In India, buying health insurance is still treated as an expense. 

Typically, the majority of the population’s spending habits reflect monthly expenses consisting of EMI, rent, groceries, utility bills etc., and the surplus is allocated to savings accounts. That’s it!

By far it extends upto FDs and if one is a bit educated it goes to mutual funds or stocks without any advice, purely based on recommendations from friends or relatives (personal view).

Hence purchasing health insurance is still a long way or to be more precise never on their list.

Only when a medical emergency hits, does the importance of health insurance become known to them but it’s too late until then.

According to Statista, in the fiscal year of 2020, nearly 500 million (50 crore) people across India were covered under health insurance schemes. 

The ratio of people insured by health insurance is less than half of India’s population, which is quite worrisome.

“Health is wealth” and thus wealth should be looked after carefully. Isn’t it?

In life, one can earn ‘n’ amount of money i.e., the sky’s the limit in earning but only if health supports you during that earning process. 

So let’s be clear.

Whether health insurance is mandatory during financial planning?

Yes! A wise man will always have health insurance. Topping the cake – a deduction under section 80D of the Income Tax Act, 1961 is allowed for payment of health insurance premiums. 

Now, as we have concluded that health insurance is what wise looks for, which factors to be looked upon while purchasing health insurance?

A major chunk of people rely on agents of different companies while purchasing health insurance.

Never do that blunder!

from now on and if you already have one then check for any flaws and try to rectify them.

Agents are employees and they get a commission for selling respective insurance. They want to sell the policy and that is it.

They don’t care about the claim success ratio, your income, room rent, whether hospitals accepting cashless are in your reach or not, and like. They don’t care and why should they? It is our responsibility to read insurance documents and select a policy that best fits the criteria decided by us.

But what should be the criteria one should be looking for? 

Let’s see the few criteria which should be looked upon while purchasing health insurance.

Important things to look for before purchasing health insurance.

Network hospitals

Preferred Provider Network (PPN):- means a network of hospitals that have agreed to a cashless packaged pricing for listed procedures for the insured person. The list is available on the website of the Company/TPA and is subject to amendment from time to time. 

Explanation: – Always be prepared for the worst. Look for insurance that has your preferred hospital in their PPN list. 

Select a hospital according to the illness one has taken insurance and if there are no major diseases among members then look for a good decent hospital in your area. Take previous experience about that hospital from family-friends. And one important point which should be kept in mind is distance should not be more from your resident.

There is no point in paying a hefty premium when you have to run a long way to a hospital during emergency times.

In an emergency, every second counts.

Pre-post hospitalization expenses

It is a cover for an expense that will be bear by the insurer.

Pre hospitalization expense means expenses that occur before getting hospitalized. Generally, major insurers cover 30 days’ expenses.

Post-hospitalisation expense means an expense that will occur after getting discharged from the hospital. The industry standard is 90-120 days’ expense.

Majorly pre-post hospitalisation expense is ignored by many people but looking at the present medical scenario, the rate of medicines is touching the skies and it is always advisable to insure that as well.

Eg:–

• National insurance

Maternity

Maternity expenses should be looked upon only when you’re planning a baby in the future otherwise, it will only increase your premium.

It’s not like the 90s anymore. The expense of maternity has inflated a lot which costs a high amount.

Also, make sure to have a glance at the waiting period and sub-limits clause of the respective policy.

E.g., –

• National insurance

• United India Insurance Company Limited

 Daycare facility

Explanation:-Nowadays many diseases are operated on within a day (less than 24 hours) but the expense of it is pretty high. 

Before opting for a policy make sure to have a look at the policy coverage for daycare facilities for inclusion-exclusions of the diseases.

Eg;-

• National insurance:-

• HDFC ERGO:-

Claim settlement ratio

Explanation: – it is the ratio of the customer’s claim which has been settled by the insurance company in a financial year.

The higher the ratio, the better the policyholder can rely on the company to settle their claim.

It’s always advisable to check for this ratio from insurance regulatory and development authority of India (IRDA).

6. Co-Payment

Definition: – A cost sharing requirement under a health insurance policy that provides that the Insured will bear a specified percentage of the admissible claims amount. A Co-Payment does not reduce the Sum Insured.

Explanation:-Co-pay is the percentage capped by the insurer which has to be borne by the policyholder from his/her own pocket.

