What is Health Insurance? How does it Work?

One of the basic financial planning steps is health insurance! Today medical bills are the expensive ones and the only way to the dissolution of your savings or availing of emergency loans. Medical insurance will save both life and wealth during unpredicted health hazards. 

A stat says that only 514 million people in India had covered health insurance plans in 2021. This is just less than 5% of the total population in India. Among the 5% insured, Indians have coverage of fewer than 5 lakhs in a year.

There are various myths, misconceptions, and unawareness in India when it comes to insurance on the whole. There are oodles of companies and policies available today. The task is to select the best and most satisfying plan with a high claim settlement ratio (CSR). 

Before signing a scheme, you need basic health insurance knowledge and how it performs. We tried to cover every nook and corner of them under the article.

What is Health Insurance?

Health insurance is also known as the medical insurance policy. It pays your medical expenses at a hospital in case of any illness surgery or major injuries. Pre and post-hospital expenses are covered under this insurance.

Every health insurance plan has two options, cashless treatment and reimbursement. You can only avail cashless treatment option when admitted to the network hospital suggested by the insurance company.

Also, you can’t avail of these benefits being an outpatient (OP); the minimum duration of admission should be 24 hours.  

It also has tax exemptions up to 75 K per year under section 80D of the income tax act 1961 says that you can claim tax benefits under a health insurance premium.

How Does it Work?

Various health insurance companies in India are regulated by IRDAI (Insurance Regulatory and Development Authority of India). Since it’s a part of personal financial planning, you should know how medical insurance works in India.

The first step is choosing the sum assured or coverage for a year. Once the sum assured is defined for several people in your family, the yearly premium will be calculated by various factors. These factors are,

• Age
• Pre Existing Diseases
• Surgeries history
• Smoking and Alcohol existence.

Before validating the total and yearly premium, these companies will conduct a medical test for all the policyholders.

Double-check the policy for cashless before hospitalization. If your policy is cashless, contact the Third party administrators of the hospital to cover the hospital bills. If the policy is not cashless, you need to pay the hospital bills, which the health insurance company will refund.   

Some insurance companies will reward you with no claim bonus if you haven’t claimed for a year. The process is struggle free, and most of the companies here are user-friendly. 

A bonus suggestion from Fincareplan would be to prefer the insurance company with no claim bonus (NCB) benefit.

What does it cover?

• Hospital expenses
• Mental healthcare
• Pre and post-hospital bills
• Day care treatment
• Home healthcare
• AYUSH benefits
• Organ donor expense
• Recovery benefit
• Preventive health checkups
• Lifelong renewability
• Multiplier benefit
• Sum insured rebound

Different health insurance companies provide diverse inclusive and exclusives, and we tried to cover most of the benefits under health insurance.

Why Do You Need a Health Insurance?

The seeds that were planted 20 years ago provide shade today. Likewise, the premium you pay today will cover your expensive medical bill tomorrow. It has many rewards for unclaimed policyholders. 

If a person ‘A’ met with any acute illness, surgery is expected to be Rs. 10 lakhs. The person has to either bury their savings, go for a personal loan, or die without the money.

In case the same person has insured their life with medical insurance, that to admit to a cashless treatment network hospital, you can initiate the process with the help of an insurance card.

It not only saves a person’s life. It also protects their hard-earned savings also keeps them from failing under debt or another social status.

You should think as if spending on food every day while purchasing health insurance. It is not a savings or investment but a mandatory expense that should be added to one’s monthly budget.

Types of health insurance?

• Individual health insurance is offered to an individual as per its name; the plan’s total is also given to the same individual.
• Family floater health insurance – Every family member will be covered in a single plan.
• Group health insurance – Usually, companies and business owners take this plan to cover their employees’ medical expenses. 
• Senior citizen health insurance – Elders above 65 years come under this plan. Generally, this plan has a high premium because of the higher health risks.
• Critical illness insurance – Critical and chronic (long-term) diseases like diabetes, cardiac ailments, hypertension, and cancer come under this policy. Medical expenses for these diseases can only be claimed under this policy.
• Disease-specific illness covers the mentioned diseases in the policy like maternity specific, covid specific, heart disease-specific, etc., particularly.
• Bite-size health insurance plans – Not every company offers the program. This policy has small premiums to cover rare diseases like chicken pox, dengue, etc.

