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Why should I take Health Insurance?

Why should I take Health Insurance?

What is Health Insurance?

Health insurance is a general insurance that provides financial coverage to the policy holder for medical bills and medicines. Having a suitable health insurance plan helps one receive medical treatment without any burden on one's finances. Such medical insurance schemes give protection against medical costs and cover hospitalization expenses, domiciliary expenses, ambulance charges to name a few

Types of Health Insurance Plans

·         Individual Health Insurance Plans:Individual Health Insurance plans as the name suggests that these policies give coverage to only single individual. Individual Plans do not cover the family members of the individual.

·         Family Floater Plans: It is a single plan for complete family. In this plan the coverage is applicable on all the family members and there is no need for buying separate policies for each member of the family.

·         Group Health Cover: These are plans bought by the employers for their employees. The premium under the group health cover is lower than that of Individual or Family floater plans. These plans offer same benefits to all the employees.

·         Critical illness health cover: These plans cover expenses involved in life-threatening diseases like cancer, tumor or permanent paralysis. These policies usually pay lump sum to the policy holder on the diagnosis of any such life-threatening disease.

·         Senior Citizen Insurance: This plan covers people aged above 65 years. The premium is generally high in Senior Insurance policy because usually treatment for old people is quite expensive.

Waiting Periods and Exclusions

Waiting Periods

Waiting period refers to a period to be passed to start the coverage of the health insurance policy. During the waiting period claims cannot be made. Usually waiting period to start the policy is between 30 to 90 days. There are several types of waiting periods, some of them are:

·         Pre-Existing Diseases: If the insurer declares that the person already has specific diseases such as diabetes, thyroid, high blood pressure etc. the person must wait for at least 4 years for coverage of these pre-existing diseases. This also implies that any hospitalization expenses related to these diseases during the waiting period cannot be claimed for the period of at least 4 years.

·         Waiting Period for certain Ailments: Some ailments such as hernia, ENT disorders etc. usually have 1- or 2-years waiting period.

Exclusions

Exclusion refers to medical expenses that are not covered in the health insurance policy. Some of the common exclusions include:

·         Cosmetic Treatments

·         Diagnostic expenses

·         Dental Treatments

·         Lifestyle related expenses

·         Injuries caused by suicide attempt

Sub Limit

A sub-limit clause is a cap that the insurance company keeps for the policyholder on expenses against a specified medical procedure. Cap is normally a predetermined limit by the insurer on the total claim figure for specific diseases or medical treatments. Insurance companies usually place sub-limits on consultation fee, hospital room rent, ambulance charges and some pre-planned medical procedures such as plastic surgery, cataract operation and some more.

How does Health Insurance work in Indian context?

The relationship between the policy holder and insurance company start when the policy holder purchases the policy. The premium is determined by the insurance company based on the age, gender and health condition of the policy holder.

The insurance company will set yearly premium limits and the assured amount limits including deductibles and co-payments.

There are specifically two types of Health Insurance policies in India. They are:

1.    Cashless Policy: In case of any medical expenses, in the cashless mode of insurance you need to contact the Third-Party Administrator (TPA) in the network hospital of the insurance company. The TPA will directly pay the medical bills to the hospital.

2.    Reimbursement Policy: In this policy the holder must pay the bills and get it reimbursed later by the insurance company.

Understanding how the Health insurance works is important factor when investing in these policies. Having depth insights about the working can help one to make strong claims and make effective use of the health insurance policy.

Why to have Medical Insurance policy?

There are several reasons to have insurance policy. Following are some reasons:

1.    Health Emergencies:

Anything can happen to anyone’s health at any point of time unexpectedly since health emergency comes with high price. For instance, you can take the example of current COVID-19 pandemic, the treatment costs a hefty amount and it may be a burden on one’s pocket. To avoid burden health insurance comes into the picture.

2.    Safeguarding your closed ones:

By buying one policy one can protect his/her entire family in one policy rather than buying separate policies for each member of the family. Medical insurance ensures best medical treatment for the family members without any financial burden.

3.    Promotes savings:

Since the main objective of medical insurance is to reimburse medical expenses. This will save a person’s income as the person will not be obliged to pay from his/her pocket because the expenses are covered in the policy.

4.    Countering Medical Inflation:

In India inflation is increasing at an alarming rate and the healthcare inflation is increasing at double the overall retail inflation. To counter the inflation healthcare insurance plays an important role.

Insured vs. Non-Insured Families

According to EY India is one of the least insured with health insurance penetration rate of 20%. Below explained is the scenario of two families, one family is insured, and the other family is uninsured.

Family 1: Insured

This family buys health insurance policy with yearly coverage of 3 lakhs. This a family of four, husband, wife and two kids. One day wife gets seriously ill and is diagnosed with tumor and the treatment to remove the tumor costs around 2 lakhs and required hospitalization for a week extending the bills to 2.5 lakhs and this was complete reimbursed by the insurer to the insured family avoiding financial burden on the family.

Family 2: Uninsured

This family had the opportunity to buy a health insurance policy, but they denied the opportunity to buy it. This is a family of 3, husband, wife and a daughter and one day the daughter is diagnosed with a rare heart condition and it costs a hefty amount. They had to borrow loans from several of their relatives and to sell off some of their priced possessions.

Hence, by analyzing the above two scenarios you can understand why buying a health insurance policy is especially important.

* Please read the policy terms and conditions carefully before applying 

Blog written by AbdulRahman, Intern , Barakah Finserve LLP 

DISCLAIMER:  THIS BLOG IS FOR INFORMATION AND NOT TO SOLICIT ANY BUSINESS.  ALTHOUGH BEST EFFORTS ARE MADE TO ENSURE THAT ALL INFORMATION IS ACCURATE, OCCASIONALLY UNINTENDED ERRORS AND MISPRINTS MAY OCCUR.  IT IS VERY IMPORTANT TO DO YOUR OWN ANALYSIS AND SEEK PROFESSIONAL ADVICE BEFORE MAKING ANY INVESTMENT BASED ON YOUR PERSONAL CIRCUMSTANCES. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS; READ ALL THE SCHEME RELATED DOCUMENTS CAREFULLY. THE PAST PERFORMANCE OF THE MUTUAL FUNDS IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE SCHEMES. BARAKAH FINSERVE LLP OR ITS STAFF WILL NOT BE RESPONSIBLE FOR ANY LOSSES ARISING OUT OF ANY INVESTMENT DECISION YOU TAKE