In short, the percentage of claim expense has to be pursued by the policyholder.

The higher the co-pay, the lower the premium amount.

It is always wise to study the co-pay clause before purchasing a policy

Simpler term– Mr A has taken insurance having a Sum assured of 5 Lakh and his claim amount is Rs 1 lakh according to the policy 10% is a Co-pay 

Here Mr A will be compensated Rs 90000/- From the insurance company and Rs 10000/- has to be personally Borne by Mr A.

Eg,

• SBI General Insurance Company Limited

• National Insurance 

• Experts talk:-

Room Rent limit

Definition: – Room rent includes the amount charged by a hospital towards Room and Boarding expenses and shall include associated medical expenses.

Explanation: – Generally insurance companies cover Room rent up to a specified percentage of the sum assured (SI) mentioned on the policy. Room rent expense seems very nominal at first sight but when the actual expense occurs then it can eat up a major chunk of savings as normal rent ranges higher in metro cities.

My advice will be to look for room/ICU rent in your nearby hospitals or your preferred hospitals and then accordingly go for the policy which best suits your preferred hospital rent for a single day.

Simpler term: – Mr. A has taken insurance having a Sum assured of Rs 5 lakh then the maximum 

Room rent he can avail is 1% of SI or actual i.e.  Rs 5000/- or actual expense whichever is lower.

ICU rent he can avail is 2% of SI or actual i.e. Rs 10000/- or actual expense whichever is lower.

Note: – A wise man should be aware of the proportionate clause which is linked with the room rent clause.

In the above sheet, the room rent limit allowed is Rs 2500/- but the actual room rent expense that occurs is Rs 5000/- which is 50% more than the limit.

Therefore other expenses will also be deducted by 50% except for medicines expenses as per Note and 53000/- is to be bear by the policyholder which is nearly 42.92% of the total claim.

To avoid this, one should look for a policy with no limit on room rent.

People generally tend to ignore this clause and eventually end up paying a huge chunk from their pocket.

Eg,

• National insurance

• HDFC ERGO General Insurance

Sum Assured

It is the maximum amount which will be covered by the insurer. 

There is no thumb rule about how much one should get insured. It all depends upon the city you are living in, your preferred hospital, the disease for which you are taking cover and all such other stuff matter.

Just keep in mind the inflation factor in medical costs before taking insurance and accordingly plan. 

With advancement of the medical field, cost of treating disease also increases due to advanced machinery.

Personally witnessed the house getting financially shaken due to high medical treatment costs.

Note: – Higher the insured amount, the higher the claim. 

Advise:-Don’t opt for a very high sum Assured that to pay the premium you have to misbalance your financial planning.

9. Top-up plans/Super top-up plans

First, let’s understand the Difference between top-up and super top-up plan

Difference between Top-up and Super Top-up plans.

Top-up plan: – Top-up plan triggers when you have exhausted your deductible.

Let’s first understand what is deductible? Suppose you have a sum assured for 3 lakh. Here this 3 lakh insured acts like a deductible.

A point to note here is that the deductible can be in any way i.e. if you don’t have insurance and you had a condition to pay the first 3 lakh from your pocket that also works like a deductible.

In short, the amount which is insured (paid by you or the insurance company) acts like a deductible.

Super top-up plan: – The super top-up policy is the same as top-up policy, difference arises in the claim.

For instance, Mr. A has a base policy of 3 lakh and a top-up policy of 5 lakh.

Here if a claim of say 2 lakh has been popped then the base will cover it. Now another claim pops of 2 lakh then 1 lakh will be covered from the base policy and the remaining 1 lakh will have to be borne by Mr. A out of his pocket as the Top-up policy works on a single claim rule.

In the same scenario if Mr. A had a super top-up policy then the second claim of 2 lakh-1 lakh will be paid by base policy and the remaining 1 lakh will be paid from the super top-up plan.

In subsequent claims of 2 lakh whole would be paid from a super top-up policy.

Note: – Top-up/super top-up can be purchased from a company other than the base policy company.

Waiting period

It is a period during which a claim for a pre-existing disease will be available only after a pre-decided period (usually 2-4 years) has been passed but a premium has to be paid during the pre-decided period.

It is learned to go for a policy with the least waiting period.

