- Sum assured refers to the main limit of coverage that your health insurance plan offers. Sub-limits are caps on the maximum amount your insurance policy will cover for specific areas of benefits.
- Co-payment is the portion of the bill that your insurance doesn’t cover and you need to pay out of your pocket. Deductibles are the initial part of the bill which you need to bear yourself before your insurance kicks in.
- Pre and post hospitlisation benefits help to cover bills for treatment expenses paid before and after a hospitalisation or surgery.
- Waiting period for pre-existing conditions refers to the amount of time for which a pre-existing condition is not covered after signing up for an insurance policy.
- Individual policies cover every individual separately. Floater policies cover an entire family or group under the same plan with a common sum assured.
Getting a decent health insurance coverage is one of the first steps to starting your financial planning journey. The stress of having to pay medical bills out of your own pocket and the possibility of losing your job due to major health issues can lead to a high level of anxiety, which in turn impacts the rate of recovery from an ailment. Hence, alongside the obvious benefit of protecting your savings from the impact of healthcare costs, health insurance and critical illness coverage also take away a significant amount of mental strain caused by the situation, thus resulting in faster recovery rates. Beyond health benefits, you can also reap tax savings under section 80D when you insure yourself and your dependents.
So clearly, health insurance has multiple compelling benefits. However, for the layman looking to get a policy for themselves or their dependents, the terms and conditions can be difficult to comprehend. In this post, we simplify some of the key jargons so that you can make the most informed decision when signing up with a health insurance policy.
1) Sum assured and sub-limits
Sum assured refers to the main limit of coverage that your health insurance plan offers. This is usually in the form of the maximum yearly claim that you can make out of your health insurance policy for all bills combined. It is recommended to go for a relatively high sum assured even if you are young and healthy. This is because the likelihood of developing health issues increases with age, which may restrict individuals at a later stage from increasing the sum assured.
Sub-limits are caps on the maximum amount your insurance policy will cover for specific areas of benefits. For instance, there might be sub-limits that specify the maximum room and surgery charges that a policy will cover. Be cognizant of what these limits are and try to purchase plans which don’t have very low sub-limits.
2) Co-payment & deductibles
Co-payment is the portion of the bill that your insurance doesn’t cover and you need to pay out of your pocket. It is common for this co-payment to be in the form of a percentage of the total bill. The idea is to share a small amount of burden of the payment with the policyholder so that potential fraud and abuse of the insurance cover can be minimised. Go for insurance policies with low co-payment so that you minimise your out-of-pocket liability.
Deductibles are the initial part of the bill which you need to bear yourself. Your insurance cover kicks in only after the deductible amount is reached. For example, if your deductible is Rs 10,000, it means that for a bill below Rs 10,000, your insurance will not kick in. If the sum total of bills is above that, you pay for the initial Rs 10,000 while the remaining amount will be covered by your insurance. You can choose the deductible amount as it is customisable for most policies. A low deductible policy is more expensive. Usually it is prudent to go for a low deductible plan.
To make your coverage comprehensive, you can choose to then add on a high deductible top-up plan which would give you access to a higher sum assured at a lower premium. We will be deep diving into how these top-up plans work and why they make sense in our upcoming post.
3) Pre and post hospitalisation benefits
Typically, health insurance helps with hospitalisation or surgical bills. However, there might be other related bills before and after hospitalisation such as outpatient or specialist visits, ambulance cost, diagnostic tests, etc. These bills can add up to be a significant amount and be an unnecessary burden on your wallet if not covered. Buy a health insurance plan that covers these expenses.
4) Waiting period for pre-existing conditions
When you buy a health insurance policy with a pre-existing disease, it will usually not be covered from the date of inception of the policy. In fact, there will be a waiting period imposed before such conditions start to be covered, which typically ranges from 1-4 years. This waiting period varies between the different policies as well as between different health conditions. The rationale is to ensure policyholders do not make claims for immediate treatment of a pre-existing and ongoing issue, and is meant to protect their healthcare costs in the long run. Hence, if you are buying a health insurance policy with pre-existing conditions, it is important to understand the waiting periods involved and is an important factor to decide the final plan you go ahead with.
5) Individual and floater policies
It is extremely critical that you have your family covered with a health insurance plan as well. So there are two options here:
- Buy an individual plan for each family member: These policies cover every individual separately, which means each family member benefits from their own coverage limits, and claims made under one policy does not affect the other family members. The coverage amounts can be customised for each family member.
- Buy a floater plan for your entire family: Floater policies cover an entire family or group under the same plan with a common sum assured. Such plans have a larger sum assured which can be shared among the family members. This solution is usually more cost effective than buying individual plans for each family member. That said, it is important that you make sure that your floater sum assured is still high enough to factor in more than one family member falling sick in a given year.
Health insurance is an absolute must for you to protect yourself from the ever-rising healthcare costs as we discussed in our recent post. The very first rule is to get health insurance while you’re still young and healthy to minimise exclusions. Get it for your dependents as well, as their health issues are also your financial responsibility. The great thing is that you have got a range of policies in the market that are tailored for various different needs. Make sure that you read through the terms and conditions, any exclusions and waiting periods, to ensure that the plan you get best suits your needs.