How to Choose the Right Health Insurance Policy
The adage ‘health is wealth’ can also be true in reverse, where ill health can drain off your wealth faster than you can count from 1 to 10. With the rising cost of medical treatment, whether it is for a simple consultation or a surgery, you can be sure that the expenses will burn a hole in your pocket. So, what’s the solution to this? Obviously, the first thing that comes to mind is health insurance.
A health insurance policy should be taken as an investment that will cover you in times of any illness, while also saving you thousands of rupees in taxes. Under Section 80D of the Income Tax Act, you are eligible for tax benefits on the premiums paid. However, apart from this benefit, there are so many other advantages of taking a health insurance policy. For one, you have the peace of mind that comes from knowing that, if faced with any medical emergency or even a planned surgery, you will be able to cover it financially without breaking the bank or breaking into a sweat.
However, for your peace of mind then as well as now, what is most important is choosing the right health insurance policy. Here are some pointers for you to ensure that you are on the right track in this regard:
1) Indemnity vs defined benefit: The first thing to consider is what kind of health insurance you need. There are defined benefit plans and indemnity plans. Depending on your budget or requirements, you could choose either one of the two or choose both, which will be better in the long run.
With a defined benefit plan, you would receive a lump–sum amount that is irrespective of the hospital bill. With an indemnity plan, you would get reimbursement of the specific hospital expenses.
Critical illness plans come under the ambit of a defined benefit plan, whereas an individual health insurance policy comes under the indemnity plan.
The best plan of action would be to choose an indemnity plan (also called family floater or mediclaim) and then top it up with a defined benefit or critical illness plan.
2) Family floater plan vs individual plan: To understand whether to choose a family floater or individual plan, it’s important to know that the family floater plan covers all the members of the family that you choose to insure with a single premium being paid, but that the sum can be claimed by any number of members or just one person. However, if more than one person in the family falls ill in the same year, then there could be a shortfall of money in the policy to cover the subsequent hospitalisations.
When you take an individual policy for each member even though you have to pay the premium for each person depending on their age and separate sum insured, you will also get a discount on the total premium. This way, even if more than one person falls sick in one year, each has their own sum insured which does not get affected by the other.
3) Bigger vs smaller cities: Keep in mind that medical expenses in larger cities will be more expensive than in small towns, so calculate how much sum insured you need accordingly. Also, if you have a family history of any diseases, you may need additional cover in the form of a critical illness policy or rider.
4) Pre-existing ailment coverage: This is an important feature that is often overlooked when you research policies. Pre-existing illnesses are usually covered but only after a period of 36 months to 48 months after the policy starts. Some illnesses have a waiting period only after which a claim can be raised. Pre-existing illnesses have to be disclosed at the time of policy purchase to avoid any complications later.
5) Sub-limits: Sub-limits refer to the amount that will be reimbursed to you under specific expenditure heads, such as room rent. There are plans without sub-limits as well. Having a sub-limit might force you to either pay out of your pocket if the expense exceeds the limit or you might end up compromising on the level of care or comfort (such as in case of room rent) in order to fit into the sub-limit.
6) Co-payment: This is a feature that is especially useful if it is for a senior citizens’ health insurance policy where a part of the claim amount is paid out of the insured person’s pocket and the remaining is paid by the insurance company. This can help to bring down the premium amount. However, co-payment may be higher if the treatment is not in a hospital that is empaneled with the insurance company.
Now that you know what to look out for in a health insurance policy, all that remains is to compare at least 3-5 different policies and choose the one that best suits your budget and requirements. There is no doubt that now you will be able to make a better–informed decision than before reading this article!
Financial Analyst at Farmer’s Insurance with over 25 years of experience in the Financial Industry