What is health insurance? What are the benefits of taking health insurance?
03 December 2010, Friday
Health insurance is popularly known as Medical Insurance or Mediclaim. It is a kind of agreement made between a person and an insurance company. It protects you and your dependents against any financial constraints arising on account of a medical emergency. It sometimes includes disability and long term medical needs. In Mediclaim you pay a premium and in return the insurer commits to pay a prearranged sum of money to meet the claims. Health insurance is new in Indian context and is slowly catching up with the consumers. Consumers recognize the objective of health insurance and it’s offering to cover the ever rising medical expenses. Health insurance is sometimes used more generally to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a government-sponsored social insurance program or from private insurance companies.
Health insurance is obtainable to both individual and groups (e.g. by a firm to cover its employees). In each case the covered groups or individuals pay premiums or taxes to protect themselves from high or unexpected healthcare expenses. However premium for individual policy is costlier than that of the group policy. An individual is the owner of his personal policy. Whereas in group plans the sponsor is the owner of the policy and the registered members are enclosed by the policy. You can take benefit of group health insurance to overcome the shortage of your individual insurance. People with no policy or are uninsurable due to one or the other reason can take good advantage of the group plans and be covered.
By estimating the overall risk of healthcare expenses a routine finance structure such as a monthly premium or annual tax can be developed, ensuring that money is available to pay for the healthcare benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business or not-for-profit entity. The person or the insured should pay a regular fee called a premium to the insurance company. In return the insurance company will pay all or some medical expenses wanted when the insured becomes injured, ill, or otherwise hospitalized.
Categories of medical insurance:
Medical expenses has raised manifold in last few years. There are some kinds of health insurance and they are follows :
- Individual Medical Insurance
- Group Medical Insurance
- Special Plans
Individual Medical Insurance
These types of medical insurance plans offer protection and indemnity on an individual basis. Insurance premium for individual plans are advanced than that for a group policy.
Group Medical Insurance
These medical insurance plans generally available through an employer or society or union are written on a number of people under a single master policy.
These plans are specially structured to suit the needs of elderly persons, veterans of military service, etc.
Types of Health Insurance
Health care expenses have seen a phenomenal rise in the recent times. This has led the customers to insure not only themselves but their family members also. It will cover future medical expenses and other connected requirements if it ever arises. The need to insure has gained more importance amongst older generation who is either retired or will retire in the near future. Let us discuss the types of medical insurances available in the market.
- Medical Insurance
- Critical Illness Insurance
This is typically a hospitalization cover and reimbursement of the medical expenses incurred in respect of enclosed disease or surgery while the insured was admitted in the hospital as a patient. Different types of medical insurances are available in the market like individual medical insurance group medical insurance and overseas medical insurance. There are health policies that reimburse you the actual hospitalization cost for treatment of any disease and are obtainable by the non-life insurers only. These policies are popularly called Mediclaim policies. Other types of health insurances are provided by both the life and non-life insurers.
Critical Illness Insurance
Critical Illness plan insures you against the risk of serious illnesses in return of a premium you are necessary to pay. This gives you the same safety of knowing that a certain cash sum will be paid if the unexpected happens and you are diagnosed with any one of the critical illness. Sometimes a critical illness can change your lifestyle in adding to help within the home or the family. In this type of health insurance plan the insured receive a lump sum amount within a few days of diagnosing critical illness. Once this lump sum is paid the plan ceases to remain in force. Normally a critical illness plan would supply cover for the illnesses mentioned below ;
- Aorta graft surgery
- Coronary artery bypass surgery
- First heart attack
- Kidney failure
- Major organ transplant
- Multiple sclerosis
- Primary pulmonary arterial hypertension
Need of Health Insurance
Medical expenses are in sky high these days. A meeting with a doctor might churn out big bucks. The complicated medical treatment expenses could eat into your savings meant for the future. Health insurance policy kicks in to guarantee that you get the necessary treatment and your pocket is still under control. Having health insurance is significant because the coverage helps people get timely medical care and improve lives and health. It covers the risk of monetary difficulties in the event of long illness. The awareness has been enormous in the last couple of years. This must have been in response to the series of uncertainties people have observed in recent times like the terror attacks.
Benefits of Health Insurance
Benefit depends on the policy you choose and the coverage it provides. Here is a list of basic coverage provided by most of the health policies.
- It helps securing a better future by paying a fraction as an expenditure today called the premium.
- It reduces saving huge amount of financial losses, risk of financial breakdown in case of expensive medical and post-illness care.
- It certainly induces a sense of security to the insured.
- It provides financial security to the family members.
- It covers your hospitalization and medical bills.
- It also covers disability and custodial bills.
- You can avail tax benefits on the premium paid under section 80D of the Income Tax Act.
- The best factor, you can also opt for health insurance policies even after the age of 60.
