The ABCs of Health Insurance

People are prone to diseases and it is impossible to predict as to when a health crisis will manifest itself in your life. Health care also has improved leading to longer life expectancy. However, the cost of health care also has gone up, and can empty your life’s savings if you need hospitalization and special medical care . When you do your budgeting, you need to allocate some funds for unforeseen expenditures like health care. But such an allocation will be totally inadequate in case of major illnesses requiring special medicare and hospitalization. You also need to factor in the healthcare requirements of your immediate dependent family members as well. This is where health insurance comes in. You can factor in the total premium cost of health insurance which is ascertainable instead of health expenditure itself which can not be predicted or estimated.

Health insurance is basically getting yourself protected against the risk of medical expenses and hospitalization for a consideration, called premium, paid to the insurer every year. Hospitalization causes may be many including an accident. Health insurance is subject to all the basic principles of insurance such as good faith, insurable interest, indemnity, proximate cause etc. Health insurance contract also requires full disclosure from your side such as your addiction to tobacco, alcohol, drug abuse etc., if any, as the risk  to health factor increases manifold in the case of such habits. Health insurance policies are available for individuals, family floaters policies covering self and dependents and policies for senior citizens.

Insurance Coverage

Health insurance can cover expenses connected with medical emergencies, hospitalization, medical treatment etc. Health insurance in India basically covers hospitalization expenses and does not cover domiciliary treatment . But it can cover post surgical expenses. A health insurance policy basically covers hospitalization expenses provided that you have undergone treatment for at least 24 hours in a hospital. Health insurance may cover cost of ambulance service, bed charges, nursing, blood, consultants charges, surgeons charges, operation theatre expenses etc. All addons require additional payment of premium to the insurer. However, cosmetic treatments (including those relating to dental problems), certain specified diseases and pre-existing diseases are excluded from the scope of insurance. Pre-existing diseases are those that you were known to have before you took out the policy. It includes not only those diseases which you know you have but also those that you ought to have known that you have. Exclusions may be covered by the insurer after existence of policy for two to four years. This is called the waiting period. The waiting period for a regular health policy before making any claim is 30 days from date of issue of a policy, unless in the case of an accident requiring immediate hospitalization.

Age Factors

An individual health policy covers only the individual who is insured. If you have taken health cover of say Rs 3 lakhs, the policy will cover expenses up to Rs 3 lakhs only. Expenses over and above Rs 3 lakhs will have to be borne by you. In a family floater policy, each member covered can individually claim insurance up to Rs 3 lakhs. However, if the senior member in family floater reaches the maximum age permitted by the insurer, then the policy lapses and others will need to arrange fresh insurance  policy without having the benefit of their claim history and pre-existing disease coverage that comes from continuous renewal of the policy. Similarly, if a family member in a family floater reaches say 25 years of age , then he/she needs to take insurance on their own and will not be covered in the existing family floater. In a family floater insurers normally allow 2 adults (the insured and dependent spouse) and 3 dependent children to be covered along  with dependent parents. Lastly, if all the family members have an accident at the same time the floater may be inadequate for individual medical expenses. The terms and conditions of health insurance business vary from insurer to insurer and from scheme to scheme within overall regulatory oversight of IRDA.

Many insurers offer health insurance policy for senior citizens. The insurance cover is subject to extensive medical check up and premium rates are also higher. Pre-existing diseases coverage will be after waiting period which may extend to four years. Some insurers also restrict the maximum amount that can be covered. Most of the insurers may insist on medical check up where the entry age of insured is 45+. The lists of mandatory tests go on increasing as the insured amount and age of entry increases. The cost of medical tests will have to be borne by the insured. Some insurers refund 50% of the tests cost after the proposal has been accepted and premiums are paid.

Health insurance has an entry and exit age and it may vary for each insurer. Some insurance companies have set minimum entry age at 18, maximum entry age as 55 years and maximum exit age as 65 years.  In the case of senior citizen policy, entry age may be as high as 70/74 years.

You can take out multiple health insurance policies with different insurers but after informing them all. The principle of indemnity will apply in the case of claims and you are not allowed to make a profit out of multiple insurance policies but only actual hospitalization cost reimbursed in total. Exception to this principle is a life insurance policy.

Mandatory and Optional Cover

You can also take out health insurance with sub-limits by capping amounts for specific surgeries and medical procedures, and thereby reducing premium outgo. Some insurers allow you to design your own policy within the insurer companies broad policy requirements. There are certain diseases which are categorized as permanent exclusions , meaning no health insurance cover will be available for them and they are permanently excluded from the scope of insurance. Policies include mandatory cover and optional cover. Mandatory cover refers to those that cannot be excluded by the insured and optional cover refers to those diseases that the insured can opt to cover or not to cover.

Cashless Hospitalization

Before introduction of cashless health insurance policies, you had to foot the hospital bill and make a claim with insurance company for reimbursement. The process involved making a claim intimation, claim processing and finally claim payment and closure. But with cashless hospitalization , provided you have committed yourself to a hospital where insurer has a tie up (called a network hospital), the expenses will be directly paid by insurer to the hospital. You need to provide the insurance health card provided by insurer to the hospital. The steps involved in this type of settlement require that you to intimate to the insurance company the fact of your admission to the network hospital, by taking a pre-authorization 48 hours before admission in the case of a planned commitment. Unplanned commitment will require post authorization within 24 hours after commitment. Detailed information will be provided by the claims team on request. It is also available in the booklet provided to the insured along with the health card.

Tax Benefits

If you take out health insurance and never had an occasion to be hospitalized, the premium paid annually will be foregone. Like any other insurance cover, you are covering a fortuitous risk and nothing more. I would say I would thank my stars that I had no occasion to make a claim! As a sweetener to this scenario, you get a tax rebate on premium paid for health insurance. Premium paid against the medical insurance policy that you have taken out, covering yourself, spouse and dependent children entitles you to a tax deduction of up to Rs 25,000 (or Rs 30,000 if the insurance is for you or your spouse above 60 years) per annum from your gross taxable income. If you insure your parents, you get an additional deduction of Rs 25,000 (or Rs 30,000 if they are above 60 years). No such deduction is allowed for premium paid for health insurance of your parents-in-law! You need to pay the premium using credit card, DD or through a debit to your bank account and not by cash to be eligible for the deduction.

Lastly, when you should take out health insurance policy? I would say earlier the better in view of uncertainties in this life. Only thing is, choose the best insurer and the best scheme available at lowest premium. You can browse through the net and can get all the information that you want including comparisons of various policies and take an educated decision. We, at, wish you all very  good health!!

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