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Avoid these six pitfalls while buying health insurance

The fine print may have more exclusions or limits in a cheaper variant as compared to a costlier one.

July 16, 2018 / 06:10 PM IST

Buying health insurance is one of the simplest things to do given the abundance of information and ease of purchase online. But here are a few mistakes you must avoid.

Buying low premium products

The online purchase option enables insurance buyers to compare and buy health policies at the click of a button. However, that makes many opt for buy cheaper variants offering the same sum insured. However, this may not be the best way to buy health insurance. The fine print may have more exclusions or limits in a cheaper variant as compared to a costlier one.

One should first assess their needs and then buy one. Cheaper need not be better. “Always try to understand the benefits offered by a health insurance policy. Buy a health insurance that offers to pay wider range of benefits than one which restricts benefits,” Prakash Ranjan Sinha, a Mumbai based independent investment coach, stated.

Opting for a low sum insured

Asking for a minimum sum insured policy can hit you. Ten years back, it was common to buy a policy with a Rs 1 lakh or Rs 2 lakh cover. But given the double-digit inflation in medical treatment, this approach may not work for you. An objective analysis will reveal that most people buying insurance are underinsured.

“You must buy a sum insured as per your needs. Buy a cover which will pay for likely medical expenses in your area,” Chetan Bhatia, financial planner and founder of Beyond Numbers, said. For example, if a bypass surgery costs Rs 5 lakh in a hospital that you would like to get admitted to, then that is the bare minimum number you should look at. Please note that the number fluctuates as per your life-style and preferences.

Cashless benefit and hospital network

This can be terrible. Not knowing the finer rules can leave you in trouble. “Check hospitals in the insurer’s network. The hospitals that you prefer should be a part of this list. The company must be offering cashless settlement in these hospitals. If you are suddenly down with some illness and you find that there is no cashless benefit option, will you run around to raise money for your treatment? Sinha questioned. Do not compromise on these parameters.

Not disclosing facts

Hiding existing illnesses and poor health conditions can be costly. The insurer can reject a claim in such cases. Bhatia said one should clearly mention their medical history while purchasing a health insurance policy. "Specify the disease and treatments you have gone through in the past.” If the insurer wants to conduct medical tests before accepting you as a risk, go for it. It clears the clouds for both you and the insurer.

Exclusions matter

Many a times the policy is bought looking at benefits. But this need not solve all your problems. Ignorance of exclusions does not give you the right to claim. “More than benefits, you should be aware of the exclusions the insurance cover comes with,” Bhatia stated. Exclusions, waiting period, and survivor periods have to be understood before purchasing a policy.

Opting for higher deductibles or co-pay

Given the rising health insurance premium, there is tendency to reduce the premium by opting for a higher deductible amount or going for a co-pay option. For beginners, a co-pay option is an arrangement where the policyholder agrees to pay a certain percentage of the claim, say 20%. For instance, if the hospital bill is Rs 2 lakh, the insurer’s liability is capped at Rs 160,000.

Opting for a deductible is an arrangement where the insured person agrees to pay a certain part if there is a claim. For example, if a policy is issued with a deductible of Rs 1 lakh and there is a claim of Rs 5 lakh, the insurer’s liability is capped at Rs 4 lakh, subject to terms of the policy. If there is a claim of Rs 1 lakh or less, the insurer will not pay a single rupee towards the claim. “Such arrangements lead to lower premium. But the insured should have his share ready with him in case of hospitalisation,” Bhatia said.

Buying health insurance may sound too complicated but it reality it is not if you know your needs. “Though there are many products in the market, each one of them comes with its own set of benefits and limitations. You have to choose one that suits your needs,” Bhatia added.
Nikhil Walavalkar
first published: Apr 27, 2018 01:57 pm
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