Benefits of Health Insurance:

Cashless treatment: With some paperwork, you can have cashless treatment at hospitals.

Daily allowance: Some health insurance companies provide a daily amount up to a limit for your hospital expenses. A good thing here is that this will not affect the total.

Tax benefits: As mentioned above, the health insurance policy will help cut taxes. You can deduct up to 25000 on your premium, and for the elder citizen, you can deduct up to 50000. So, a total of up to 75K can be exempted under section 80D

Life saver during life-threatening diseases: Some unexpected accidents and illnesses will wipe out your savings if you don’t have life insurance. Health insurance will save you during these conditions if your income equals your expenditure.

Medical checkups: Frequent medical checkups must be taken at least every year when you grow older. Health insurance will cover these medical checkup bills.

Why do you need to buy health insurance when you are young?

Age plays an important role in deciding the premium amount for your chosen policy. If you are new to personal finance, take an insurance plan as soon as possible.

Most financial experts recommend taking an insurance policy immediately when you turn 18 because yearly premiums will increase when you grow older.

Most health companies believe that younger people have lower health risks, so there are benefits when you have health insurance at a younger age. 

When a person above 45 years takes health insurance, the company will have a medical test to validate all the health issues before deciding on the policy. Total and premium are determined according to the results of the medical examination. But for a young person, there are no medical checkups.

Generally, younger people are not prone to frequent diseases, so there will not be a need to claim the reward. The policyholder will get a bonus for every no-claim year, which might add to the total. 

Health insurance is the major and basic step toward financial freedom; taking health insurance at an early age will lead you to financial freedom.

Is it worth buying health insurance?

Of course, we all have this question despite knowing anything we decide to buy. The answer is a Big YES! Having health insurance will be a lifesaver in most cases. 

Whether you claim it or not, it will be a lump sum at the end. You’ll save your tax amount through health insurance, regardless of the type of health insurance. It would be great if you knew how health insurance works and the complete process before purchasing one.

Things you should know before buying health insurance:

• Total Coverage: This should be the last consideration when choosing health insurance. Choose a policy and company that offers a maximum amount.
• Network hospital: The availability of the hospital network is the second most important thing to check for. Choose a company with more hospital networks, which will help you in the struggle-free claiming process. 
• Coverage: Know what the policy can cover! Choose a plan that covers most of the medical expenses like pre and post-hospitalization, ambulance bills, medical health checkups, etc. 
• Type of policy: You must have an understanding of the policy you have chosen. For instance, if you have selected individual health insurance, you must know that no one from your family can access it except you.
• The claim settlement ratio is the ratio between the number of claims made and the number of shares issued to the policyholder. Choose a company that has a higher claim settlement ratio.
• Waiting period: As per its name, it is a period when you cannot claim your health insurance. The waiting period varies in every company and will solely depend upon the particular company’s terms and conditions. Choose a company that has the least waiting period.

How to select the best insurance policy?

Research a little and compare the policies and companies offering it. Don’t blindly select or reject a policy under the premium to be paid and total sum assurance (coverage). Instead, check on their user-friendly nature, claim process, and coverage. 

Keep an eagle eye on the cashless claim and the network hospitals. These will help you in easing the claim process during an emergency. Cross-check the eligibility and documents match both sides. Last but not least, have a clear idea of the inclusive and exclusives of the policy.

Why do you need to buy health insurance online?

Today there are multiple health insurance companies with different policies available to choose the right one. Taking an insurance plan online will be the better and more time-saving choice.  

If you decide to take it from an insurance agent, you must hear hours of lectures on different policies; it will consume plenty of your time and energy; also, it might not be easy to compare. 

