Health Insurance: A Comprehensive Guide
Health insurance provides financial protection against medical expenses incurred due to illness or injury. This guide explains different types of health insurance policies, their benefits, and how to choose the right coverage for your needs.
Quick Summary
- Health insurance covers hospitalization expenses, pre and post-hospitalization costs
- Individual plans cover a single person, while family floater plans cover the entire family
- Coverage amount should be based on your city of residence, age, and family medical history
- Premiums paid qualify for tax deduction under Section 80D
- Waiting periods apply for pre-existing conditions and specific diseases
Types of Health Insurance Policies
1. Individual Health Insurance
Individual health insurance provides coverage for a single person. Each family member needs a separate policy with its own sum insured.
Key Features:
- Dedicated sum insured for each individual
- Premiums based on individual's age and health condition
- No sharing of sum insured
- Ideal for single individuals or families with specific health needs
2. Family Floater Health Insurance
Family floater policies cover the entire family under a single plan. The sum insured is shared among all family members.
Key Features:
- Single premium for the entire family
- Shared sum insured among family members
- Cost-effective compared to multiple individual plans
- Typically covers spouse, dependent children, and sometimes parents
3. Critical Illness Insurance
Critical illness insurance provides a lump sum payment upon diagnosis of specific critical illnesses like cancer, heart attack, stroke, etc.
Key Features:
- Lump sum payout regardless of actual medical expenses
- Covers specific critical illnesses listed in the policy
- Survival period clause (typically 30 days from diagnosis)
- Can be purchased as a standalone policy or as a rider
4. Senior Citizen Health Insurance
Senior citizen health insurance is specifically designed for individuals above 60 years of age, with features tailored to their needs.
Key Features:
- Higher coverage for age-related illnesses
- Shorter waiting periods for pre-existing conditions
- Coverage for pre and post-hospitalization expenses
- Annual health check-ups
- Domiciliary treatment coverage
5. Group Health Insurance
Group health insurance is provided by employers to their employees. It offers basic coverage at lower premiums due to the group discount.
Key Features:
- Lower premiums compared to individual plans
- No medical check-ups required
- Pre-existing conditions covered from day one (in most cases)
- Limited customization options
Key Components of Health Insurance
1. Sum Insured
The sum insured is the maximum amount the insurance company will pay for medical expenses during the policy year. It's crucial to choose an adequate sum insured based on your city of residence, age, and family medical history.
Recommended Sum Insured:
- Metro cities: Minimum ₹5-10 lakh per person
- Non-metro cities: Minimum ₹3-5 lakh per person
- For senior citizens: Minimum ₹10 lakh
2. Network Hospitals
Network hospitals have tie-ups with insurance companies for cashless treatment. Check if the insurance company has a wide network of hospitals in your vicinity.
3. Sub-limits
Sub-limits are caps on specific expenses like room rent, ICU charges, doctor's fees, etc. Policies with fewer sub-limits are generally better.
4. Co-payment
Co-payment is the percentage of the claim amount that the policyholder has to bear. Lower co-payment percentages are preferable.
5. Waiting Period
Waiting period is the time after buying the policy during which certain conditions are not covered. There are different types of waiting periods:
- Initial waiting period: Typically 30 days for all illnesses except accidents
- Pre-existing disease waiting period: Usually 2-4 years
- Specific disease waiting period: Typically 1-2 years for conditions like hernia, cataract, etc.
- Maternity waiting period: Usually 2-4 years
6. No Claim Bonus (NCB)
No Claim Bonus is a reward for not making any claims during the policy year. It can be in the form of an increased sum insured or a premium discount.
Tax Benefits of Health Insurance
Section 80D Deduction
Premiums paid for health insurance policies qualify for deduction under Section 80D of the Income Tax Act.
| Category | Self & Family | Parents | Maximum Deduction |
|---|---|---|---|
| All below 60 years | ₹25,000 | ₹25,000 | ₹50,000 |
| Self & Family below 60, Parents above 60 | ₹25,000 | ₹50,000 | ₹75,000 |
| Self & Family above 60, Parents above 60 | ₹50,000 | ₹50,000 | ₹1,00,000 |
How to Choose the Right Health Insurance
- Adequate Sum Insured: Choose a sum insured that can cover potential hospitalization expenses in your city.
- Network Hospitals: Check if the insurance company has a wide network of hospitals in your vicinity.
- Coverage: Look for comprehensive coverage including pre and post-hospitalization expenses, day-care procedures, domiciliary treatment, etc.
- Sub-limits and Co-payment: Opt for policies with fewer sub-limits and lower co-payment percentages.
- Waiting Period: Choose policies with shorter waiting periods for pre-existing conditions.
- Claim Settlement Ratio: Check the insurer's claim settlement ratio, which indicates the percentage of claims settled.
- Renewability: Opt for policies with lifetime renewability to ensure coverage in old age. Opt for policies with lifetime renewability to ensure coverage in old age.
- Exclusions: Understand what is not covered under the policy to avoid surprises during claim settlement.
Health Insurance Checklist
Before purchasing a health insurance policy, ensure it has:
✓ Adequate sum insured (minimum ₹5 lakh per person)
✓ Coverage for pre and post-hospitalization expenses
✓ Day-care procedures coverage
✓ No room rent capping or reasonable limits
✓ Shorter waiting period for pre-existing conditions
✓ No claim bonus feature
✓ Cashless treatment facility at network hospitals
✓ Minimal exclusions
Common Health Insurance Terms
Pre-existing Disease (PED)
Any condition, ailment, or injury that exists before the policy inception and for which the insured has shown symptoms or has been diagnosed.
Cashless Facility
A facility where the insured can get treatment without paying upfront at network hospitals. The insurance company settles the bill directly with the hospital.
Reimbursement Claim
When the insured pays for the treatment and then claims reimbursement from the insurance company by submitting the necessary documents.
Day-care Procedures
Medical treatments or surgeries that require less than 24 hours of hospitalization, such as cataract surgery, dialysis, etc.
TPA (Third Party Administrator)
An intermediary between the insurance company and the insured, responsible for processing claims and providing cashless facilities.
Frequently Asked Questions
Is group health insurance provided by my employer sufficient?
Group health insurance provides basic coverage but may not be sufficient for all medical needs. It's advisable to have a personal health insurance policy as well, especially considering that group coverage ceases when you leave the organization.
Should I disclose pre-existing conditions?
Yes, it's crucial to disclose all pre-existing conditions at the time of application. Non-disclosure can lead to claim rejection.
What is the difference between health insurance and critical illness insurance?
Health insurance reimburses actual medical expenses, while critical illness insurance provides a lump sum payment upon diagnosis of specified critical illnesses, regardless of the actual treatment cost.
Can I port my health insurance policy to another insurer?
Yes, IRDAI regulations allow policyholders to port their health insurance policy from one insurer to another while retaining benefits like waiting period credits for pre-existing conditions.