(Photo credits: Doug)
Have your heard of horror stories of friends and family trying to claim money from Insurance companies during hospitalization and failing? We bet you have.
- You'll hear reasons like
- This is not covered
- Or better still this is covered only after 'x' years
- You have overspent, your eligibility was only this - so that's all you'll get. (Nobody in the world can understand that calculation)
So are Insurance companies trying to cheat you?
The answer is largely no. We forget to use our brains while buying insurance and pay the price. It's funny how we research most things before we buy, but not Insurance.
We did a quick unscientific poll with our friends and realized most people know tech specs if their phone well, but don't know how much they will need to shell out in a life threatening situation. Sad, but true.
So can you overcome the long and winding Terms & Conditions?
It's not so tough. Though it's not possible to understand all the fine print, understanding some basic concepts of insurance can go a long way in making a sensible choice.
First and foremost, get a hang of commonly used terms or policy features in health insurance. Each of them pretty much imply the same thing across various plans. Most important ones are- premium, sum assured, no claim bonus, room rent, exclusions. Let's quickly look at each one of them.
1. Premium - This is what you pay
A premium is the "fee" you pay to remain covered in your insurance plan.
Normally good things don't come cheap. The cheapest available plan may not be the best one for you or your family. Always look at the premium in return of the benefits or the coverage you get.
It's not a rule - but normally and by sheer logic, you get wider coverage if you go for a higher priced product. Wider coverage implies more ailments / more situations and more expenses covered.
2. Sum Assured - The max you can get
Sum Assured is a fairly simple concept, once understood. As the words suggest it means the maximum the insurance company will pay under all possible heads in case of hospitalization. The heads range from treatment, procedure or surgery expenses, to room charges at the hospital, to follow-up treatment after discharge from hospital, ambulance charges etc. etc.
Also, so you don't get jargonized by some salesman or brochure
Sum Assured = Sum Insured = Coverage Amount
So a sum assured of 3 lacs will mean that in no situation, will the insurance company under all heads combined pay more than 3 lacs.
Therefore it is crucial that you select a sum assured which is high enough to cover all possible eventualities. Specially if you're anywhere in the top 10 cities in India, the costs of good health care are extremely high. Spending 2-3 lacs at the hospital is quite normal and there is approximately a 15%-20% escalation in costs at good hospitals every year.
So go for a higher sum assured. Thumb rule, 5-6 lacs should be a reasonable cover in the top cities in India.
3. Room Rent Limit- This is a killer
This innocent sounding condition, is actually lethal.
The same treatment by the same doctor in the same hospital costs up to 50% higher, depending which room you choose.
Get the point?
How does this impact your insurance choice? Let's say you have a 4 lac insurance cover, with a room rent limit of Rs.4,000.
So if you decide to take good care of yourself and like your own space while recuperating and take a private room. Let's say this private room costs INR 6,000/ per night. This is where it gets interesting. The Insurance company will pay only as per the shared room -which is Rs. 1.5 lacs as you bust your room rent limit. Wham! One innocent line in your policy terms and you are paying 1.5 lacs from your pocket.
Why? You overspent. You were not eligible. You indulged...maybe?
That's not at all, all other expenses at the hospital will also be paid proportionately. So in the above example, you could basically be footing half the bill. Going dutch with the insurance company. Uncool.
Most plans express this limit in terms of numbers - like a straightforward room rent limit - Rs. 2,000/- OR as a percentage of your sum assured. Normally 1-2%.
So a 3 Lac Sum Assured = Rs. 3,000 room rent limit.
So if you are not ready to go to a lower category room or not willing to pay the difference, do yourself a favor - select health insurance which has a high room rent limit or better still no limit. Yes, that's possible. The world is not so unfair. But only if, you don't sign insurance application forms like you are practising your signature in a boring meeting.
4. No Claim Bonus - Ensure you get your freebie
Think of no claim bonus as a gift for being a good kid. You don't do any anything bad and you get a gift. So you don't get unwell and don't claim, you get discounts on your premium or a free increase in cover.
This is calculated every year. Every year that you don't claim, you get a discount ranging from 5% to 50%. Some companies now double your cover in approximately 2-3 years.
Medical inflation in India is about 15%. So roughly the cost doubles 4-5 years. A free increase in cover is priceless.
5. Waiting period & Exclusions - Insurance Company says ‘Don't cheat us'.
Another important aspect to remember is that none of the health insurance plans 'start immediately after' you buy them. This means that all companies make you wait for a defined period of time, before you can become eligible to claim. This is called the "waiting period”. Waiting period is of various types-
Initial waiting period viz. first 30 days you remain out of cover inspite of buying the policy, except in the case of hospitalization due to accidents. You can't fall ill, then buy and then claim. This so that people don't game the system.
Exclusion waiting period- Once your cover becomes active, certain procedures or disorders are not covered for a specified period of time- usually 2-3 years. Few of them are cataract, fibroids, appendix removal, hernia removal etc. This is for conditions which probably do not require immediate attention and can be lurking for years before you treat them.
So the waiting period clause is to defend the Insurance Company from fraudsters. This waiting period can be as high as 4 years for conditions which already exist (pre-existing conditions) before buying an insurance plan.
So if you have suffered from any of these or have a family history - check what is not covered and for how long. Don't assume or ignore, it might bite you.
If you know what these 5 things mean and make a sensible choice, send me a gift to thank me. Ok, no gift for me. Just buy the right health insurance. It's not fun like a spa vacation spend, but you'll thank yourself someday.
And yeah, don't go by 'most popular, best company, super plan hai sir, best in the market'. Do yourself a favor, make an informed choice.