Health Insurance: A must have
In this episode of Dhan ki Baat, Md Shahid, Product Head and Director - Insurance, IIFL, explains why it is important today to have a health insurance plan.
Why you should have health insurance
Health insurance is a basic requisite of financial planning today. In case of a medical emergency, it gives you cover to meet financial obligations. It allows you to pay for health treatment without affecting your savings.
A health insurance plan is a financial product, which provides hospitalization cover against payment of a small amount called premium.
Health Insurance in India
In India, there is a lack of awareness about health insurance and people rarely know about its benefits.Factually, 80% of people are not covered under health insurance in India. This exposes them to huge financial risk in the event of a medical emergency. People mostly break their savings in fixed deposits,provident fund and jewelry to pay hospital bills. At other times, people are forced to borrow from friends and relatives due to absence of enough savings. In general, the cost of medical treatment varies from Rs1lakh to Rs5lakh and if someone suffers from critical illness, then the medical cost may reach up to Rs10lakh. You also need to take into account inflation in medical costs, which is in the range of 10% and growing more rapidly than food and other items. Hence, it is increasingly becoming unaffordable for the common man to meet medical costs from their financial savings.
Even though having a health insurance plan is indispensable in today’s world, many people delay having it and assume that they may not face medical emergency in near future. However, due to growing pollution, unhealthy lifestyle like long working hours, unhealthy eating habits and no physical exercise,we are more prone to lifestyle-related diseases. Atleast one member in every family is affected by lifestyle diseases in India.
Considering the above facts, you should opt for a health cover, the cost of which varies from Rs300 to Rs500 per month.
Features and benefits of health insurance
Many times, consumers are not aware of the features of a health insurance product and its benefits thereon. Health insurance provides a complete health package, which ensures protective as well as preventive care. The features of health insurance are highlighted as follows:
1) Cashless hospitalization
When you have a health insurance plan, you can avail cashless treatment through a network of hospitals. Customers will not have to pay anything from their pocket. The list of network hospital is significantly extensive wherein you will not face any challenge in availing treatment at the hospital of your choice. This absolves customer to have any kind of emergency fund for medical treatment.
2) Free health checkup
Most of the health plans provide free health check-ups for family members, which ensures that preventive care is taken in case of any sign of medical adversity before it gets critical. This is majorly prevalent in India.
3) Pre-existing disease
People generally think that if someone suffers from any disease, he would not get health insurance cover, which is not true. Health plans do cover people who suffer from any disease except few terminal illnesses like Cancer, HIV patients etc. However, there is a waiting period of 3-4 years in the case of pre-existing diseases, but the accidental cover and any other diseases cover are active from start of the plan
4) No claim bonus
During the tenure of a health policy, if a customer doesn’t make any claim his sum insured is increased further via no claim bonus. The no-claim- bonus can almost double the sum insured in some plans. So customer doesn’t have to pay any additional premium to get higher cover if he is healthy and not making any claim under the health plans.
5) Restoration benefits
This feature gets triggered when a customer makes a claim under health plans. This also doubles the sum insured for the customer for the same premium and ensures that he can still avail the medical cover even if his sum insured is exhausted. However, restoration benefits are usually not applied for same diseases.
6) Pre and post hospitalization expenses
Health plans not only cover hospitalization costs, but also doctor consultancy and medicine expenses before and after hospitalization. For most of the plans, the period for pre-hospitalization is 30 days and post-hospitalization is 60 days. This debunks the myth that health insurance companies will settle claims only for costs incurred during inpatient hospitalization.
7) Tax Benefits:
Health insurance provides an additional tax benefit under section 80D of Income Tax Act. Tax benefits of Rs25,000 is available for self, spouse and children. An additional tax benefit of Rs25,000 is available for parents and if the parents are senior citizens the tax benefits are increased to Rs30,000.
Mr. Md Shahid has been with IIFL since October 2014 and is presently the Product Head and Director in Insurance. He is a strategy professional with 6 years of experience in financial services and management consulting. In IIFL, he worked on key strategic projects in CEO Office like venturing into new business, new product and other initiatives for the existing businesses. Prior to IIFL, he was part of Management Consulting in PricewaterhouseCoopers (PwC) focusing on business strategy, deal advisory in post merger integration. He is a CA, CFA (US) and B-Com (Hons) from St. Xavier’s Kolkata.
Ask an Expert
What is Health Insurance?
Health insurance is a protection against medical costs. It covers the cost of an insured individual’s medical and surgical expenses. Depending on the type of coverage, either the insured pays costs out of pocket and is then reimbursed, or the insurer makes payments directly to the provider.
Why do I need Health Insurance?
- Each of us is exposed to various health issues and a medical emergency can strike anyone of us without any prior warning.
- Health cost is getting expensive day by day with new procedures, technology advances and more effective medicines.
- Think for a minute about the expensive medical costs you would incur, if you suffer a major accident tomorrow or were suddenly stricken by an illness.
- There are many uninsured people who are living with such a high risk every day.
- Till the time these costly treatments may be beyond the reach of need, taking the security of health insurance is much more affordable.
What kinds of health insurance plans are available?
