Buying a Health Insurance

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‍“A good laugh and a long sleep are the best cures in the doctor's book. Having health insurance ensures you sleep better at night.”

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Did you know?

Due to rising costs, health insurance becomes inadequate every 5 years.

In the last few years, prolonged hospitalization for critical care has shot up bills between ₹30 lakh to ₹50 lakh. The average claim for infectious diseases increased by over 160% and had a compound annual growth rate (CAGR) of 26% from Rs 24,569 in 2018 to Rs 64,135 in 2022. 

Still 30% of the population did not have any financial protection for health, leading to high out-of-pocket expenditure and impoverishment. Make sure you are not amongst them. 

You might feel redundant to buy health insurance at this early age but before you jump to the conclusion, we want you to take a look at KEY BENEFITS of buying health insurance from an early age.

Health Risks: The financial risk associated with your health is less when you are younger,  but as we grow old and reach the age bracket of 35-40, our bodies are more vulnerable to different diseases like diabetes, kidney failure, cancer, heart diseases and many more.  When you buy a earlier in life, you are virtually safe from contracting a life-threatening disease.

Pre Existing conditions: It's likely that you have a health condition of some kind when you purchase health insurance in your 40s. For some diseases, insurers typically impose a waiting period. If you had a pre-existing condition when you purchased the policy, you would not be able to file a claim for it for a certain amount of time (usually 2-4 years). Purchasing insurance when you're younger ensures coverage before such conditions develop, allowing immediate treatment for any illness that arises later.

Free Annual checkups: Most top health insurance plans entitle policyholders to free medical check-ups once every 2 or 4 years, depending on the policy purchased. Even if policyholders are aware of the free medical check-up facilities; experts say that only 25-35% of them go for it. Regular health checkups help in timely detection of any serious or life-threatening condition  and reduce the chances of late diagnosis.

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There are several other benefits like cheaper premiums at young age and tax deduction u/s 80D upto Rs.25.000 for self and Rs 50,000 for parents ageing above 60.

You can save on the cost of insurance premiums by purchasing a long term health insurance policy. It has a coverage of up to 3 years. Major benefits that you will get is lock in the price of premium for the next couple of years in advance and also you will be eligible for a 10% to 15% discount on the premiums. 

If you are a fitness enthusiast or you are someone who travels a lot on foot then there’s good news for you. Most insurance companies motivate you to start incorporating physical activity into your daily routine. All you need to do is take 10,000+ steps a day and you are eligible for a 5%-10% discount on premiums at the time of renewal.

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The BIG question here is “How much insurance cover is adequate for me?”

For an Individual: An individual who is looking for a health insurance plan during his/her early phase of life should always go for a health cover above 3 lakhs. This will help them get the much needed coverage to deal with the expenses due to illness if any. Also, at an early age there are low chances of you registering a claim, which means you are highly probable to enjoy the no claim bonus or cumulative bonuses,which means your sum insured will rise year on year up to 200%.

For Families: Most policyholders in India cover their families for around Rs 7-9 lakhs and the average sum insured is shared by a single family. For 2 adults and 2 Kids go for at least a sum insured of 10 lakhs. Also, your parents if they are senior citizens will definitely need a higher sum insured and the premium too would be high as per their age.

Remember, there is no thumb rule to ascertain the coverage, though it is a good practice to go for a minimum coverage of 6 times of your salary. So if your monthly salary is Rs 40,000, then you should go for a coverage of at least Rs 2.5 lakhs. This can also go up to about Rs 5 lakhs coverage. Sum insured that appears sufficient today may be inadequate to cover your healthcare expenses in the next few years. So, it is advised to factor in the inflation before deciding on the sum insured.

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There are multiple riders like Top up and super top up etc which can enhance your health cover. 

‍A top up will be useful when the basic treatment cost is above the threshold limit but is limited to only one claim if exhausted. Deductible is paid on every claim before the top up can be applied. 

A super top-up is applied to the cumulative bills during a policy term once they exceed the deductibles, unlike the top-up rider. Experts suggest a Super top-up plan to cover the risk of chronic ailments requiring more than one hospitalisation in a year. Also, the cost of the premium is low in comparison to buying a separate health plan with a higher coverage amount. 

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Next crucial decision to make is regarding the kind of insurance you should buy?

There are 4 major types of health insurance. Since each person's insurance needs are different, you should purchase an insurance plan that meets both your needs and your budget.

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1. Mediclaim : Mediclaim only covers costs associated with hospitalization, including anesthesia, oxygen, and nursing care etc. In most cases, the maximum cost of hospitalisation is up to Rs 5 lakh. If you are tight on your budget, you should seek to buy a mediclaim but keep in mind the limited coverage and less flexibility that comes with it.

2. Individual Insurance:  An individual's insurance policy is intended exclusively only for you. This also includes pre- and post-hospitalisation expenses, daycare, OPD expenses, etc. You are entitled to get the money you spent while in the hospital under this policy upto the basic sum insured.

3. Floater Family Plan: You can provide coverage for every member of your family under one plan. Each member receives an equal portion of the insured amount. If you have not turned to age 25 yet then there are high chances that your parents have an existing family floater and you are covered under that. Make sure to get the details and then make a decision. 

4. Group Mediclaim:. If you are employed, your employer may have provided you with an existing cover. You should know the specifics of the insurance policy. The group insurance policy offers standardized coverage to all employees and they are not required to fulfill any pre requisite conditions unlike in individual insurance.

5. It is advised to have separate insurance from the employer-sponsored one as the policy will lapse once you decide to switch the job. 

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Quick tip: It makes sense to exhaust the sum insured provided by your employer's group health insurance first so that your individual health insurance policy remains untouched.

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Selecting the right insurance

There are 30 insurance companies in India offering various types of health insurance policies. It's critical to recognize that health policies in India have specific features and restrictions.While taking health insurance, it is very important to compare the coverage, services, benefits and premium offered by different companies.Some of the key features to look at are mentioned below

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1. Co-Payment: These are out of pocket expenses. Make sure to read this clause very carefully. Higher the co-pay, lower will be the premiums. For instance, if the claim amount is Rs. 2,00,000 and the co-payment clause is 10%, the insured will be required to pay Rs. 20,000 and the insurer will cover the remaining amount.

2. No Claim Bonus: The insurer gives you a bonus every time you don’t file any claims during a given year. This bonus can take the form of a higher sum insured or a reduction in premium for the following year. Your sum assured can go up to 200% in the next few years. Check the details about how quickly your no claim bonus accumulates and doubles your sum assured.

3. Room Rent Cap: In the event of a hospital stay, room rent is frequently capped by insurers. You will have to pay from your own pocket for the difference in rent if you select a room that is more expensive than the cap.

4. Pre and Post Hospitalisation: Up to a specific number of days, medical costs incurred both before and after hospitalisation are covered. Higher the number of days, the better the policy is for you.

5. Cashless: Policyholders can avail of medical treatment without having to pay the hospital or medical facility directly. Instead, the insurance company settles the bill directly. There is no waiting period for reimbursement. In case of an emergency, you can get admitted without worrying about finances. Know the networked hospitals of the policies, higher the number of hospitals in the network, the better it is for you. It’s advisable to go for the policy with the cashless claims facility first as you can avoid paying out of pocket

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Key Takeaway: It is important to invest in a health insurance policy as early as you start earning. Start early, compare other plans and get the best coverage which are well suited to you and your family’s needs. Not just for tax deductions and exemption, buy a health insurance policy as it provides you the ultimate financial protection in case of unexpected medical costs, which is important as you get older and kind of face a higher risk of health issues.