Some say, “Get an insurance agent!” While others say, “Figure out an optimum policy by doing a thorough research.” What is better?
Here is a story that will help you understand the importance of doing your homework.
Neighbours and best friends, Aakash and Prashant, went to buy health insurance policies for themselves. Aakash relied on the advice of his trusted insurance agent and bought a top-of-the-line policy that comes at a very high monthly premium. Aakash’s agent told him that the expensive insurance policy comes with a lot of add-ons, giving him a very high health cover against all diseases.
Prashant, meanwhile, chose the online route, did all the right homework, and finally chose a high-utility health insurance policy that came at a lower premium. He spent hours getting all his queries answered to his satisfaction by the customer service advisor and studying the policy material of several health insurance providers. In the end, Prashant chose a policy that had a much lower premium than his neighbour’s. However, Aakash came home happy, believing he got a better policy than his friend.
A couple of months later, both friends suddenly fell ill with the same ailment, and had to be hospitalized. Here’s what happened:
Both Aakash and Prashant landed up at the same neighbourhood hospital to receive treatment. Both were confident of free treatment because of their policy’s cashless hospitalization service. They expected the insurance company to directly settle their medical expenses with the network hospital. Aakash was in for a surprise – the hospital was not part of his insurance company’s network. Prashant, meanwhile, had checked the insurance company’s list of network hospitals to ensure his preferred hospital was covered. So, while Prashant did not have to pay anything for his treatment, Aakash had to arrange for a loan to clear his hospitalization bills.
In the absence of cashless hospitalization, Aakash hoped that the insurance company would reimburse him afterwards. Unfortunately, he did not know about the ‘waiting period’ clause in health insurance policies. Under this clause, the insurance cover does not start until a few days (typically 30 to 90 days) from the commencement of the policy. The waiting period does not apply to accidental hospitalization. It also varies with the ailments.
Aakash’s policy had a waiting period of one year for some diseases. Additionally, for existing diseases (ailments that you have before buying the policy) the policy does not begin coverage until two to four years from the date of commencement. Aakash’s policy had a longer waiting period than Prashant’s, who had specifically opted for a low-waiting period plan. Hence, Aakash had to pay his entire hospital bill despite an expensive insurance, while Prashant’s treatment was completely cashless.
Fortunately, both Aakash and Prashant were treated successfully and returned home soon. Once home, Aakash came across a letter from his health insurance company that informed him about an increase in his premium. He was taken aback! Aakash had turned a year old while he was still in hospital and that meant he had entered the next age bracket. His agent had not disclosed that health insurance policies have age brackets. So the premium would increase every time he progressed to the next age bracket. Aakash had no idea that they existed. Prashant, who had opted for a policy with larger age brackets, did not face immediate prospect of an increase in his premium.
Aakash paid a much larger insurance premium than Prashant, yet he received fewer real benefits in return. One reason for this is that Aakash’s insurance policy had a lot of unnecessary frills and add-ons, which increased his premium. In other words, Aakash was over-insured. You are over-insured when your policy offers too many services that are never useful to you in real life. Yet, you end up writing a fat premium cheque. This typically happens when you don’t do your homework or read the fine print.
You need to understand one thing that health insurance is for you to protect your financial well-being. It’s an investment you are doing for gaining the right benefits. Hence, it’s recommended to do a little homework before you make that final premium payment to avoid any rude shocks during claims.