Adequate health insurance should be an essential part of your financial plan. Not only does it help you cover the cost of health emergencies that land you hospital, it also helps you focus on utilising your savings better given that health-related expenses are taken care of.
Innovations in health insurance have led to the inclusion of day-care and OPD expenses, and even the cost of preventive health checkups, in certain policies for a reasonably priced premium.
If you don’t have any health-related emergencies, it may feel as if the premium paid has been a waste. However, given how expensive medical treatment can be, it is prudent to cover expenses with an insurance policy rather than by dipping into your savings.
Abhishek Bondia, MD and Principal Officer, SecureNow Insurance Brokers, says, “Health insurance is needed for health catastrophes, which can be a costly affair.”
For a good health insurance policy, scrutinise the premium, the hospital network, the illnesses that are included, whether it is cashless or not, and the waiting period before you can claim for general treatment and for expenses on maternity and pre-existing illnesses.
There are a few other details you should be aware of before signing up for a health insurance policy.
Sub-limits
These limit how much you can claim for certain things. For example, your insurance may cover cancer treatment, however, if there is a sub-limit, you will be able to claim the cost only partially.
If your insurance policy has a room rent sub-limit, it means that you may not be eligible for the room you desire.
Nisha Sanghavi, Certified Financial Planner and Co-Founder, ProMore, a wealth management firm, says, “Read the fine print to see what the policy wordings are. Some policies will cover a single air-conditioned (AC) room, but the hospital you are admitted in may have multiple categories of single AC rooms. In most such cases the cheapest one will be covered. If this is not available, only then will the insurer pay the cost of the higher category room.”
Bondia says, “There is no point in taking a policy with sub-limits and capping. It’s better to pay a few hundred or thousand Rupees extra on the premium, rather than regret later.”
Sub-limits help an insurer reduce the payout and allow the insured to pay a lower premium. If sub-limits (defined as a proportion of the sum insured) are applied on items like room rent or post-hospitalisation expenses, then your out-of-pocket expenses can be very high.
Often, in a bid to pay a lower premium, we are unable to visualise the importance of adequate cover. Sub-limits are not useful and you can end up paying a lot more on out-of-pocket expenses than you save on the premium.
Deductibles and co-pay
Deductible refers to the amount (of the hospital bill) you have to pay before claiming the rest from the insurance company. This amount will be specified in the insurance agreement and you should be aware that you need to have at least this much set aside for hospitalisation expenses.
Co-pay is similar. However, it refers specifically to a percentage of the claim you will need to pay. For example, your co-pay could be 10 percent of the bill, while the insurance company will cover the rest (up to the sum assured). Unlike a deductible, co-payment doesn’t have to be made before making the insurance claim.
Sanghavi cautions, “One has to be careful when it comes to co-pay as it is a percentage of the claim, and where claims are large, the payment you need to make towards co-pay can also be quite substantial.”
If you have a cover from your employer or if you have enough accumulated savings to afford deductibles or co-pay, then using this can help you get a larger cover as premiums are lower. Nevertheless, you need to give it careful consideration.
According to Bondia, deductibles can be deceptive, “Deductible is applied every year. If the policyholder makes repeated claims, year after year, she will end up spending quite a bit due to the deductible. You should have that level of savings every year.”
Claims
The most important aspect of any insurance policy is claims. When it comes to this, you should assess the no-claim bonus that your policy provides, and the claim settlement ratio of your insurer.
A no-claim bonus shows up as an increase in the coverage if, in a year, you do not put in a claim. Comparing the no-claim bonus across policies is one way to make your policy efficient in the long run. If you have taken a policy at a younger age, no claims for the next few years can even double your sum insured without having to pay a higher premium. “This becomes like a hedge against inflation in the long run,” says Bondia.
Moneycontrol.com and SecureNow have published health insurance ratings which will tell you the claim settlement ratio for various policies.
Ultimately, the health insurance policy you take has to be aligned to your and your family’s health needs and circumstances.
Sonesh Dedhia, Certified Financial Planner and Co-founder, IFANOW, a wealth management firm, says, “Keep it simple — have one comprehensive policy without limits and deductibles. However, check if there are clauses whereby an insurer may legitimately reject claims, or not cover a pre-existing condition.”
Being aware and mindful of small details can benefit you at the time of making a claim. Don’t be in a hurry and read through the relevant details before committing.
