How Does Health Insurance Work? 5 Basics That Help to Choose the Right Plan

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Due to the rising medical costs, individuals might want to consider a proper health insurance policy that reduces their financial burden. Several insurance companies in India offer a range of health insurance plans and other benefits at reasonable premiums. 

Furthermore, one can raise cashless claims on their health insurance policies by getting treatments from the insurers’ network hospitals. 

However, a clear understanding of health insurance might help in choosing an appropriate plan effortlessly. 

Also read: Healthcare Planning is Important for All for These 5 Reasons

What is health insurance? 

A health insurance policy is an agreement between an insured person and the insurance company, where the latter provides financial assistance to the policyholders to meet medical expenses. Under this plan, one can avail of reimbursement or a cashless facility for an illness or accidental injury. 

Additionally, the health insurance policy provides a range of coverage, including hospitalisation expenses, ICU charges and more. Also, policyholders can also obtain tax benefits on health insurance premiums under the Income Tax Act, 1961. 

Also read: 5 Top Benefits Hospitals Can Reap with Automated Healthcare Claims Denial Management

Who needs a health insurance plan?

Although health insurance plans are vital for everyone, some individuals might require it more than others. Here is a list of such categories of people:

  • A person with lifestyle diseases such as diabetes, obesity, heart disease etc. 
  • Families with ageing parents who are vulnerable to illnesses
  • Individuals who are exposed to a hazardous working environment
  • One who needs maximum protection against medical inflation (Below Poverty Line families). 

How does health insurance work for different age groups?

Given below are the functionalities of health insurance policy for different age groups:

  • Senior citizen: With age, health complications increase, and consequently, the need for suitable insurance also increases. Additionally, insurance providers insist the elderly policyholders on getting thorough check-ups for pre-existing diseases. Insurance companies provide coverage for pre-existing medical conditions, especially for senior citizens, after 1 or 2 years of the policy period. The period of pre-and post-hospitalisation can also get reduced with age. 

Also read: 12 Common Questions Term Insurance Buyers Have

  • Youngsters: The major advantage of applying for a health insurance plan at an early age is that one can avail of them at lower rates. At a younger age, individuals are also offered extensive coverage options. As health insurance plans come with a pre-existing waiting period, applying for one at an early age will cover this period while the policyholder is still young. This will, in turn, help obtain coverage benefits later in life if he or she falls ill. 

Key coverages under different kinds of health insurance

Broadly classified, there are two types of health insurance plans available in India: indemnity and defined-benefit plans. Further, there are insurance options under these main categories. 

Some of the key coverages under each insurance option are as follows:

Indemnity plans

Indemnity-based health insurance plans provide reimbursement for the medical costs incurred during hospitalisation up to the sum insured limit. In order to receive reimbursements, policyholders might need to submit hospital bills and the details of other expenses. Some examples of such insurance plans are: 

  • Mediclaim insurance: This insurance includes hospitalisation costs incurred due to illness or accidents. Mediclaim insurance, also known as mediclaim policy, provides coverage for nursing charges, doctor’s fee, surgery costs, etc. It is available as group mediclaim, overseas mediclaim insurance, individual insurance and more. These plans are appropriate for individuals between 65 to 80 years of age. 
  • Individual insurance: Under this policy, only an individual can avail of coverage benefits. It includes hospitalisation expenses, and individuals can file a claim up to the sum insured limit. This health insurance plan is best suitable for individuals around 30 years of age. Furthermore, couples can also benefit from this plan as both of them can claim against the sum insured under the policy. 
  • Family floater plan: As the name suggests, this plan ensures an individual and his or her family. It is a single plan where the sum insured is divided equally among the family members. One of the benefits includes lower premium rates compared to other mediclaim policies. This plan might be ideal for someone who wishes to insure his family at an affordable premium. Therefore, middle-age groups (30-45 years) can consider applying for this policy. However, floater policies come with an age limit of 60-65 years depending on a policy provider.
  • Unit linked health plans: These plans come with the benefits of both insurance and investments. Under this plan, insurers invest a part of the policy premium in money-market instruments and offer returns based on the market performance. Thus, individuals looking to invest for better returns might prefer this option. A person above 18 years and a maximum of 50-60 years will find this plan desirable. 

