Health insurance is a type of general insurance that provides financial security to an individual against several illnesses and injuries and their treatment. Like other types of insurance policies, a health insurance policy is also a contract between an insurer and an individual or group. However, in a health insurance policy, the insurer agrees to provide specified health insurance cover to the insured at a particular amount of premium subject to terms and conditions specified in the policy.
Every human being is exposed to various health hazards. A medical emergency can come in anybody’s life anytime without any pri- or warning. In such a case, an individual can protect himself/herself against huge cost incurred on hospitalisation and critical illness by having an appropriate health insurance policy in place.
Advancement in technology, invention of several new medical procedures and effective medicines and medical expertise have contributed a lot in shooting the cost of healthcare. Bearing the expenditure from one’s own pocket for high-end medical treatment may be beyond the reach of many people. In such a case, taking the security of health insurance is much more affordable.
The monetary limit of expenses covered under the available health insurance policies may range from `Rs5000 to `Rs50 lakhs or more (in case of certain critical illness plans). Mostly the insured members prefer policies between 1 lakh to 5 lakhs of the sum insured. Usually, non-life insurance companies provide health insurance policies for the duration of one year. The insured may avail treatment in a hospital under the insurer’s network of hospitals in which the insurer pays directly to the hospital known as cashless facility.
However, in such cases, expenses beyond the limits of policy or expenses, which are not covered under the policy are not paid by the insurer. In addition, a cashless facility is not available on availing treatment in a hospital that is not in the network. The type and amount of expenses covered are generally specified in advance.
Types of Health Insurance Policies
With increasing reforms taking place in the insurance sector, a variety of health covers are available depending on the need and choice of the insured.
The following are some types of health insurance policies:
Hospitalisation indemnity policy
The actual cost of treatment in the case of hospitalisation is fully or partially covered by this policy. In addition, this policy covers expenses incurred before and after hospitalisation for some specified period.
Hospital daily cash benefit policy
A fixed daily amount, which is a percentage of the sum insured for each day of hospitalisation, is provided under this policy. In addition, there may be per day charges paid on a daily basis in the case of Intensive Care Unit (ICU) admissions or for specified illnesses or injuries.
Critical illness benefit policy
It provides a fixed amount to the insured in the case of diagnosis of a specified illness or on undergoing a critical illness treatment. Usually, once this lump sum is paid, the plan ceases to remain in force.
Surgical cash benefit
This policy provides coverage against a specified undergoing surgery. According to Yateesh Srivastava, the Chief Marketing Officer at AEGON Religare, Surgical cash benefit is a benefit that is paid out if the insured has a surgery. In a surgical cash plan a fixed amount, depending on the type of surgery, is paid out. This is not dependent on actual expenditure incurred. The payouts vary depending on the severity of the surgery. However, the surgical cash benefit amount depends on the severity of the operation and recovery period.
Apart from the abovementioned categories, there are variants of policies available in the market that specifically targets particular segment of population like senior citizens. Apart from this, buying health insurance for self and family makes an individual eligible for a rebate on tax under Section 80D of the Income-tax Act, 1961.
Any individual purchasing health insurance by any payment mode other than cash can avail an annual deduction of Rs 15,000 from their taxable income for payment of their premium for themselves, their spouse and dependent children. In addition, since the financial year 2008-09, an additional Rs 15,000 is available as deduction for health insurance premium paid on behalf of parents. The deduction is Rs 20,000 if the parents are senior citizens.
Important Aspects of Health Insurance Plan
A health insurance plan consists of certain aspects that play a crucial role in claim settlement. A proposer should understand all these aspects before purchasing any health insurance policy. Lack of clarity on these aspects may lead to a wrong interpretation of actual policy terms by the proposer. Let us discuss these aspects in detail:
The age of the proposer is a principle factor that determines the premium chargeable for the policy. The older the buyer, higher will be the premium cost as elderly are more prone to illnesses. The previous medical history of the insurer is another major factor considered for determining the premium. In the case of absence of any prior medical history, the premium will automatically be low.
Waiting period
On purchasing a new policy, generally, there is 30- day waiting period starting from the policy inception date. During this period, any hospitalisation charges will not be payable by the insurance company unless arising out of an accident. This waiting period also known as the lock-in period and is not applicable for subsequent policies under renewal. Certain medical conditions, such as knee joint replacement and gall bladder removal, have a pre-defined waiting period before which a claim for the treatment of these conditions or procedures shall not be payable.
Pre-existing condition in health insurance
Any medical condition or disease that existed before the inception of a health insurance policy is called pre-existing conditions. A claim arising out of treatment for such a condition within 48 continuous months of the policy start date shall not be payable. It means pre-existing conditions can be considered for the payment only after the completion of 48 months of continuous insurance cover.
Grace period
It is a 15-day period from the premium due date. The policy ceases to be in force if the premium is not paid within the grace period. However, coverage is not available for the period for which no premium is received by the insurance company.
Portability of policy
The Insurance Regulatory and Development Authority (IRDA) w.e.f. 1st July, 2011, has mandated insurance companies to allow portability from one insurance company to another and from one plan to another, without making the insured to lose renewal credits for pre-existing conditions, accrued in the previous policy. However, this credit is limited to the sum insured (including Bonus earned if any) under the previous policy.
Balance sum insured
Once a claim is filed and settled by an insurance company, policy coverage or sum insured is reduced by the amount that will be paid out on settlement. For example, suppose you start a policy with coverage of 3 lakhs for a year in the month of January. In April, you make a claim of 2 lakhs. The coverage available to you for the May to December will be the balance of Rs 1 lakh. This amount of Rs 1 lakh is known as the balance sum insured.
Any one illness
It means the continuous period of illness, including relapse of the ailment within a certain number of days as specified in the policy, which is usually of 45 days.
Maximum number of claims allowed over a year
Any number of claims may be allowed during the policy period unless there is a specific limit of payment prescribed in any policy. The sum insured is the maximum limit under the policy irrespective of the number of claims filed.
Health check-up facility
Some health insurance policies pay for specified expenses towards general health check-ups of an insured for a limited amount once in a few years. Normally, this is available once in a block of four years of continuous coverage.
