitable for people who are looking to cover all their medical expenses in a tax free manner.
So what kind of coverage can I get ?
You can buy health insurance coverage both as an individual as well as for the family. It can also be bought by companies for their employees as a "group". As mentioned above, here we will be concentrating only on health coverage for individuals and families.
Usually, health insurance coverage is available to individuals above the age of 3 months to a maximum age of 65 years. You can choose to cover your family in one floater policy or through multiple individual policies depending on your needs and the costs involved.
While deciding on your coverage, you may come across a term called "rider".A rider is a certain add on which gives you additional benefits. You will have to pay for the rider but usually the incremental costs are minimal. You cannot purchase a rider without first having a health insurance policy. Some of the riders commonly available with health insurance policies are :
a) Accidental Death Benefit
In case of death of the policy holder due to an accident within the policy period, the nominee (mentioned in the policy) is compensated with the sum that the policyholder was insured for.
b) Permanent and Total Disability Cover
This rider insures against the permanent and total loss of limbs or sight due to an accident. This compensation is given as a lump sum benefit. It is payable only if the disablement results in inability of the policy holder to be gainfully employed.
c) E Opinion Rider
This rider covers the expenses of second opinion via e-consultation services for a patient based in India suffering from a serious illness. The policy holder can seek a second opinion from a doctor within network hospitals across the world. Qualified physicians from this network must give a written report which includes a diagnosis and treatment plan within 7 working days.
d) Children's education allowance
A specific allowance is paid for payment of tuition fees and related costs so that your children's education is not affected during the period that you are indisposed.
(Please note that these riders may be insurer or plan specific and may not be available with all policies.)
How much does health insurance cost ?
To avail of the benefits of health insurance, you need to pay an yearly premium or the cost of insurance. There are some two year policies also available. This premium mainly depends on the following factors :
a) The no of people to be covered
Whether you are planning to cover just yourself, you and your spouse or include your children as well.
b) The amount of coverage needed
Insurance is usually available from Rs 50,000 to Rs 500,000 in multiples of Rs 25000 or Rs 50,000 depending on the insurer. You can choose the coverage that you need depending on your budget and your anticipated needs.
c) Age of the oldest family member who is proposed to be covered
The premium is determined by the relative health of the person who is seeking insurance – insurance keeps becoming expensive as you grow older. As older people are considered to be more vulnerable to illness.
d) Can I get any Tax Benefits with Health Insurance?
As per Section 80D, of the Income Tax Act any amount of health insurance premium paid up to Rs. 15,000. Would be allowed as deduction from the total income for income tax calculation purposes.
A higher amount of up to Rs 20,000 is permitted for senior citizens.
Are there any alternatives to health insurance ?
Many life insurance companies have started offering riders with their life insurance policies which are specifically give you health related benefits. Some of these riders are outlined below:
a) Critical Illness Benefit
A health insurance policy is a reimbursement of the medical expenses whereas the Critical Illness rider as provided by most life insurance companies are benefit policies. Under a benefit policy on happening of an event, the insurance company pays the policyholder a lump sum amount regardless of the expenses incurred. Whether the client spends the amount received on the medical treatment or not rests on his or her own discretion. The catch lies in the structuring of the payouts and the base policy's status after claiming the bonus. Many plans reduce the sum assured or cancel the other riders after payout of the critical illness rider.
b) Hospital Cash Benefit
Unlike health insurance which gives a comprehensive cover, Hospital Cash Benefit usually reimburses only room charges, and does not cover all hospital expenses. A Major Surgical Illness rider provided by ICICI Pru gives a lumpsum of up to 50 per cent of the SA, depending on the degree of the ailment. This benefit can be received any number of times provided it does not exceed the maximum amount eligible and the illness has not been treated earlier. There is also no cashless settlement in the benefits provided by a Life Insurance provider.
Things to watch out for:
Health insurance will not cover all the costs that you might incur for medical related reasons. But it will still go a long way in saving your money.
Even after buying health insurance it is essential that you set aside some part of your savings for health related expenses as the product inherently has some limitations that one should be aware of when planning for the future.
- No coverage for routine medical expenses, checkups or medicines.
A minimum of a day's hospitalization is needed to claim health insurance. If you incur an expense that does not result in hospitalization (like a hairline fracture for instance), you cannot claim any compensation. Most policies also do not cover Out Patient care hence the routine expenses are also not covered.
Insurance companies usually have a limit of up to Rs 500,000 on their policies. So your compensation is limited to that amount. Modern medical care especially for critical diseases is very expensive and may not be covered by Rs 500,000 alone and you might need to foot the excess bill.
- Limited coverage for the elderly
Medical insurance is usually made available only up to a certain age limit (for most insurance companies this is 65 years). So you are above this age limit, you will not be given a fresh policy and on the same lines the existing policy will not be renewed after a certain age. Ironically, this is the age when individuals need financial assistance the most; although the Government and IRDA have encouraged the insurers to take out special policies for senior citizens it is yet to be implemented.
- Exclusions in policies might result in expenses for you
Medical insurance policies usually have exclusions. This means that they do not compensate the policy holder for certain illnesses/medical problems. If the policy holder is afflicted by any of these medical problems, he will have to pay for the expenses on his own. Expenditure on pregnancy and related ailments are not covered under individual health insurance policies.
- Need Protection against loss of income
Lastly, health insurance only covers the expenses that you might incur for treatment but it does not protect any loss of income due to injury or disease. It should ideally be complemented by disability insurance for total protection of your family.
For details:
SMS "finvest" 56070
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