Health Insurance Plans: How to start researching

In our previous posts on health insurance, we have discussed various parameters to consider before purchasing health insurance and compared various health insurance plans on these parameters. In these posts, we focused on product features and using those features to assess the best health insurance plan for you and your family.In this post, we discuss certain inhibitions people have about purchasing a health insurance plan. Additionally, we discuss the tax benefits and how to start researching for the plans.

I have a health insurance plan from my employer. Why should I buy?

You might argue that you have health insurance from your employer which covers your family and need not buy a separate plan. Insurance cover from employer is generally very basic and may carry restrictions such as limited sum insured, co-payment, compulsory deductibles, sub-limits on room rent etc. You should read fine print of the insurance policy provided by your employer to understand the features completely. If the health insurance plan meets your requirements (both in terms of features and sum insured), then you don’t need to buy a separate health insurance for you and your family.

There are a few additional things to consider. Insurance from your employer is valid only for the duration of association with the employer. So, you may find yourself (and your family) without health insurance during a job switch, job loss or retirement. Any medical emergency during the time can seriously deplete your financial health.

I am fit and young. I don’t need health insurance

Younger individuals or couples may feel they are less likely to get hospitalised and can do without buying insurance. Yes, they are less likely to fall ill (or so they may feel) but accidents can happen to anyone, irrespective of age. We recommend them to start early primarily because of following reasons. Firstly, at a younger age, premium is lower and puts lesser burden on your pocket. Secondly, when you start early, you can tide over the waiting period for your pre-existing illnesses or any other waiting period as imposed by the policy (at a time when you are less likely to seek hospitalization for such illnesses). Finally, as you grow older, you are likely to contact illnesses. The nature of such illnesses can impact underwriting risk of the insurer and hence your premium may rise or you insurer can even exclude claims arising of such illnesses at the time of issuing the policy. If your health insurance policy was in force while you contacted such illness and made hospitalization claim arising due to the illness, insurer cannot increase your premium as per IRDA regulations. So, buying a plan early in life can save you on some costs too.

Disclose medical history

One additional thing to note is that the premium mentioned on the insurance company websites or aggregator websites (such as PolicyBazaar) are only generalised quotes. Insurance companies may ask you to get a health check-up done and administer you a questionnaire (about your medical history) to better assess their underwriting risk and price the insurance policy accordingly. Expectedly, if your medical examination (or disclosures) suggests that you have higher chances of getting hospitalised (or making a claim under the policy), your premium will be revised upwards to reflect the risk taken by the insurance company.

Remember to disclose all the details about your medical history to the insurer while purchasing the policy. Do not decide on your own whether a particular piece of information about your medical history is material or not. Let the insurance company decide if the information is material or not. If the premium goes up based on your disclosures, so be it. If the revised premium is out of your budget, you may choose another policy (even if that requires compromising on a few features) so that the premium suits your pocket. For example, you can go for a plan that allows only shared accommodation (instead of single private room) or does not provide a regular health check up or go for a co-payment option. In the future, when your income rises, you can opt for your preferred plan.

You must note insurance companies can reject your claim if they find out you had hidden any material information (which may have led to hospitalization under consideration) while purchasing the policy. In case such a thing happens, you will be in for a rude shock when you try to settle a claim. At time of hospitalization, you are already going through a lot of physical and emotional stress. At such a time, you (or your family) do not want to enter into a dispute with your insurance provider. Hence, we reiterate complete disclosure about your medical history is must. Such disclosure will only smoothen out the claim settlement process.

You must always remember what you buy insurance for. Insurance cannot reduce your chances/risk from meeting an accident or falling ill. It cannot save you from physical and emotional stress you go through during hospitalization. However, it can mitigate financial stress (medical expenses) arising out of your hospitalization/treatment and help you get the best treatment for you and your family. By not disclosing the complete details, you run the risk of not mitigating even that financial stress (despite paying the premium).

Tax benefits of purchasing a health insurance plan

Health insurance premium to the extent of Rs 25,000 paid for self, spouse and dependent children is eligible for tax deduction under Section 80D of the Indian Income tax Act. An additional deduction of Rs 25,000 can be claimed under the same act towards premium payment for parents (Rs 30,000 if either parent is a senior citizen). Though tax benefit shall not be a criterion for buying insurance, it does help if the tax regime is favourable.

Where do I start?

Insurance aggregators such as PolicyBazaar can be a good point to start. You can compare various plans and their premium online. You can use the website to shortlist a few plans. Subsequently, you can call up various shortlisted insurance companies or even PolicyBazaar and seek further details about the shortlisted plans. This will help you better assess if the features offered fit your requirements. Our recommended method would be to download the policy wordings and try to understand the finer details of the policy. However, since most of us are not comfortable with reading the finer details, you can grill customer care executives of the insurance companies on phone or e-mail to get the information you need. Clarify everything before you make the final choice.

Mint, a business daily, has come with ratings for various medical insurance policies. You can view the ratings here. Mint has rated the policies on various parameters such as premium, co-payment, no-claims, pre-existing disease exclusion, waiting period and sub-limits. Every parameter has a certain weightage in the final score and the final rating is the weighted sum of the parameter scores. Health insurance plans have too many conditions (and sub-conditions)/riders attached for parameters to quantify them on a scale. However, you may refer to those ratings as a good starting point.

PersonalFinancePlan Take

Start early, make an informed purchase decision in terms of features availed and premium paid, provide complete disclosures, and hope you never have to make a claim under the policy. We wish you good health and happiness.

Deepesh is Founder, PersonalFinancePlan.in

Image Credit: Darko Stojanovic. Original image and information about usage rights can be downloaded from Pixabay.com