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What is Health Insurance Plan and how does it work?

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What is Health Insurance Plan and How does it work-min

Health Insurance is also termed as medical insurance plan is an agreement between the insurance company and insured, where the insurance company compensates insured for any hospitalization or medical expenses. Every individual need to consider a health insurance plan, otherwise it can ruin their financials for any unexpected medical expenses or hospitalization expenses. What is Health Insurance Plan? How does Health Insurance Plan work? What are various benefits of Health Insurance Policy?

What is Health Insurance Plan?

It is a type of medical insurance, which offers insurance coverage for any unexpected medical expenses or hospitalization.  Some of the common items covered are pre and post hospitalization expenses, room rent, doctor consultation charges, day care procedure charges, critical illness related expenses, ambulance charges, surgery expenses, ICU charges etc.,

How does Health Insurance Policy work?

Here is how the health insurance plan works in India.

  • Individuals can filter a good health insurance plan based on their need.
  • Once an individual finalizes the health policy, they would approach health insurance company and make premium payment.
  • Health Insurance company would review the application, check for pre-existing diseases and if they are okay, they would issue the health policy to the individual. In some cases, they would increase the premium and once the differential premium is paid, the policy is issued.
  • In case of hospitalization, the individual would approach insurance company.
  • In case the hospital is part of the network hospitals list, the insurance company would grant cashless facility. In this case, an individual need not pay money and the insurance company would directly pay to the hospital.
  • In case the hospital is not covered as part of network hospital, individual need to take hospital bills + doctor bills and make the claim with an insurance company or TPA after discharge from the hospital.  The insurance company would review and process the payment wherever the bill is eligible for processing.
  • One need to keep renewing a health insurance policy every year on or before the expiry of the current policy to continue the policy in future.

How does Health Insurance Policy work exactly-min

Benefits of Health Insurance Plan

Here are the key benefits of taking health insurance plan.

1) Hospitalization expenses: These plans would have coverage of medical expenses in case of hospitalization more than 24 hours.

2) Pre and post hospitalization expenses: Such health policy covers pre and post hospitalization expenses for 30/90 days respectively.

3) Surgery Expenses: Health plans cover surgery expenses. This can help you not to pay high medical bills from your pocket.

4) Cashless treatments: Medical insurance helps for cashless treatments at a network hospital without having any money in your pocket

5) Afford quality treatment: Medical insurance helps to afford quality medical treatment so that you can focus on getting cured.

6) Protect Savings: Such plans help to protect your hard earned savings from high hospital bills.

7) IT Benefits: Health insurance premiums are eligible for income tax rebate u/s 80D.

What is covered in Health Insurance Plan?

The majority of the health policies cover the following expenses:

1) In patient hospitalization expenses

2) Pre and post hospitalization expenses

3) Pre-Existing disease coverage (after waiting period)

4) Ambulance charges

5) Maternity expenses (after a waiting period)

6) Day-care Procedure charges

7) Preventive health checkups

8) Ayush expenses

However, one need to ensure that all these coverage details are part of the health insurance policy document. Any of them are not part of this policy document would not get covered.

What is not covered in health insurance plan?

The following are not covered in the medical insurance plan.

1) No coverage for hospitalization in the initial 30 days of taking policy unless such hospitalization it is due to accident

2) Pre-existing disease coverage till the waiting period. Generally there is, waiting period of 2 to 4 years for pre-existing diseases.

3) Critical illness expense coverage generally comes after the 90 day period

4) Suicide attempts

5) Injuries caused by war or terrorism or nuclear activity

6) Plastic surgery or cosmetic expenses

7) Dental expenses

8) Diagnostic tests and post-care procedure expenses

9) Adventure sports injuries

10) AIDs and other diseases of similar nature.

One should go through the insurance policy document and read all major exclusions indicated in this document.

How to choose an ideal health insurance plan suitable for you?

Here are some tips to choose a good health insurance policy suitable to you.

1) Check for the coverage required by you including features, special benefits, exclusions etc.,

2) Check ideal Sum Insured based on your need and opt the plan fits into that.

3) Check which plan is ideal for you. Is it individual or family floater or senior citizen insurance plan.  Review basic sum insured you need to take, what is the top up amount and super top up amount which you need to consider.

4) Check the plan which has lowest waiting period clause.

5) Consider a plan that has least co-payment clause

6) Opt a plan where it has highest network hospitals in your city/town. This would help you to have more options in case of medical emergency.

7) Consider insurance company that has incurred claim ratio (ICR) of 70% to 90%. The incurred claims ratio is the ratio of total claims paid over the net premiums received. Higher the ICR, the company might not sustain. Lower the ICR, means the company is paying low claims and retaining all profits.  An ideal ICR could be anywhere between 70% to 90% where a company might honor the majority of claims and at the same time retain some money as profits.

8) Choose a medical insurance plan which has no loading factor which can save you from paying extra premium. This is useful especially for Senior Citizens Health insurance plans where insurance companies would have loading factor considering their medical condition.

Suresh KP

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