Health Insurance - Answers to Commonly Asked Questions

Why do I need health insurance?

Everyone is exposed to various health risks. If you have not purchased any Health Insurance plan, you end up paying hefty medical bills in the event of hospitalization out of illness or injury from your own pocket. Effectively, this means that your savings would become zero. In case you don’t have enough money for treatment; you may have to borrow from someone and incur a debt for the medical treatment. In such circumstances, health insurance comes to your rescue. It is a means to shield you against unforeseen financial medical urgency due to illness of injury.

Health insurance covers the cost of private medical treatment for illness and injury that is curable. Health insurance is necessary owing to increasing medical costs these days & uncertain environment. Therefore, insuring your family against Health Insurance is a must & should surely be a part of your regular financial planning.

How would I benefit by buying health insurance at a young age?

• Health insurance premium amount tends to increase with age; more the age, higher the premium.
• You can be covered for medical conditions that may be diagnosed over the years provided there is no break in the policy.
• In addition, each "no-claim" year would fetch you a discount on your premium or an increase in your sum insured amount at no extra cost. The treatment in case of no-claim bonus varies from company to company.
• Lastly, income tax benefit under Section 80-D of the Income Tax Act in India.

What is a No Claim Bonus in health insurance?

This concept works on the same lines as the no-claim bonus on your car insurance. A Policyholder, who has not made any claim in a year, can use the bonus to their benefit the following year.

Generally, it is 10% increase in the policy sum insured for every claim-free year, with no change in premium. So, a policy with a sum insured of Rs 5 lakh, will get an extended cover of Rs 50,000 the following year at the same premium. A claim-free third year will see him earning another ten per cent extra cover on his base sum insured, taking the total to Rs 6 lakh. A maximum bonus of up to 50 per cent is permissible. In case of claim, the accumulated bonus is reduced by 10%.

Do I need to undergo a medical check-up while buying a health insurance policy?

You may be required to undergo a medical check-up after you buy, in case any member to be insured is above 45 age or for sum insured 15 lakhs or above. In most of the cases, the medical tests are done in your home, after taking appointment from you. No payment is required upfront for the same. In case the policy is issued, you will not be charged anything. However, if the policy is declined/cancelled, medical charges will be deducted from the refundable premium amount.

What is the difference between a family floater and critical illness or hospital cash insurance?

The individual or family floater health insurance works on the principle of indemnity. This means that these insurance policies will pay you only what you have spent for medical treatment in hospital. On the other hand, the critical illness or the hospital cash insurance pays you the amount insured, irrespective of the amount spent for medical treatment. These are a benefit based policies.

What is beneficial; floater insurance or an individual insurance?

Buying an individual cover or a floater cover is an individual’s perception. However, as a general rule, at younger ages floater cover is advisable. As you grow older, you should go for an individual cover.

How does a Floater cover work?

For instance a person wants a health insurance for himself, his spouse & their children, the Family Floater plan offers insurance coverage to the entire family under one premium payment. Let’s take an example wherein the person insures himself, his spouse & the dependent children with the individual insurance plans with a sum insured of Rs 1 lakh each, he ends up paying premium ranging between Rs 1000 - Rs 2000 for each family member. On the other hand if the person would have opted for the family floater plan with the sum insured of Rs 3 lakhs, the total premium would surely be less than the separate premium payments in individual health insurance plans. Moreover the separate health plan holds the cover of only Rs 1 lakh as against Rs 3 lakh in case of the Floater plan thus helping the family in case the medical treatment costs go beyond that. This 3 Lac is available for each of the family members individually as well as collectively.

What is Co-payment?

Health Insurance companies use Co-Payment after insured member turns a certain age. Co-pay is that part of your claim amount, which you have to bear. Co-pay can be in % terms or an absolute amount. For example, in case of co-pay of 20% and claim of Rs. 10,000, insurance company will pay you Rs. 8,000 (80% of 10K) and you will bear 20% (Rs. 2,000).