But when you choose online, you can select your perfect plan by comparing a wide range of information in a matter of time. Unlike an insurance agent who takes days to confirm, you’ll get the policy instantly when the payment is made online. 

How to buy online?

Succeeding your research on health insurance, you will have an idea of the most suitable policy in a convenient company. Now, go to the particular website and fill out their extensive form. 

You’ll receive a quote once you apply; before the payment process, take a deep look at the quote; if it satisfies, proceed. Immediately after the payment, you’ll receive the policy instantly.

Eligibility criteria :

• A basic criterion of every insurance plan is the holder must be above 21 years old to have individual health insurance.
• If you have crossed 50 years, you must undergo a health checkup before having health insurance under your name. 
• In the family floater plan, only two adults and two children can be covered.
• A child under 3 years cannot be covered under a family floater plan.

Those mentioned above are the basic criteria; however, every company has criteria based on its terms and conditions.

Documents required to buy health insurance:

• Age proof: Adhaar card, PAN card/driving license / Birth certificate / 10 or 12 mark sheet.
• Address proof: Adhaar card/ration card/voter ID/passport/electricity bill.
• ID proof: Adhaar card/PAN card/voter ID/passport size photograph/passport/driving license
• Medical reports: Some companies take a medical test for you in their network hospitals, but only very few companies ask for a medical report. A complete master health checkup will be required if you are above 50 years old.

How to claim health insurance?

Before understanding the process of a claim, you must know what the insurance company will look for.

Every insurer will accept your claim to be Genuine, and of course, they cross-check it. 

If you regularly haven’t paid your premium on the date, there are high possibilities of claim rejection.

You must pay an amount when you claim health insurance; the amount you claim must be decently above the amount you pay; otherwise, the claim may get rejected. 

Inform the insurance company before you are hospitalized or at least during hospitalization to receive the claim sooner.

Now, we’ll get into the process! Two possibilities make you claim health insurance; one is planned, i.e., an operation or a required hospitalization suggested by your doctor. 

Another one is an emergency like an accident or heart attack. In both cases, get the reports from the hospital and request your doctor to fill out the form.

Submit these two files to the insurance company while you seek a claim. 

The company will compare the medical expenses, and assured if the medical expenses are less, the claim will be approved.

If the estimated medical expenses exceed the sum assured, the company will pay a particular percentage of the hospital bill. 

If you have been hospitalized in the network hospital, then the medical bills will be settled cashless by the insurer.

Avoid making frequent claims, as this will affect the premium to be paid. 

Do’s when buying health insurance:

• Have an eagle eye while looking at the policy coverage you selected. Go with one who has the maximum number of diseases covered.
• Try to understand how insurance plans work and what things to avoid.
• Look at the sum assured and the premium to be paid.

Don’t do this:

• Never select a fancy one or the one recommended by your neighbor without proper research.
• Never choose a policy without knowing the terms and conditions of the company; it can affect the grad total or the premium.
• Do not claim frequently.
• Please don’t make your premiums late; try to pay them on time.

Does health insurance cover COVID-19 treatment?

COVID is the current health crisis the world is suffering from. Both the previous health insurance holders and the newbies have this common question.

IRDAI ( Insurance Regulatory and Development Authority of India ) has ordered every insurance company to add the COVID-19 treatment under every policy.

Some policies have also added quarantine expenses, and some support ICU expenses.

Maternity Health Insurance:

Let’s break the ice now! Most insurance companies cover either regular health insurance or maternity coverage; also, they have a waiting period of 3 years for maternity claims. 

Now, we’ll look at the statement of IRDAI! They have a standardized rule for maternity claims. Maternity hospital expenses should cover 30 days before and 60 days after the child’s birth.

The health insurance plan must cover the normal and cesarean delivery complications the mother would undergo after the birth. 

Also, it must cover the hospital expenses of the baby from day 1 to day 90.

FAQs