Spend, Save and Invest Smartly

Things to Know Before Buying Health Insurance

Is this the way

Just call an insurance agent and ask for any health insurance policy?
Pick up the health policy with the cheapest quote/offer available based on the premium?
Pick up a health insurance policy with a highly reputed Company without even looking at the policy?

Or

Is this the way

Do your research and pick up a health insurance policy suitable to your needs.Understand the terms and conditions in the health insurance policy Pick up a health policy from a reputed Company …Definitely Yes …But only if it matches your needs. Compare quotes online and arrive at a policy that matches your needs not only because the premiums are low but also after studying the terms and conditions of the policy.

Things you need to note while picking up a health insurance policy

Sub-limits in a health insurance policy

  • If you fall ill and have a health insurance policy with a sum assured of INR 2 Lakhs can you take a hospital room/bed with a daily rent of INR 5000 assuming you plan to stay in the hospital room for a week?
    No definitely not…Always check the sublimit in the health insurance policy.
  • The health insurance policy might have a sub limit clause where the hospital room rent is restricted to 1% of the sum assured.
  • The health policy may have a sum assured of INR 2 Lakhs and your hospital room rent is restricted to (1% of INR 2 Lakhs) which is a mere INR 2000.
  • If your hospital room rent exceeds this amount then the Insurance Company will not pay this. This is an out of pocket expense which you have to bear from your own pocket.
  • In addition you may have sublimits on ambulance charges, certain surgical procedures, doctor’s fees and expenses incurred on certain day care procedures.

Copayment in a health insurance policy

If you are a senior citizen always look for the copayment clause in the health policy. Senior citizens typically incur high medical costs. The insurance Companies charge a high premium to protect themselves against such high medical expenses. The probability of an elderly person falling sick is high and in spite of the higher premiums the insurances Companies charge they still are reluctant to insure the elderly as they are a high risk pool.(Chances of them falling ill are high). If you are a senior citizen the insurance Company will insure you only if you bear part of the medical expense. This is a fixed predetermined percentage. You may have to bear 10% of the medical expense incurred and the insurance Company will bear the remaining amount. If you incur a medical expense of INR 50000 and the copayment percentage set is 10% then

  • You pay INR 5000 (10% of INR 50000) and the insurance Company pays the remaining amount which is INR 45000.

This is a win win situation for both the senior citizen and the Insurance Company.

Top ups and Deductibles

A top up plan kicks in once a certain threshold (set limit) is breached. This set limit is called a deductible.
If you take a top up health policy of INR 5 Lakhs with a deductible of INR 3 Lakhs then this policy comes into effect only once your hospitalization expense crosses INR 3 Lakhs. You have to bear any hospitalization expense below the amount of INR 3 Lakhs out of your own pocket. If you were to fall ill a number of times incurring small expenses of even INR 5000 each time soon you would be spending thousands of rupees from your own pocket.

How would you solve this problem?

You need to take another health insurance policy with a sum assured of INR 3 Lakhs which will cover all expenses below the deductible (Threshold of INR 3 Lakhs).

So why take a top up health policy?

If you have a person in your family who falls ill a number of times (Chronically ill) or an elderly person then he/she would incur heavy medical expenses. An expense of INR 5 Lakhs will blow the family savings away. A top up policy can save you in such a situation.

Why can’t I take a number of health insurance policies instead of a top up health policy?

A top up policy takes effect only once a certain threshold limit (deductible) is breached. As a concession the top up policy charges a lower premium. If you pick up a single health insurance policy with a high sum assured (say INR 10 Lakhs) or a number of health policies (say 3 or 4 policies) with a sum assured of around 3-4 Lakhs you would have to pay a high premium. If you are 35-40 years of age and take a top up policy of INR 5 Lakhs with a deductible of INR 2 Lakhs the premiums would cost you INR 3000-3500.An individual health policy with a sum assured of INR 5 Lakhs will cost you INR 7000-7500.Quite a saving on the premium if you take a top up health plan.

Remember: A top up plan depending on the deductible (threshold limit) can save you 20-40% on the premiums you pay for the health policy. When purchasing a health insurance policy beware of the deductibles and sub limits and the co payment clauses in the policy. These are mainly out of pocket expenses and you would have to bear these expenses yourself unless you pay sufficient attention to the fine print of the health insurance policy.

Insurance
Term Insurance