What Is Health Insurance: How It Works & Benefits – Forbes Advisor INDIA – Forbes

Published: Nov 22, 2022, 9:58am
Healthcare expenses are increasing at a rate higher than medical inflation, and that is why it is must for everyone to have a health insurance cover which not only helps you to save your emergency funds and saving of lifetime, in case any medical emergency occurs to you or your near and dear ones, but also supports you to deal with rising medical costs. 
Experts believe that a health insurance policy must be a part of your financial planning and it should be purchased early when you are young and responsible to stay safe and secured. Investing in a health insurance plan at an early age also provides other numerous advantages such as better sum insurance coverage, lower premium rates, no medical tests and so on.
Here’s a guide which explains clearly all about health insurance policy , factors affecting health insurance, what are the different kinds of health plan which one can opt for and much more. 
Health insurance policy is an assurance which provides immediate financial help in case when any medical emergency arises. It is a contract between a policyholder and the insurance company which covers medical expenses that might occur due to illness, injury or accident. If you have a health insurance policy, then some or all the medical expenses will be borne by the insurance company, against which an insured is supposed to pay a certain amount known as premium.
There are two ways by which which the insurance company compensate for your medical expenses:
Cashless Treatment: Here, the policyholder is not supposed to pay anything to the network hospital. As the insurance company pays the hospital directly.
Reimbursement: Here, the policyholder is supposed to settle their medical expenses first and later ask for reimbursement from the insurance company.
Purchasing a health insurance plan is something that we all avoid till the time we understand its importance. Before buying one, it is crucial to understand the various benefits of a health insurance plan as medical emergencies can knock anytime and could make a big hole in your pocket. Therefore, it is advisable to buy a health insurance policy at a very young age, where one can have the comprehensive coverage at an affordable premium cost, plus you also get the advantage of tax deductions on premium paid.
In a nutshell, one should purchase a health insurance policy because:
There are basically two kinds of health insurance policies such as individual or self-plan and family floater policy. As the name suggests, individual policy would only provide coverage and benefits to the main policyholder. On the other hand, in case of a family floater plan, there is only one plan which provides coverage to your entire family such as spouse, dependent children, parent and parent-in-laws or dependent siblings.
One should select the plan, depending upon the factors such as your age, family medical history, children’s age, medical history and of course one’s budget.  Let’s understand about each of these plans in detail:
Individual or Self Health Insurance Plan
An individual health insurance policy is issued under the name of a single policyholder, which means that the sum insured coverage and the benefits of the policy is totally dedicated to the insured and covers no one else. Here, the individual purchases the policy to maintain their own health which in turn provides financial help in case of their own medical emergency.
Family Floater Health Insurance Plan
Family floater policy is one policy which aims to provide sum insured coverage to individual and as well his family members. Rather than taking a single policy for each member of the family, the family health insurance plan is a better option, as it acts as an umbrella for the entire family. Here the sum assured coverage is shared by all the members who have been covered under the same plan.
However, it is advisable to have a separate plan for your senior citizen parent or parent-in-laws as it will prove to be a more affordable option. Similarly, if any member in the family has a huge medical history, then it is also better to buy a separate plan for them rather than covering them in the family floater plan.
Here are some factors that you can use in deciding on the right health insurance company –
1. The Range of Plans Offered
Check out the different types of plans that a company offers as well as the plan USPs. Some companies offer a range of products to suit the varied coverage requirements that you have. Choose a company with a diverse range of plans so that you can find the right policy suiting your needs. 
2. The Network of Hospitals
The network of hospitals is extremely important for availing cashless claims. The wider the network that an insurer has, the better it would be. This would allow you to locate the nearest cashless hospital with ease.
3. Claim Settlement Ratio
The claim settlement ratio points to one thing – what percentage of claims did the company settle in a financial year. A higher ratio indicates that the company is steadfast in settling its claims. A factor that works in favor of the insurer.
4. Claim-Based Loading
Some companies tend to increase the renewal premium if you made claims in the previous years. This converts to higher premium expenses. As such, avoid companies that follow this practice.
