Healthcare costs in our country have been rising at a faster pace. According to the latest reports from various health organisations, healthcare inflation in India is 14% per annum. While creating a financial plan for the family, insurance plays an important role in managing the risks. We have already discussed term insurance as a measure to mitigate the risk of death.
However, there are circumstances where a medical condition can lead to hospitalisation. Health insurance is a product that works as a risk management tool in case of hospitalisation expenses.
There are various types of health insurance policies available in India with many variations within them. In this article, we are going to discuss the most important category of health insurance that is comprehensive health insurance policy.
As the name suggests, comprehensive health insurance policy comes with a wider coverage on the types of expenses that one has to incur in case of hospitalisation. There are very few general exclusions in a comprehensive health insurance policy. Let us deep dive into this topic & understand the most important features available.
Limit on room rent: This is a pre-defined limit set by the insurance company on certain policies where per day room rent is capped at a certain percentage of the sum assured. Eg: 1% of sum assured means that a policy having a sum assured of Rs. 5,00,000 will have a capping of room rent per day of Rs. 5,000. In case the actual room rent is higher than the claim settlement is done on a proportionate basis.
Suppose a policy has a room rent capping of Rs. 5,000 per day but the patient gets admitted to a room with rent of Rs. 10,000 per day. In this case, the entire hospital bill will be slashed by 50% & only 50% claim will be settled. In most of the comprehensive policies, there is no limit on room rent.
Limit on ICU: Similar to the room rent, certain policies have a capping of 2% of sum assured for ICU expenses. It is important to check that your policy has no such capping.
Copay option: Copay refers to sharing of the hospital bill between insured person & insurance company. A 20% copay means that 20% of the entire bill will have to be paid by the patient and the remaining will be borne by the insurance company. However, in a comprehensive policy, there is no copay. Hence the insurance company pays the full hospital bill.
Pre & Post hospitalisation expenses: There are medical expenses that are incurred before a patient is actually admitted to the hospital. These could be the preliminary checkups or medical tests done before actual hospitalisation. Also there could be the expenses that may continue for a few days after the discharge of the patient from the hospital. These expenses are covered in a comprehensive policy. Eg: A policy may cover 30 days of pre-hospitalization and 90 days of post hospitalisation expenses.
No claim bonus: As the name suggests, if there is no claim made towards the insurance company in any year, the company rewards the policy holder by increasing the sum assured without paying extra cost. This additional sum assured is known as no claim bonus. This varies in the range of 10-50% per annum.
Eg: A policy with sum assured of Rs. 10 lakhs & 50% no claim bonus will become Rs. 15 lakhs in the next year if there is no claim made in the previous year. Do keep in mind that once the claim is made in any subsequent years, the sum assured amount will again fall back to the base sum assured.
Restoration benefit: A few insurance companies provide a restoration benefit in case the sum insured is used up in any single year. Eg: Suppose you have a policy of Rs. 5 lakhs & get a claim of Rs. 4 lakhs. After the claim is settled, the insurance company restores your policy back to Rs. 5 lakhs. However, if the claim amount is above the base sum insured then the same is to be paid by the patient.
Pre-existing diseases: Health insurance companies want you to disclose all the pre-existing medical conditions in order to price the policy correctly. These conditions will have a certain waiting period before which they can be covered under the policy. It is important to disclose these conditions while taking a policy to ensure smooth claim settlement experience in future.
Health insurance policies are complex in nature, it is always suggested to take assistance from a full time financial advisor or insurance agent who can understand your requirements & suggest the appropriate policy that suits your requirements. Further it is important to read everything that is written in the policy to understand its coverage & exclusions.
TIP: It is suggested to avail health insurance at an early stage of life. As we age, the chances of contracting the diseases increase which may lead to higher premiums or waiting periods for health insurance or in some cases even rejection to grant a policy.
CA Rohit J. Gyanchandani is Managing Director, Nandi Nivesh Private Limited, A Pune based Wealth Management Company.