How to Buy the Perfect Health Insurance Policy?
The ongoing COVID-19 crisis makes this an important time to look at health insurance. With reports of private hospitals charging lakhs of rupees for treatment, people who do not have medical insurance are often left in the lurch. However, with many health insurance options available in the market, which plan do you choose? Here are a few pointers to help you make your decision.
1. Right Policy Type
Health insurance plans have the following types:
• Indemnity – where the insurer pays you (or hospital directly) the hospitalization expenses for any illness or disease (subject to policy conditions).
• Critical Illness – where the insurer pays you a lump-sum amount if you are diagnosed with a critical illness
• Specific Disease – where the insurer pays you for hospitalization expenses related to a specific disease, such as COVID-19, diabetes, etc.
Indemnity plans are the most common and we will focus on these.
2. Individual or Floater
Indemnity Plans can be taken either separately for each individual in the family or as a family floater cover. Family floater plans are more economical, but they might not provide enough cover in COVID-like situations where more than one family member gets hospitalized in the same policy year. Furthermore, family floater premiums are decided by the eldest member of the family is covered. Therefore, it is more economical to have a separate policy for your elderly parents, instead of including everybody in one plan.
3. Base or Top-Up
Indemnity Plans can belong to two categories – Base and Top-Up. Base plans provide cover without any deductible amount, i.e., insurers provide the entire amount of the claim within policy limits. On the other hand, Top-Up health insurance plans do have a minimum deductible amount. Their advantage is that they substantially increase the sum insured without an equivalent increase in premium. But Top-Up plans should not be purchased without a base plan, as the deductible amount would then have to be paid from your pocket. These days a good approach is to have a cascading set – a good Base Plan with a reasonable sum insured, and a Top-Up whose deductible amount is the sum insured of the Base Plan. Best of both worlds!
4. Right Sum Insured
These days, you should at least have a cover of Rs 5 lakhs per person. This means, if you have a total of 4 family members, it is wise to have a total cover of at least Rs. 20 lakhs as the sum insured.
5. Right Insurer
Selecting the right insurer is linked to the best plan that you finally select. However, while shortlisting the right insurer, you need to keep in mind the following points:
i. Cashless Treatment: This is offered in-network hospitals designated by each insurer. In these hospitals, you do not need to pay first and later claim reimbursement. The claims are directly settled by the insurer with the hospital. An insurer with more network hospitals in your vicinity is better.
ii. Claims Ratio: Look for an insurer that has a high claim settlement ratio. You do not want to argue with the insurer when someone is ill.
6. Right Coverage
Once you decide the sum insured, you need to choose a plan to address the specific needs of your family. Here are some points to keep in mind while selecting a health insurance plan:
i. Room Rent Limit: This differs across hospitals and room types. It is better to go for a policy that provides a higher room-rent limit. Often the room rent limit is linked to the sum insured, in which case you might need to increase the sum insured
ii. Waiting Period: Health insurance plans have different waiting periods, e.g. 1-4 years, after which they cover pre-existing diseases, maternity expenses, and certain treatments like hernia etc. Make sure you choose a plan that comes with a minimal waiting period.
iii. Co-Payment: It is the percentage of the claim amount that you will have to pay from your pocket. For instance, if you have a policy with a 10% Co-pay clause, for a claim of Rs. 1 lakh, you will need to pay Rs. 10,000 from your own pocket while the insurance company will pay Rs. 90,000. Decide if you want this. It helps reduce policy premiums but adds to the claims burden.
iv. Pre/Post Hospitalization expenses: Your doctor may recommend some tests before a surgery or a planned hospitalization. Similarly, after discharge, you might still have to follow up with the doctor and continue with some diagnostics. Make sure your plan covers these expenses as well.
v. Sub-limits in the plan: Sub-limit refers to limiting the claim amount paid for specific diseases, treatments, or surgeries. E.g. for a cataract, your policy may pay a maximum amount of Rs. 30,000, or for normal delivery only Rs. 40,000. You should carefully assess these and match with your needs.
vi. Free Medical Check-Up: Many insurance policies include free periodic check-ups as part of their add-on benefits. With an increase in lifestyle diseases, a free preventive health check-up can be valuable.
7. Right Premium
The best health insurance plan could cost you a fortune and therefore, managing your premiums is an important task. How much premium to pay is your choice, but keep in mind that you should set aside at least 1-3% of your annual income an annual premium for health insurance. The older you and your family members are, the higher should be your premium budget.