5. Premium Rate
Pricing policy is how much premium the company charges vis-à-vis its competitors. You can check the pricing policy by comparing similar plans across different companies.
For instance, the Aarogya Sanjeevani policy offers uniform coverage features across all insurers. Its premiums, however, depend on the insurer’s pricing policy. Compare the premium of the plan across insurers to find the insurer that charges the least. Chances are, its pricing policy would be fair across all its plans.
6. Ease of Claim Settlement
Insurers have revolutionized their claim process and made it simpler. The following concepts are gaining traction: 
Such facilities speed up the claim process and make it hassle-free. Thus, look for insurers that provide such facilities for quicker claim settlements.
7. Reviews
Lastly, don’t ignore customer testimonials and reviews. Most insurers showcase their customers’ reviews on their websites. You can check them out. Alternatively, you can talk to your friends and relatives about their insurers. If they have made a claim, find out their claim experience to know which company follows the best practices. 
Once you have zeroed in on the right insurance company, the next, and also the most important, step would be to select the plan. With multiple insurers offering multiple plans, you have a lot of choices. However, choosing the right policy is important.
As such, here are some factors that would help you with the same –
1. Coverage benefits
The first thing that you need to check is the coverage benefits that are offered by different plans. While most plans offer the basic coverage benefits, look for plans that have unique features.
First, assess your coverage needs and then look for plans that offer those. For instance, if you are planning to have a child in the near future, look for plans that offer maternity coverage. Alternatively, if your family is complete, skip such plans.
Second, look for other additional features that might enhance the scope of coverage. For instance, sum insured restoration, high no claim bonus, value-added benefits, annual health check-ups, etc. are some of the features to look for.
Choose a plan which has the most comprehensive scope of coverage. This would minimize your out-of-pocket expenses during claims and give you better financial security.
 2. Customization option
Look for plans that allow you to customize the coverage features as per your requirements. This is possible through add-ons that health insurance plans offer. The add-ons help you to opt for additional coverage features as per your needs and make customization possible. 
3. Premium Amount
Of course, the premium amount is important. Check the premium charged vis-à-vis the coverage offered. To get a better idea, compare. Compare the premium across other plans of different insurers that have similar coverage benefits. See if the premium is competitive or inflated given the coverage.
Choose a plan with the most competitive premium rate for the same coverage benefits, even if it means selecting another insurance company.
4. Sub-Limits
Health plans might have sub-limits on different expenses like room rent, ICU room rent, AYUSH coverage, domiciliary treatments, etc. These sub-limits limit the scope of coverage and might result in out-of-pocket expenses. As such, choose a policy that has no sub-limits so that you can enjoy the maximum possible coverage.
5. Co-Payment Clause
Health insurance plans might have co-payment clauses for different reasons. Co-payments mean that in every instance of a claim, you are supposed to pay the specified part of the claim from your pockets. For instance, a co-payment of 10% means that 10% of every claim would be borne by you. Common co-payment clauses are applicable in the following instances:
Look for health insurance plans that do not have the co-payment clause. Even if the clause is unavoidable, like in the case of senior citizen plans, opt for plans with a lower co-payment rate.
6. Waiting Period
The waiting period is when specific coverage is not allowed by the health insurance policy. Once the waiting period is over, coverage is allowed.
Health insurance plans impose waiting periods in various instances. These include the following:
Waiting periods are inevitable. However, you can find a plan where the period is low. This is especially relevant if you are looking for maternity coverage or if you have pre-existing conditions and you want coverage for them at the earliest.
7. Discounts Available
Health insurance plans allow various types of discounts to lure customers. Some of the commonly available discounts include the following:
Look for the available discounts. Choose a plan that offers the highest discount so that you can get the best deal on the premium. 
Now that you have found the best company and the most suitable plan, you might think that your work is done. It is not. You should keep in mind another aspect – choosing the right sum insured.
An optimal sum insured is important to ensure that your health plan sufficiently covers your medical expenses. A low sum insured defeats the whole purpose of investing in health insurance and is a strict no-no.