- Health insurance policies are available from Rs 1lakh till Rs50lakh and more, varying from one company to another. It is always advisable to take adequate cover from an early age because it will be difficult to increase sum insured once the claim is made. Most of the non- life insurance companies offer health insurance policies for duration of 1 year, but there are plans that offer health insurance policies for 2 years, 3 years, 4 years and 5 years also.
- A hospitalization plan covers fully or partly the various hospitalization expenses, including expenses before and after hospitalization for some specified period.
- Different kinds of health related insurance plans are also available like personal accident cover, critical illness insurance, cancer care plans, dengue cover and top up plans.
What are the advantages of buying health insuranceonline?
Purchasing health insurance online is convenient, fast and usually costs you less. With just one click, you can buy any policy from any corner of the world at any point of time. There are various advantages of buying health insurance from us.
- Low Premium: –On account of multiple plan comparisons, customers choose the best plans at the most affordable rate. The entire process is paperless, which reduces the administrative costs of the company. Both factors reduce the premium and you benefit from lower premium rates.
- Easier Comparison: You have a wide range of policies to compare and purchase online. You get all the detailed information on website through which you can compare the policies and decide to buy accordingly.
- Time saving: Being online allows you to skip the option of speaking to an insurance agent in person. You can directly get the quotation online, which will save your time.
- Availability of information round the clock: You can view information regarding health insurance policy round the clock 24*7.
- Automated Servicing: You can yourself get the quote, download the brochure, policy wordings, pay premiums online, and track your insurance policy. The difference from offline mode is that you do not have to be dependent on anyone.
- Immediate coverage: –Purchasing health insurance policy online helps you to get your cover active immediately. From Day 1, accidental injuries are covered. Payment transaction is easier and can be done immediately for buying policy.
- Discounts: Many insurers provide you discounts if you plan to buy policy for your family or you buy policy for more than a year. This helps you to buy policy at a lower premium.
Factors to be considered while buying health insurance policy
- Age: Age is the major factor that gets affected while buying health insurance policy. Higher the age, higher will be the premium. So it’s always advisable to buy policy at a younger age.
- Room rent capping and sub limits:Insurance Company provides capping on room rent. The limit varies from company to company.
- Networking hospitals:To avail cashless facility, an insured person has to get hospitalized in networking hospital. Networking hospitals are those hospitals where your insurance company has a tie up with the hospital.
- Coverage:Coverage is nothing but sum insured.
- Loading charges on premium:If you are suffering from any pre-existing disease and undergoing through pre medical test, loading charges might apply depending upon the type of disease.
- Add on riders:Insurance Company provides you add on benefits or riders like critical illness,reduce waiting period for maternity, etc. To avail these riders you need to pay extra charge.
- Claim settlement ratio:One of the important parameter a person has to look after while purchasing health insurance policy is settlement ratio.
- Eligibility:For every health insurance policy, a person has to look for eligibility. Every company has minimum and maximum entry age for purchasing a new policy.
- Offers and Discounts:There are some companies that provide discounts if you are opting policy for more than a year.
- Exclusions:Exclusions are of two types, i.e. temporary and permanent exclusion.Temporary exclusion means there are certain list of diseases if occurred after purchasing the policy one has to serve 2 years waiting period and there are certain list of diseases if occurred before purchasing the policy one has to serve 4 years waiting period which will depend on company to company. Permanent exclusion means there are certain diseases which can never be covered by insurance company.
- Claim settlement process:You need to understand the claim process first, before you buy a health insurance policy. Get answers to these questions: How to avail cashless facility? How to reimburse? What is the process for the same?
- No Claim Bonus:If you do not claim for the entire policy period, company provides you an additional bonus in terms of percentage with maximum limit. Bonus is different for different companies.
- Restoration:If your basic sum insured gets exhausted because of any hospitalization then the company restores the entire basic sum insured back to your policy for different diseases, that too with no extra cost and no additional paper work.
What is cashless facility?
Cashless facility is provided by an insurance company where the insured person can get admitted and undergo necessary treatment without paying anything to the hospital directly for the medical expenses. The company settles the bill directly to the healthcare provider.An insurance company has a tie up with several hospitals all across the country as a part of their network. This helps to reduce the direct financial burden on insured person at the time of hospitalization.
What is reimbursement facility?
Reimbursement means repayment of money that a person has already spent. In health insurance, the customer first pays for his hospitalization expenses and then claims from insurance company for reimbursement. In the event, if an insured person is hospitalized in any hospital and pays the treatment cost at the time of hospitalization, he/she needs to file a claim for the amount due under policy. The insurance company then reimburses the amount of the insured person’s out of pocket medical expenses.
What all health insurance policy does not cover?
Generally, health insurance policy does not cover certain pre-existing diseases. They can be considered as a temporary exclusion. They might need to serve a specific waiting period if they require the coverage for the same. There are also certain diseases which will never be covered and which can be termed as Permanent Exclusion like HIV AIDS, mental disorders,congenital diseases, suicide, intentional self injury etc.
Can I transfer my policy from one insurance company to another without affecting my renewal benefits?
As per IRDA, you can transfer your policy from one insurance company to another without affecting your existing renewal benefits for pre existing diseases. However, this credit is limited to the sum insured including bonus under previous policy.
What is the maximum number of claims allowed in one year?
Any number of claims is allowed during the policy period unless there is a specific cap mentioned in any policy. But, the sum insured is the maximum limit under any policy.