Pre-existing disease: – Means any condition, ailment, injury or disease 

1. That is/are diagnosed by a physician within 48 months prior to the effective date of the Policy issued by the Company or its reinstatement or 
2. For which Medical Advice or treatment was recommended by, or received from, a physician within 48 months prior to the effective date of the Policy issued by the Company or its reinstatement.

Eg,

• HDFC ERGO:-

• National insurance policy:-

Free medical check-ups

Insurance provides reimbursement for medical health check-ups after a few conditions are met.

Note: – I will personally never go for a body check-up with insurance money. Why tell about your health to insurance companies? It’s better to pay from your own pocket.

Future escalation of premium

Increase in premium can’t be controlled as inflation can’t be controlled. Rather than complaining, we should focus more on dealing with it properly.

Check for clauses dealing with an increase in the premium of the company you’re looking for purchase health policy.

Below are a few photos of the policy in which you can clearly see the rate at which the premium is increasing.

Critical care benefits

Definition: – Critical illness means stroke resulting in permanent symptoms, cancer of specified severity, kidney failure requiring regular dialysis, major organ/ bone marrow transplant, multiple sclerosis with persisting symptoms an open chest CABG (Coronary Artery Bypass Graft), permanent paralysis of limbs and blindness.

Explanation: – It is always advisable to have insurance for critical diseases like cancer, diabetes, and heart problems separately (if Sl is not huge). 

Look out for the history of your elders if any disease is genetically inherited insured for that specifically.

Generally in critical disease chances of exhaustion of Si increase and as a result expenses have to be borne out of the pocket which could create an imbalance in your Long-term finance.

No claim bonus

It is a benefit given by insurance companies to those policyholders who haven’t claimed any expense in a particular year.

Benefit is provided to insured by discounted premium in a subsequent year or by increasing the sum assured against the same premium.

Point to note: – It is not advisable to claim for small expense if there is an NCB clause in your policy. 

Say there is a medical cost for 10000/- and no other claim has been made before that. Your NCB is say 30000/- (10% of 3 lakh) then I would suggest better pay the medical cost by yourself if possible and don’t break the NCB chain.

Again, in the end, depends on your financial situation. If there is no resource for 10000/- then don’t go too long like borrowing from lenders or any other for the NCB clause to be unbroken.

• Expert’s talk:-

Eg,

• National insurance

Existing customer review

Second opinions always add value. 

The company might be highly recognised, rich in cash, but there is no point when he doesn’t treat his customers well.

Before opting for any insurance, always talk with executives and try to clear your doubts as much as possible. Try to get company reviews from your relatives, friends, colleagues, etc. You can take help from the internet also. 

Look for negative reviews and verify the same with the executives and if they answer them with valid reasons then only go ahead with that insurance company.

Exclusions

This is the clause where most insurance buyers make a mistake because nobody wants to deep search the few small letters inside the insurance policy.

Whatever agent says we blindly rely on them.

But, at the time of claim, it might cause a major issue if the disease for which we have purchased insurance is under the list of exclusions and you were unaware before taking that company’s policy.

Now we have pretty much knowledge about the clause of health insurance to look into and overall now you can say that you possess much knowledge to select health insurance individually.

So concluding what the ideal health insurance one should have

Points to be considered while purchasing a health insurance 

• Always have two different plans in case you have an elder person in your family. One for dependents i.e. husband, wife, daughter, son, and another one for elder ones.
• In case any member has any critical illness then be insured for that disease separately.
• Make sure to have a top-up or super top-up plan incase the sum insured amount alone is not a large sum i.e. 3 or 5 lakh.
• Never go for the trap of “low premium”. No one in this world provides better facilities at a low cost. Use common sense.
• After finalizing the policy, make sure you are well-aware of the claim process. At the time of an emergency, our mind tends to get overloaded with the events.
• Check companies’ “premium collection” of the latest audited report. It will show whether a company is rich in cash flows or not because in the end the claim will only be settled only if they got enough income.
• If living in metro cities then look for a policy having no capped on Room rent.

Keep one thing in mind, there is never any thumb rule to buy health insurance. It differs person-to-person on the condition of health one is seeking.

In the end, what I can give as a piece of advice is “Never plunge into something blindly and always do deep research or say reasonable research in not only health insurance matter but any finance-related matters.”