Selecting the right sum insured is easier than you think. You just have to consider the following factors:
Most insurers help you calculate the ideal sum insured based on your income, expenses, existing coverage and members to be insured. You can also estimate the optimal requirement through a simple formula which is as follows:
Sum insured = 50% of your annual income + total hospitalization costs incurred during the last 3 years
For instance, say your annual income is INR 15 lakh and in the last three years you have incurred a hospital bill of INR 5 lakh. In this case, the optimal sum insured would be calculated as follows:
50% of INR 15 lakh + INR 5 lakh = INR 12.5 lakh
The premiums of health insurance plans are affordable. Moreover, insurers offer you the facility of installment premiums wherein you can pay the premium monthly, quarterly or half-yearly. This makes the health plans affordable.
Furthermore, if affording a high sum insured poses a challenge, you can opt for super top-up health plans. Super top-up plans help in enhancing the coverage while keeping the premium low.For instance, say you want coverage of INR 15 lakh but the premiums are unaffordable. In such cases, you can opt for a comprehensive health plan of INR 5 lakh or INR 10 lakh and add a super top-up plan of INR 10 lakh or INR 5 lakh respectively.
The super top-up plan would help you enjoy an aggregate coverage of INR 15 lakh. However, the aggregate premium would be lower compared to buying a health plan of INR 15 lakh.
Rushed Into Buying A Policy : Do not buy a health insurance plan in hurry. It is advisable to do proper research and then select the best health insurance policy for you or for your family. You can do your own research and compare the premium quotes online, before choosing a health insurance policy.
Choosing Insufficient Coverage: The premium cost is a major consideration while buying a health plan. Do not choose insufficient or restricted policy coverage in order to save premium cost. Rather go for a comprehensive coverage plan with considering the family size, medical history and your financial situation.
Hiding Health-Related Details: While purchasing a health insurance plan, disclose all the necessary details about your health, lifestyle habits or and pre-existing diseases. Hiding relevant medical history can cause major damage as insurance claims can be rejected on the basis of undisclosed medical information.
Not Buying A Separate Health Insurance Policy: Do not rely completely on medical coverage provided by your employers as it has only limited coverage. Also, when you leave the organization, the contract will be terminated on an immediate basis. It is crucial to buy a separate health insurance plan where the quantum of coverage is more and it will not be affected by the terms and conditions of your current employment.
Ignoring Terms And Conditions Of The Policy Document: Do not ignore or overlook the terms and conditions of the policy document. Whether it is related to coverage, premium costs, renewability conditions, discounts, sub-limits, free-look period, waiting period, co-payment clause or any sort of deductibles, everything is clearly mentioned in your policy document. If you still have any doubts, do not hesitate to reach the concerned insurance company for more clarity on your health insurance policy.
Buying A Policy For Just Saving Tax: Do not buy a health insurance policy just for the sake of saving tax on the premium paid. One should definitely know the tax benefits provided under health insurance premium paid, but the main aim of buying a health insurance plan is to get sufficient coverage which would financially help you and your family at the time of medical and health contingencies. 
Waiting period is a very important factor in purchasing a health insurance policy. It refers to a duration which the insured has to wait for claiming the insurance benefits. It varies from one health policy to another.
Health insurance policies come up with policy duration periods such as one year, two year or three year. Once the policy tenure ends, it has to get renewed for receiving the continuity advantages. Your policy will be valid till the end of the policy tenure, it is advisable to renew the policy before it expires.
You will always get reminders for premium payments from insurance companies on your emails and registered mobile number. But if you do not pay your premiums and exhaust the grace period, then you might lose your insurance coverage. However, the premium payment conditions differ for different health insurance companies.
Yes, you can definitely have more than one health insurance policy.
You can add your family members in your policy at the time of purchasing it or at the time of renewal.
You can purchase the health insurance policy as soon as you turn 18 years of age. Before this age, you can be covered as dependent under the family floater plan.
Rashi Maheshwari is a Deputy Editor for Forbes Advisor India. She has more than a decade of experience working in news, public relations and communications. In the past, she has worked with CNBC Awaaz, CryptoWire, among others and has covered beats including insurance, personal investments and cryptocurrency. She is a travel enthusiast and would like to visit every country and try as many different culinary specialities as possible.


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