Layman's guide to a health plan

Deepak Yohannan
MyInsuranceClub.com

With the improvement in medical science, human life expectancy has also improved. This has come at a cost, with medical expenses soaring in recent years with medical inflation being much higher than regular inflation that we know of. Coupled with the improved life expectancy and the corresponding vulnerability to illness and diseases, the need for health insurance is now greater than ever before.

Thus, the elementary question arise:  What is Health Insurance and what does it entail?

To answer in very simple terms, health insurance is a tool to avoid huge medical expenses, where, in return for small yearly payments called premiums, the hospital bills are met by the insurer in the event of any medical contingencies.

Health Insurance Plans are broadly classified into 2 types:

• Individual Health Plan: which cover only 1 individual under the plan.
• Family Floater Plan: which covers 4-5 family members under the same plan. The plan provides a single Sum Assured of the entire family with a slightly higher premium compared to an individual plan.

Let me explain how it works: For example say a family of five takes out a Family Floater Plan for 5 Lakhs SA and 1 member is hospitalized and uses, say, 3 Lakhs for treatment, then the remaining 2 Lakhs can be availed by other members in that same policy year. This type of plan operates with the assumption that not more than 1 or 2 members would require hospitalization in a given year and hence family floater serves the purpose of covering the entire family in a single plan at a considerably low premium as compared to individual plans for all members.

Other than the choice of individual or family floater plan, Health Plans are further classified into 2 categories:

1. Regular Health Plan: It is related to generic health problems which leads to hospitalization and which are of short duration and not very expensive. The insurer makes payment only on hospitalization within a particular duration up to the specified hospital bill as per the terms and conditions.
2. Critical Illness Plan: Critical illness refers to Terminal Illnesses or Critical Diseases like Cancer, Paralysis, Heart Attack, Coma, etc. They are either non-curable or critical and require a considerable amount of money for treatment. In this type of plan, the insured gets the entire Sum Assured in a Lump Sum on Diagnosis of any of the mentioned illnesses and the policy terminates. This plan does not require the patient to be hospitalized.

Whatever the type of plan, there are certain Common Features of all health plans which needs to be considered and understood while choosing a plan. These are discussed below:

Daily Hospitalization Cash Benefit: This benefit entitles the insured a fixed amount on a daily basis in the event of hospitalization irrespective of actual cost of treatment subject to a maximum limit on days of hospitalization. The insurer may pay an additional amount if the insured is admitted to the ICU.

Pre-Existing Illness Benefit: Pre –Existing Illness are those diseases/illnesses that was diagnosed prior to the commencement of the policy. Most health plans cover such illnesses after a specified time period commonly referred to as the ‘waiting period’. Some insurers may exclude these illnesses altogether or implement stricter conditions for inclusions.

So, if you have any pre-existing illness, it makes most sense to declare the same and avail the waiting period during which it is not covered rather than the claim being rejected altogether for non-disclosure of material facts while applying for the plan!

Cashless Facility: Insurers usually have a tie-up with a number of hospitals across the country. If the insured is admitted to a network hospital, the hospital makes the necessary arrangements and the insurer pays the medical bills of the insured directly to the hospital. In non-network hospitals, the insured initially pays the bills and is later on reimbursed by the insurer.

No-Claim Bonus Facility: If there is no claim in a year, then, at the time of renewal, the insurer will give a discount by either reducing the next year premium or by increasing the Sum Assured by a certain percentage at the existing premium.

Tax Benefit: The premium paid under health insurance is subject to exemption under section 80D up to Rs. 15000. For senior citizens, exemption is extended up to Rs. 20000.

Thus, if one knows these pointers, buying a health plan becomes easier. In spite of the different plans available in the market, the basic features are the same and should be considered by a prospective customer before investing in a health plan for himself and his family.

The author is CEO of MyInsuranceClub.com and can be reach at deepak@myinsuranceclub.com