Few decades back health problems and hospitalization costs were not high. But today, we are more informed about the various lifestyle diseases and we go check with our doctor for any small problem and get it fixed immediately. Hospitalization expenses have also increased many times, so has the cost of any surgeries or treatments.
If you are hospitalized for some reason, bills can come to slightly less than a lakh to a few lakhs. How will you be able to pay for it when your monthly salary is lower than the bill? You can either borrow money from someone or break into your savings and investments to pay for your medical expenses. There is a third option: Have medical insurance.
Medical insurance is very simple. You pay an annual premium and the insurance company covers your hospitalization costs up to the sum assured. Eg: If you paid Rs. 1000 every year for a sum assured of Rs. 2 lakh and you end up being hospitalized for some surgery, the insurance company will cover you as long as the bill is less than Rs. 2 lakh. If it exceeds Rs. 2 lakhs in a year, you just pay with your own money. And the next year you get back the Rs. 2 lakh limit after you paid the premium.
Lets look at the various factors you need to have in mind while taking a health insurance.
Types of Health Insurance
There are a few types of health insurances and for each person one suits best.
- Individual Mediclaim policy: This is the most basic form of health insurance and it is what I explained using the example above. For each individual you need to take a separate health insurance and each gets up to their own sum assured every year if they are hospitalized.
- Family Floater policy: This is an enhanced version of the individual policy well suited for your family. You would take a family floater policy for all the members in your family and your sum assured would be a common pool for your family. Any 1 person in your family can use up the entire sum assured (or major part of it) and the remaining amount would be available if another member gets sick.
Say, there are three members, you can take a 6 lakh family floater policy. If Person A gets admitted and the bill costs Rs. 4 lakh, there is still Rs.2 lakh remaining for the current year. This remaining money can be claimed by anyone in your family. Just like individual policy, the next year, the limit resets back to Rs. 6 lakh again.
The advantage here is, the probability of all members of the family getting hospitalized in the same year is lower. So you can take a single combined policy for all and share get a higher sum assured.
- Unit Linked Health Plans: This is just like the Unit Linked Insurance Policies (ULIPs), where part of the money paid as premium is invested into the equity market and will be returned back to you at the end of the insurance term. ULIPs are a bad idea (Note to self: write a post on why its bad) and so is ULHPs. As I said before, “Never mix Insurance and Investment.” I would suggest you just forget this type of policy at all.
Now you know the different types of policies, which one is better? The choice is simple. If you are an individual, get an individual mediclaim policy. If you have a family (spouse and children) getting a family floater is advantageous.
Employee Health Insurance
Most companies would have a group health insurance scheme for all its employees. This would be sufficient for most people, but do ask your HR about the sum assured, what insurance company and how good it is and what happens if you quit/switch jobs. If you are not satisfied with any of these, you can take a separate policy which makes things simple for you, especially when you need that money badly.
Claim settlement process
There are basically two methods to get money from your insurance.
- Cashless: In this type, you just have to inform the hospital’s insurance desk that you have a health insurance and they would pass on the bills to your insurance company. But your insurance policy would have a list of authorized network of hospitals where you can get cashless treatment for your hospitalization. You must inform a third party administrator (TPA) about your planned hospitalization or within a stipulated time in case of emergencies.
- Reimbursement: This type of claim settlement is available for both network hospitals and non-network hospitals. Only you should settle the hospital bills first and then produce the bills during the insurance claim. The money paid would be reimbursed to your account directly by the insurance company
Its better to choose an insurance company which has wider network of hospitals for utilizing the cashless hospitalisation facilities as you don’t have to borrow a huge amount of money just before your surgery and wait for reimbursement. Also search the internet for reviews about the company and the third party administrator about the number of claims they settle and how hassle free the process was.
Health Insurance for aged people
There are companies now which sell health insurance for aged people (but most want you to buy it before the age of 65). But the premium will be higher as health problems are more common to a 60 years old person than a 25 years old person. However if you pay the premium for your parent’s health insurance, you do get tax benefits for that too.
Yes. Premium you pay for health insurance is exempt from income tax, upto certain limits.
- Rs. 15,000 for yourself, spouse and children
- Rs. 15,000 for your parents (Rs. 20,000 if parents are senior citizens)
And this is exempted under section 80 D (Life insurance is under 80C) so you can save a cool Rs.35,000 (max) for your taxes.
How much cover do you need?
So does that mean you go ahead and pay Rs. 35,000 for premium and get maximum tax benefit? No. Tax is not the primary reason for you to get health insurance. Your general health condition and diseases you may get because of your lifestyle should be the primary reason. Check for the expenses for basic medical ailments and surgeries and then decide on the sum assured based on that. Your premium will definitely be less than the tax exemption limits, but remember saving money on taxes aren’t important. Having adequate health insurance cover is important.
You can save money through various other ways and also earn extra money through your investments which will be the topics I will be writing about in the next few days.