Also read: Types of Health Insurance Plans that you should know about

  • Group mediclaim: These are corporate insurance plans offered by employers to employees of medium or large-scale enterprises. These plans are best suitable for employees within 18-70 years of age associated with a company.

Defined-benefit plans

A defined-benefit plan pays a stipulated amount on an insured event. Both life and non-life insurance companies offer these plans. Some of the popular defined-benefits plans include:

  • Critical illness plan: This plan covers treatment costs of major diseases such as organ transplant, cancer, stroke, kidney failure, etc. As treating these ailments without insurance can be an expensive affair, this plan can be an ideal choice for middle-class families and individuals above 40 years of age. 
  • Hospitalisation cash benefit plan: Insurers offer hospital daily cash as an in-built cover under the health insurance coverage. Under this cover, an insured person receives a daily cash allowance up to a certain limit besides hospitalisation expenses. This plan can be an ideal option for individuals in need of additional financial cushioning during medical emergencies. Anyone between 91 days and 65 years can benefit from this insurance plan. 
  • Personal accident plan: A health insurance plan comes with a personal accident cover under which a policyholder or his family receives compensation in case of accidents resulting in permanent total or partial disability or death. One can avail this plan irrespective of his or her age as the premiums of these plans are decided based on an individual’s occupational risks. That said, middle-aged workers between 30-45 years of age might find this plan to be a reliable insurance option.  

Also read: How to Determine the Right Health Insurance Coverage for Your Needs?

How are health insurance premiums paid?

Health insurance policyholders can now pay their plan premium in instalments. Insurers will send the down payment receipt received during policy issuance to an insured person if he opts for paying premiums in instalments. 

Subsequently, policyholders will receive receipts on paying the future instalments. In case an individual fails to pay premiums, insurers offer a grace period of 15 days. If a policyholder makes payment within this span, he or she will be able to avail of benefits in the form of cumulative bonuses and waiting periods. 

However, individuals can use a health insurance calculator online to avoid defaults of premiums. 

Key benefits of health insurance

Health insurance plans provide comprehensive coverage that helps policyholders to secure their finances during medical emergencies. Some of the lucrative benefits it covers are:

  1. It covers hospitalisation expenses on getting admitted for over 24 hours. Some of the medical expenses include room rent, doctor’s fees, etc. 
  2. Individuals contracting illness before hospitalisation and getting follow-up treatments can get their expenses covered under a health insurance plan. 
  3. Health insurance also covers ICU charges. 
  4. During medical emergencies, one can cover ambulance costs under their health insurance. 
  5. On getting treatment from insurers’ network hospitals, policyholders can opt for cashless facilities. 
  6. The best health insurance policies also offer coverage for pre-existing diseases after a waiting period of 2-4 years. 
  7. Some insurers also provide benefits to policyholders opting for alternative treatments such as Ayurveda, Unani, etc. 
  8. By opting for a health insurance plan, one can get free medical check-ups based on the policy terms and conditions. 

5 basics to choose the right health insurance plan

Choosing an appropriate health insurance plan can be a daunting task as there are a number of options available in the market. In this regard, policyholders can consider the 5 basics of choosing the right plan from the aforementioned section:

  1. Choose a plan with higher coverage scope: Health insurance plans offer a range of coverage benefits. One might want to choose a plan that covers maximum medical costs.
  2. Opt for affordable premiums: Health insurance premiums vary across insurers. It is advisable to go for a plan that comes at a lower premium to reduce the financial burden effectively. You can use an online health insurance calculator tool to calculate your premiums for a smooth payment procedure. With this, you can easily get an idea of the estimated cost of the health insurance premium in advance. As a result, you will be able to select the best plan as per your requirements.
  3. Select a family floater plan: By choosing family health insurance plans, policyholders can obtain benefits at a lower premium compared to individual insurance plans. In family health insurance plans, the sum insured is divided equally among each member under the same premium. 
  4. Go for a lifetime renewability option: While choosing health insurance plans in India, one might want to settle for a policy that comes with a lifetime renewability option. This will allow them to continue receiving accrued benefits for their entire life.
  5. Compare quotes before purchasing: Health insurance plans’ premium rates and other service benefits vary across insurance providers. Thus, policyholders might consider comparing insurance plans before buying the right insurance.

To conclude, health insurance policies can be a suitable option for individuals planning to reduce their financial burden in times of medical emergency. Considering this, knowing about various features and benefits before the application is crucial.


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