For representational purposes only. (HT FILE)
For representational purposes only. (HT FILE)

Personal Finance: How to pick the right health insurance

Post the outbreak of the Covid-19 pandemic, demand for health insurance policies has gone up. Here’s a guide on what to keep in mind before you pick up one that suits your needs.
By Abeer Ray
PUBLISHED ON JAN 25, 2021 12:15 AM IST

The unprecedented nature of the coronavirus pandemic revealed for many of us just how unprepared we were to pay hospital bills. Post the outbreak of the Covid-19 pandemic, demand for health insurance policies has gone up. Here’s a guide on what to keep in mind before you pick up one that suits your needs.

How’s the health?

There are many kinds of health insurance plans in the market. Currently, health insurance companies offer two kinds of plans: indemnity and benefit-based. Those with indemnity plans are reimbursed the amount spent on hospital bills while those with benefit-based plans are compensated with the predetermined lump sum amount irrespective of the actual expenses incurred. Indemnity plans are available as individual health insurance policies or family floater plans while the critical illness covers available are categorised as benefit-based plans. Adhil Shetty, CEO, BankBazaar.com, an online market place for financial products said, “Indemnity plans and fixed benefit plans fulfil two different requirements. Fixed benefit plans are necessary if one wishes to get specific coverage for a defined illness, while indemnity plans are aimed at minimizing the financial burden of hospitalization arising from any kind of medical exigency.” If you have a high risk of specific ailments in the family, it might be better for you to get a fixed benefit plan as well as an indemnity insurance plan for a comprehensive health cover. “Balancing between both indemnity and defined benefit plans also ensures that any expenses towards pre or post-hospitalization are also covered and health insurance does not remain limited to hospitalization expenses alone,” Shetty said.

Check for sub-limits

An essential feature of indemnity health plans is the sub-limits embedded within the plan. This means that you have to foot a portion of the hospital bills on discharge. This is because in plans with sub-limits, the added charges including doctor fees, nursing charges, ICU charges, etc. are linked to the room rent. In most cases, hospital expenses and room rent are limited to 1% of the total coverage. Raj Khosla, founder and managing director, MyMoneyMantra.com, a financial services company said, “The sub-limits on health insurance plans are the capping on the total claim for specific diseases and medical treatments. Before signing up for medical insurance, it is recommended to check applicable sub-limits. Always opt for a comprehensive health insurance plan for max coverage flexibility and convenience in the long term, though it can be a bit costly and will attract additional premium.”

Note the waiting period

Health insurance plans cover the treatment expenses of unforeseen health problems or diseases. This explains why insurance companies do not cover diseases from the first day of buying the policy as existing ailments are not covered. The expenses on treatment of pre-existing diseases will be covered only post completion of the waiting period. The current insurance regulations mandate a waiting period of four years though some companies limit it to two or three years. The concept of waiting period is alike in both indemnity and benefit based health plans.

Find out about co-payment clause

Senior citizens often find the co-payment clause embedded in the health plans they buy. This clause mandates the policyholder to bear a part of the hospital expenses while the rest is paid off by the insurance company. In most cases, insurance companies insert co-payment up to 20% of the hospital bills paid. Rakesh Jain, executive director and CEO, Reliance General Insurance, a private insurance company said, “Co-payment in any insurance claims is sharing of risk, higher the co-payment, higher the insurance company will provide a discount on the premium to customer.”

Choose coverage amount

No fixed rule determines health insurance coverage. However, depending on your family’s medical history, your residential city, and the hospitals in your proximity, you may decide the coverage amount. Since medical expenses are increasing, it makes sense to seek adequate coverage to pay off the entire medical costs.

Elderly people find it difficult to buy health insurance plans of their choice. This is because many policies have an entry age limitation which bars the aged from buying them. However, those paying for health plans before they turn 60 years are relieved from the burden of co-payment for the entire tenure. Though family floaters covering your entire family including parents are relatively inexpensive, it makes sense to buy a separate health insurance cover for parents to ensure increased coverage. However, health insurance premium increases with age, which is why the old have to spend more on health insurance premiums than their younger counterparts.

Personal Finance is a weekly feature that aims to provide our readers pertinent and helpful financial information.

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