What is Health Insurance? How to Decide the Coverage Required?

Health insurance covers the cost of an insured person's medical expenses. Subject to the terms of policy coverage, either the insured pays the cost of medical expenses directly to the hospital and is subsequently reimbursed by the insurance company, or the insurance company pays these expenses directly to the hospital.

What is health insurance?

Health insurance policy is an insurance product which covers the medical expenses of the insured individual. It either reimburses the medical expenses incurred due to injury or illness or pays the health care provider of the insured person directly.

Medical expenses are rising exponentially. For individual who has not saved money, arranging for a medical emergency at the eleventh hour can be a task. This is especially daunting for senior citizens, given that most ailments strike at an advanced age.

One way to fight medical emergencies financially is by taking an adequate health insurance cover. It offers considerable flexibility in terms of disease coverage. For instance, some health insurance plans cover as many as 35 critical illnesses and over 70 surgical procedures. The health insurance policy disburses a lumpsum payment towards illness/surgery regardless of actual medical expenses. The policy continues even after the payment of policy benefit on selected illnesses.

An individual who is looking for health insurance plans during his/her early phase of life should go for a health cover of at least Rs. 3-5 lakhs. This will help them to get the much-needed health coverage to deal with the medical expenses due to the illness/injury. Moreover, at an early age, there are low odds of you filing a claim, which means you can also enjoy no claim bonus or cumulative bonus, which means you can avail the benefit of higher sum assured of up to 150 to 200%.

Health Insurance Requirement for Family

Meanwhile, with medical inflation estimated to rise at the rate of 15% per annum, the cost of medical care is growing steadily. With rising health care expenses, not having health insurance – irrespective of your age – can be risky. One can never be sure when an illness will occur, leaving you with substantial medical bills. If not financially prepared, a single instance of hospitalisation can disturb your family's well-calculated budget and wipe-out their savings. In the middle of such possibilities, having a health insurance plan is of utmost importance to cover you, and your family against a medical emergency.

Having health insurance plans has become a basic requirement today. However, it is important to have an optimal mix of coverage to make it comprehensive which includes the maximum possible ailments. Most policyholders in India cover their family with a health cover for around Rs. 7 to 10 lakhs for a family of 2 adults and 2 kids. However, it is ideal to have a floater cover of Rs. 10 lakhs for the entire family and a top-up cover of another 15 to 20 lakhs thereby bringing the entire cover amount to 25 to 30 lakhs.

Health Insurance for Senior Citizens or Parents

It is important to be realistic while deciding on the level of health insurance coverage. Even a small routine surgical procedure can easily cost up to Rs. 1 lakh. A bypass surgery at a reputed hospital costs over Rs. 3 lakhs today, and it will undoubtedly cost more in upcoming years. A sum insured that appears adequate today may be insufficient to cover your medical bills in the next few years. Hence, it is advised to consider inflation before deciding the sum insured for your health insurance plans. Moreover, your parents, if they are senior citizens, will certainly need a higher sum insured to cover their healthcare expenses.

There are some essential benefits that all health insurance plans must cover, including emergency care, preventive care and prescription drugs. Most health insurance plans also cover pregnancy and a new baby born.

All individual and group health insurance plans should cover the following top essential health benefits. These health benefits are general categories and represent minimum coverage that a health plan must offer.

• Outpatient care : Also called ambulatory patient services, this is any care a patient receives without going to a hospital. This is the most common type of medical care that most people use.

• Prescription drugs : It would be best if you are looking for a health insurance plan that covers prescriptive drugs for the insured. However, some plans may require you to pay some money out of pocket for prescription medicine, usually called co-payment.

• Preventive care : All health insurance plans must cover preventive care, such as regular check-ups with a primary care physician. It also includes health screenings. Health insurance plans should also cover the treatment of chronic diseases.

• Laboratory services : Your health insurance policy must cover lab services beyond just preventive/diagnostic screening tests. Getting such diagnostic tests done could also require you to see a specialist.

• Emergency services : It is advisable to avail a health insurance plan that includes emergency care. It should not require you to receive pre-authorisation in order to get emergency care.

  • However, you must understand how your health insurance plan defines emergency services. In some case, your insurer will cover care for a life-threatening situation and for situations where you could lose a body part without immediate medical attention. In case you go to the emergency room, but your circumstances don't meet the definition of an emergency, you may end up with medical bills totalling thousands of rupees.

• Hospitalisation : All health insurance plans must cover your hospitalisation. That includes room rent, surgery, and other care you receive.

• Mental health coverage : Health insurance policies should cover mental and behavioural health services. This could include seeing a psychologist or availing treatments for substance abuse and rehabilitation. You may have to pay a co-pay, and your health insurance plan may also limit coverage for a therapist to a specific number of visits in a year.

• Pregnancy, maternity and newborn care : It will help if you are looking for a health insurance policy that covers medical care during pregnancy, as well as before and after the childbirth. After you give birth, your insurance policy should allow you to add your child to your health plan.

An insurance company often evaluate the profiles of patients which cost them more money. An individual who is ageing may require blood tests for cholesterol, diabetes, or blood pressure checks. Hence you must take note that your health insurance premium will increase as you grow older. You should act early if you want to avail a health insurance policy at a reasonable cost.

Recommended Link: Are You Aware of the Medical Expenses Covered by Your Health Insurance Plan?