Tips to select the right health insurance plan
Following are the tips to note while taking a health insurance policy
- Compare prices and features before buying. One policy can cost over 3 times the other.
- If you have a family, go for a Family floater policy. It is more economical and gives higher coverage for each member of the family. In addition it provides the flexibility that any member can use any proportion of the floater. This is helpful since in most cases one individual gets seriously ill, rather than the entire family.
- Compare the terms of the policy so you do not get a shock later. A broker will be able to give the best advice since he is largely independent.
- Do not always adopt a policy with a cashless tie up with a hospital nearby. All good hospitals can be empanelled by insurance companies. Rather look for a policy that fulfils your necessities adequately.
- Find out all the hospitals that your insurance company has empanelled with and understand what their specialization is, so if you are in need you can use the appropriate hospital, rather than just one all the time.
- Always it is advisable to buy from a broker, ask for their license number and make sure if the details provided are correct from the IRDA website. These brokers are independent and are paid for every policy they sell, so they are not inclined to push one over the other. An agent on the other hand sells for one company only and hence will usually push that company and its benefits.
- Be truthful and accurate in your declarations on the proposal form. That will only ensure payment when you have a genuine claim.
- Exercise frequently and follow healthy eating habits. Avoid smoking or drinking in excess. Over time all your efforts will definitely reduce your premium while covering the risk.
- If you already suffer from a disease take the necessary precautions. Always act as if you are uninsured yet though you may be insured. This will always control your habits and will advantage you in the long run.
Save on Health Insurance Premiums
No one likes pay more than its worth. Getting the most appropriate and reasonable Health insurance is dependent on a few aspects like your choices, capability to choose and of courses the health conditions of the policy buyer. But by following a few steps you can save a good lot on your health insurance premium.
- Smoker’s health is always at risk so people with smoking habits will end up paying more premium than a non smoker. So in order to decrease the premium, one has to quit smoking.
- High blood pressure is not a good sign and is sensible to keep it under control. Keeping control on high blood pressure can help you decrease the premium cost.
- If you are in good health then automatically your premium cost will be lower than the people whose have health problems.
- Avail your no claim benefits. Discounts on claim free years will also help reducing the premium at the time of renewal.
- Comparing the quotes from a variety of insurers is an important feature to save on health insurance premium. Though you need to shop for a while to have an idea. Make sure you get some affordable online health insurance quotes.
- Compare the profit of various health insurance plans. Perform deep research to find out what discounts you can avail for in various appropriate policies.
- Make your choices for cover very carefully; take only the coverage you require. Your random selection might end you up paying out more than actually required. So a right decision making is important.
Procedure to file a health Insurance Claim
Taking health insurance and paying premium is one story and filing for claim is another. Claiming benefits can be quiet tricky at times so you have to be smart and careful while filing for the claim. To file a Health Insurance claim with your Insurance Company you have to keep the following things ready.
- Claim form duly filled and signed by the claimant.
- Discharge Certificate from the hospital
- All documents pertaining to the illness starting from the date it was first detected i.e. Doctor's consultation reports/history
- Bills, Receipts, Cash Memos from hospital supported by proper prescription.
- Receipt and diagnostic test report supported by a note from the attending medical practitioner/surgeon justifying such diagnostics.
- Attending doctor’s certificate stating the nature of the operation performed, bill and receipt. Attending consultants / specialists / anesthetist's bill and receipt, and certificate regarding diagnosis.
- Certificate from the attending medical practitioner / surgeon that the patient is fully cured.
- Details of prior policies if the details are not already with TPA except in the case of accidents.
You are probably aware that the premium you pay on health insurance policy is tax deductible under Section 80 (D) of the Income Tax Act 1961. Until budget 08 came around there was a Rs. 15000 cap on health insurance deductibles for individuals. This cap integrated the premium paid on health insurance for the individual, his/her spouse, dependent children, and the individual's parents. In effect you could claim Rs. 15000 as deductible on health insurance under Section 80 (D). Budget '08 has come up with a very good distinction that increases your tax exemption while giving better coverage for your family and parents. Here is the relevant revised section of the Income Tax Act, 1961:
While computing the total income of an assessee being an individual there shall be a deduction of sum specified in sub-section (2), clause (a) and (b) of Section 80 (D).
Sub-section (2): Where the assessee is an individual the sum deducted from his/her taxable income shall be the aggregate of the following :
- The whole amount paid to effect or to keep in force an insurance on the health of the assessee or his family (here family means wife and dependent children of the assessee) but not exceeding Rs. 15000.
- The full amount paid to effect or to keep in force insurance on the health of parent or parents of the assessee but not exceeding Rs. 15000 in aggregate.
This means is you can now get spend a tax exempt Rs. 15000 towards your family's health Plus another Rs. 15000 towards the health insurance