As soon as you had started earning, at least you had one encounter with a health insurance agent who keeps bugging you to buy a policy cover for yourself or for your family members.
Let me tell you one secret to save your hard-earned money and time, just leave or escape from the agent for your lifetime.
I am serious..
If you have cross-questioned a health insurance agent with your specific doubts or further details about the policy details, am sure 99% of them don’t have a proper answer.
Even the subject matter experts have to refer multiple sources, to get a clear view of a health insurance policy.
Why this happens, because by default Health Insurance policy functions in a complex manner.
And if you buy a health insurance cover without understanding them you are at a loss.
Out of 1.4 billion people in India, 56% people don’t have any type of health insurance cover.
If you don’t have a health insurance cover and if you are admitted in a private hospital, you are forced to spend from your savings amount. This is called out of pocket expenditure (OOP).
As per reports, around 55million Indians are pushed into poverty each year due to healthcare related spending since they do not have any government or private health insurance cover.
Now before knowing about the types of Health Insurance policy, let’s start from the start.
What is a Health Insurance Policy?
In general, people take insurance to protect them from a specific financial loss. There are different types of insurance namely: Health Insurance, Motor Insurance, Travel Insurance, etc.
Here we shall concentrate on Health Insurance.
Health Insurance works two ways around the world – Parametric and Indemnity Insurance.
Parametric Insurance – Here the insurer will pay the insured amount to the policyholder/hospital on occurence of a hospitalisation, later the policyholder has to submit necessary documents for proof of claim. Main advantage here is there is immediate amount sanction by the insurance company. This system is prevalent only in abroad and not in India
Indemnity Insurance – Here the insurer will pay the insured amount to the policyholder/hospital only upon getting admitted in a hospital for more than certain period of time and also will pay upto certain amount for each treatment type. The insurer company will approve a claim, only if the treatment or hospitalisation is within the policy terms and condition. They even investigate before claiming an approval, since a lot of fraudulent claims happen in India.
Currently, only Indemnity Insurance system is available in India.
Who controls the Insurance Industry in India?
Like RBI is there for the banking sector, IRDAI (Insurance Regulatory and Development Authority of India) is the main regulatory body for all Insurance Companies those which operate within India.
The main function of IRDA is to protect the policyholder’s interest and to investigate any claim denial for any customer by the insurer.
Policyholder can comply to their ombudsman (investigates complaints against an insurer made by the policyholder outside the court system)
Now let’s jump into the types of health insurance policy available in India.
Types of Health Insurance Plans in India:
The different types of Health Insurance policy available in India are:
- Individual Health Insurance
- Floater Health Insurance
- Group Health Insurance
- Health Insurance for senior citizens
- Top Up Health Insurance
- Super Top Up Health Insurance
- Critical Illness Health Insurance
- Personal Accident Health Insurance
Individual Health Insurance:
These are Regular Health Insurance policies for a single person. They are indicated by several names in different companies namely Comprehensive Cover, etc. These are the ideal policies should be opted, since they provide coverage to all ailments in general, with some restrictions.
Floater Health Insurance:
They are Health Insurance plan for family. These are policies where an Individual policyholder can add his family members such as wife, children, parents, etc to his own policy for the same insured amount with additional premium.
Group Health Insurance:
These are policies where the number of policyholder’s will be high. This is more opted by corporates, etc where they had to cover a larger employee base. Since the Insurance companies are getting more customers from a single corporate company, they relax some conditions such as waiting period relaxation, etc. They are a little less costly compared to Retail Health Insurance.
Health Insurance for senior citizens:
These policies are solely for persons aged above 60 or 65 years. As you age, the risk of your health deteriorating is higher than young or middle aged people. Hence, these policies are highly charged and have more selective policy issual rate than other policies. Caution should be made while purchasing these policies, because there are higher restrictions in these policies for hospitalisation.
Top Up Health Insurance:
These policies work like our Mobile tariff recharge plans. If you could remember, a few years back there were rate cutter packs provided by telecom companies in addition to a main plan. So if you talk for a minute, you will be charged less than usual rates.
The same concept applies in these plans. If you buy these plans, you will select a deductible amount such as 5 lakhs and sum insured as 10lakhs for example. These policies will kick in only when the hospital bill crosses 5 lakhs and it will cover expenses from 5 lakh to 15 lakhs.
Since these policies are effective only after crossing the deductible amount, they are less priced. The main drawback is they are active for each hospitalisation.
In case, with the same above example: you are admitted in Hospital during Jan 2020 and your hospital bill shoots upto 8 lakhs. This policy will cover the extra 3 lakhs.
But If you are again admitted during May 2020 and your hospital bill shoots upto 4 lakhs. This policy won’t kick in to cover the expenses
Super Top Up Health Insurance:
This is the same as Top Up policy, but to address the above drawback in Top Up Health insurance policy. These are more beneficial and more advisable to be opted than selecting an Individual Health Insurance policy for a higher cover.
If you take the same above example, for 1st hospital bill – 8lakhs was spent. But in the same year, you got admitted again and the hospital bill was 4 lakhs.
In this case, this super top up policy will pay for this 4lakhs bill.
To simplify, when the cumulative hospital expenses cross the deductible amount for a policy year, then this policy will pay for all the further expenses upto to the amount you had insured.
You should always opt for Individual+Super Top Up Health Insurance cover when buying a health insurance cover. This combination is effective providing more sum insured cover at a lesser premium.
Critical Illness Health Insurance:
These are one time policies, where you take insurance for any future ailments of a specific illness, for example, critical illness Health insurance for cancer. If you get diagnosed with such diseases in the future, the insurance company will pay the insured amount to you. After you get the insured amount, these policies cease to exist.
There is a particular sub-variant to these types of policies, comment below if you want to know about it too. I will write a separate article about them in future.
Personal Accident Health Insurance:
These policies provide cover if you got into an accident causing permanent or temporary disablement.
In most insurance policies, they provide this feature as a rider. But it is generally more effective to buy them as a separate cover.
Things to note before buying a health insurance policy:
- Always opt for policies that provide a Single Private Room or above. Since health insurance policies work on a proportionate cover basis, the whole hospital bill coverage will depend on the room you opt during hospitalization.
- If you opt for a luxury room, but your policy covers only a single private room. You are doomed, my friend. So choose them carefully.
- Split your insurance cover – if you plan to opt for 25 lakhs insurance cover, opt for Individual Health insurance cover of 5 lakhs and Super Top Up Health Insurance of 20 lakhs. This way you will save money in premiums paid to the insurance company.
- Also, opt for such insurance cover from the same company as it reduces submitting different documents to two different companies during applying towards a claim.
- It is also advisable to opt for a policy from a standalone health insurance company so that you don’t have to meddle with a TPA. These companies have their own in house claim team. Why this is important, comment below if you want to know more about it.
You must be now knowing a little bit more about the types of health insurance plans now.
Remember to add these two new sayings in your mind:
You should never lie to a doctor or lawyer. Adding to it – You should never lie to your Health Insurance company while taking a policy. If you hide details, then your claim might be denied totally and your policy will become void.
Also, The best time to take a health insurance policy is yesterday.
Don’t jump in to buy a policy right away, read more about them before deciding your final choice.
Let me know what difficulties you faced or facing in deciding a health insurance cover in the comments section below.