With the rising cost of treatment, insuring your health becomes very important. This article explains the benefits of health insurance (also popularly known as “Mediclaim”), and explains why and how you should buy health insurance.
[Inspired by a query from reader “Prasanna Rao”]
Most of us buy life insurance – it protects our dependents in case of our untimely demise. (For more, please read “Life after life – Why you should buy Life Insurance”)
But that is about taking care of your family after you. What about taking care of your family now?
Welcome health insurance!
What is Health Insurance?
As the name suggests, health insurance provides insurance against financial burden arising from health related issues – this includes diseases, operations / surgeries, etc.
This means that if you have bought health insurance, the insurance company would reimburse the amount you spent on health care expenses upto the policy limit.
How Health Insurance Works
You usually buy health insurance for one year. After the year is over, the insurance can be renewed.
Most insurers would ask you for a medical check-up before issuing you a health insurance policy – this is to ascertain your health at the time of taking out the insurance. Such medical test is done only at the time of buying the policy, and is not repeated every year.
You pay a premium for the medical insurance cover – this premium is usually paid once every year. In return, you receive protection against any medical expense.
(The premium you pay for health insurance is deductible from your income under section 80D, and helps you save income tax. Please read “Insure your health, save your income tax” for more)
During the coverage period, if you suffer from any illness and undergo medical treatment, you can raise an insurance claim, and get back the money from the insurance company.
Thus, you spend money on your treatment, and the insurance company reimburses the amount to you after approving your claim. However, there is a better option available these days – cashless hospitalization.
Cashless Hospitalization
When the insurer reimburses your expenses, you get back you money. However, this means that you first have to shell out the money yourself – and in case of certain problems (like heart surgery), the amount can be rather high.
Not everyone would be able to come up with the large amount required. And why should you when you already have health insurance?
The “cashless hospitalization” feature that many insurers provide comes in handy in such cases.
Such insurers, or the third party administrators (TPAs) appointed by them provide you with an identity card (I-Card). Also, they enlist certain hospitals that are part of their network, or are approved hospitals.
When you get admitted in one of these hospitals, you don’t have to deposit any money – you just need to show your I-Card, and you get admitted. You also don’t have to pay for the treatment.
The bill for all the charges – hospital stay, medicines, surgery, etc. – is sent to the insurance company, and the insurance company directly pays the hospital!
You don’t have to pay any cash – and therefore, it is called “cashless” hospitalization.
What is covered?
In most health insurance policies, only treatments involving hospitalization are covered. This means that small health problems where you are treated as an out-patient (in the OPD, without being admitted to the hospital) are not covered.
Also, pre-existing illnesses / diseases are not covered. Through your self-declaration, and through the health check up you undergo at the time of purchasing the policy, the insurer knows the diseases that you already have.
If you undergo treatment for such a disease, the expense if not covered. (There can be an exception if your employer provides health insurance to you. In some such cases, pre-existing illnesses are also covered)
Maternity expenses are also not covered by most medical insurance policies. (Again, there can be an exception if your employer provides health insurance to you. In some such cases, maternity expenses are also covered)
Advantages of health insurance
To summarize, here are the advantages of buying health insurance:
- Peace of mind
- No monitory loss even in case of major illnesses
- No cash spent in case of schemes having cashless hospitalization facility
When should you buy health insurance?
You need not wait till you get old to buy health insurance. In fact, you should buy a health cover as early as possible.
This is because the cost of buying the medical cover – the premium – keeps increasing with age. So, the younger you are, the lesser is the premium.
Also, as we saw, pre-existing illnesses are not covered. When you are young, you would not have any illness. When you buy your insurance at a young age, and keep renewing the policy year after year, any illness developed during the tenure of the policy is also automatically covered under the policy.
(Remember, only pre-existing illnesses are not covered. Problems (like, say, heart disease) that start after buying the policy are covered even after renewals).
How should you buy health insurance?
Health insurance cover is available in two flavours – individual, and family floater.
In an individual policy, only the insured’s health is covered. Thus, if the cover is for Rs. 2 Lakhs, medical treatments upto Rs. 2 Lakhs for the insured person are covered.
In a family floater, the members of the family are insured, and the sum assured is applicable to all the members. Thus, if the cover is for Rs. 2 Lakhs, medical treatments upto a total of Rs. 2 Lakhs for the members of the family are covered.
This means that there is an overall limit (of Rs. 2 Lakhs in our example) that applies to the entire family, instead of separate limits applicable to each individual.
Example
Suppose, your wife undergoes a treatment, and you claim Rs. 50,000 for it. Thus, after this, the remaining limit for the family would be Rs. 1.5 Lakhs. This limit is available to your family (including your wife) till the cover expires.
The advantage of a family floater is that it is cheaper. Thus, instead of having a cover of say Rs. 1 Lakh for you, your wife and your daughter each, you can buy a family floater of say Rs. 2 Lakhs for a lesser cost.
Some important points to note
Continuity of cover
As mentioned above, pre-existing illnesses are not covered.
Suppose your health insurance cover expires, and you do not renew it. After a year, you want the insurance cover again. All the diseases that you have at that time would be treated as pre-existing!
Had you renewed your medical insurance, these diseases would still be covered! Therefore, it is very important to maintain continuity of the health insurance cover.
Falsifying information in the application form / self-declaration
Like any other insurance, the trust between the two parties – you and the insurance company – is very important for health insurance.
If you provide any false information in the enrollment form or in the declaration (for example, about the pre-existing conditions), and it is caught at a later stage, the insurance company has the right to fully deny any compensation to you.
Therefore, please make it a point to provide correct information at the time of applying for a health insurance policy.
Who offers health insurance in India?
All the major insurers in India – both private and government (PSU) – offer medical insurance. Some of them are:
- ICICI Lombard
- Tata AIG
- Bajab Allianz General Insurance Company
- HDFC Ergo General Insurance Company
- Royal Sundaram Alliance Insurance Company
- IFFCO TOKIO General Insurance Company
- Reliance General Insurance Company
- The New India Assurance Company
- United India Insurance Company
- National Insurance
- HSBC
- Cholamandalam General Insurance
- Bharti AXA
- Future Generali India Insurance Company
- Apollo DKV Insurance Company
- Star Health & Allied Insurance Company
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