Health insurance has traditionally been ‘low priority’ for Indian households. For a long time, insurance was considered an additional expense in our country. However, Covid has painfully highlighted the importance of insurance in our lives. For example, only 41% of Indian households had someone covered by a health insurance plan in 2019-21 according to the National Family Health Survey-5 (NFHS-5). Economics 20-21 said our insurance penetration was “extremely low” at 3.76% of GDP. In complete contrast, “travel insurance on arrival” is compulsory for the UK and many European countries.
Health insurance not only guarantees prompt treatment in the event of a medical emergency, but also protects the financial well-being of the entire family. Medical inflation in India has reached 14% in FY 2021 i.e. medicines, hospital treatment and post-hospital care, medical products and services have all become more expensive by compared to the previous year. Medical inflation has always been high, exceeding the annual inflation rate in recent years. Thus, medical insurance is all the more necessary for our country where more than 50% of the population is under 25 years old and the annual per capita income is less than Rs 1 Lakh (as recorded in FY20 -21). With high work parity, i.e. a workforce of 70% men and less than 20% women, Indian households are largely dependent on a single income and insurance is therefore an essential medical shield.
The low penetration of insurance is largely due to the lack of awareness and the tedious paperwork involved. However, the rapid digitization and Ayushman Bharat of the government have improved the situation to some extent. Yet adequate insurance is a long way off for a majority of the population. Confidence, assurance is not an investment but a necessity. Everyone who works in the financial sector must ensure that the maximum network of people around them is aware of the advantages of insurance.
Without further ado, let’s break down 10 essentials to ensure an adequate health insurance plan for the future needs of you and your family.
1. Assess the medical insurance needs of yourself and your family
There is no single health insurance plan. Carefully assess your family’s medical needs. The need for coverage will vary greatly depending on the medical history, age and income of the beneficiary or a group of beneficiaries. For example, a newly married couple may need an insurance plan covering pregnancy, while a family with children would need a comprehensive plan including day treatment, cashless hospital treatment, coverage for a maximum of diseases and health problems, accidental injuries, etc. elderly parents, separate individual plans, as well as supplements according to health care requirements for the elderly will be required.
2.Cost of premium
In times of COVID, health insurance premiums have increased by at least 13% in fiscal years 21 and 20. So delaying your decision to purchase insurance is a costly mistake, as the price of the premium also increases with age. Also note that the premium for a floating family plan is calculated based on the oldest member of the policy. It is therefore recommended to take out an individual policy for elderly parents. In total, the premium cost will vary depending on age, amount of coverage and benefits included.
3. Adequate insurance
Health insurance is an ongoing need and you need to plan properly for contingencies. As a general rule, review your insurance needs every 2-3 years. For example, in an urban setting, a family of four would need insurance with a sum assured/basic plan of Rs 10 Lakh. However, as we have seen during the COVID years, even an insured sum of 10 Lakh is not enough to meet a health emergency. The best solution is to go for an affordable add-on plan to your existing insurance plan with 10 lakh sum assured and have a good backup. A supplemental plan helps cover medical costs above the threshold at an affordable cost.
As a general rule, never depend on one health policy. Have a combination such as group health coverage through the employer, individual plans for elderly parents and a family float with a top-up option. You need to add health checkups, options for extra floaters, and critical illness coverage.
Exclusions are medical conditions and situations where your health plan will not cover the expenses incurred. Some of the common health insurance exclusions are pregnancy, dental treatment, pre-existing conditions, cosmetic surgery, etc. Be informed and know that the lowest premium is not always the best choice. If your policy provides inadequate coverage and low benefits, you will add out-of-pocket expenses along with the medical claim. Always buy a plan aligned with your future needs.
The waiting period is the cool down period before making a claim for a specific health condition. For most pre-existing conditions, the waiting period will be 2 to 3 years. With pre-existing conditions such as blood pressure, diabetes, thyroid, hemorrhoids, etc., a waiting period will apply. So, check the list of treatments and diseases like arthritis, cataracts, cosmetic surgery, etc. included, as well as the cooling period. Compare plans from different insurers and opt for a minimum waiting period.
6. Sub-limits and co-pay clauses
Under the co-payment clause, the insured is also required to pay part of the medical costs when reporting the claim. Whereas in the sub-limit clause, a cap is placed on certain expenses. These two clauses must be avoided by paying a slightly higher premium. Opt for future convenience.
Cashless hospitalization saves you from cumbersome paperwork and procedural delays when you need emergency medical treatment. You can enjoy hassle-free hospital admission and easy claim with the insurer’s hospital network. Consult the list of approved hospitals and healthcare centers before signing the insurance contract.
8. Claims settlement rate
The claims settlement ratio (CSR) is the percentage of successful claims out of an insurance company’s total claims in a year. It is therefore as important to choose the right policy as to choose the right insurer. You can assess the success of the insurance company’s handling of past claims with CSR. Each company as well as the IRDA publicly disclose the annual CSR on their respective websites.
9.No Claim Bonus / No Claim Discount
Opt for an insurance policy with bonus-malus. On subsequent renewals of the policy after a claim-free year, you will receive a cumulative bonus (increased coverage) or a reduction on the premium amount. Read terms and conditions carefully, as benefits can vary widely from institution to institution and policy endorsements.
Always read the fine print. Also, amount of coverage, exclusions, incorporated hospitals; look for additional benefits and inclusions available. Check inclusions such as hospitalization, day care, room rental allowance, pre and post hospitalization cover, preventive health diagnosis and alternative treatments for AYUSH (Ayurveda, Yoga, Unani, Siddha and Homeopathy) depending on your health needs. The policy should have provisions for enhancement and supplemental coverage.
Have confidence, this handy checklist can help you make an informed insurance decision. A word of warning: Feel free to disclose your medical history and ask questions about ambiguities, if necessary. Do your due diligence and read the terms and conditions carefully.
An informed insurance decision today can be rewarding tomorrow, not only for you but also for your family.
The opinions expressed above are those of the author.
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