The important points to take care before buying a Health Insurance Policy.

       The important points to take care before buying a Health Insurance Policy. We normally take insurance to cover or guard against uncertain things.  A major medical expenses can eat away your entire savings and put you in a bad financial situation.  This is the very reason why it is advisable to take health insurance to safe guard your financial interest. It is very essential to buy health insurance and  seems mandatory to most of us, let us look at most important aspects before choosing a health insurance company/policy:

1) Third party administrator (TPA) – With a whole lot of insurance companies in the market, it’s confusing as to which one to choose. Some insurance companies have a Third Party Administrator (TPA) who act as intermediary between Insurer and Insured and are responsible for Claim settlements. Having a TPA can sometimes increase the claim settlement time. Hence, it is better to choose an Insurance company which operates without a TPA since we can directly interact with them and claim settlement would be faster and hassle free.

2) Network hospitals – It’s important that an Insurance company has a lot of network hospitals in place. It will enable us to choose one which is reputed and also accessible to us. Distance of the hospital becomes very important especially when there is an emergency.

3) Sum assured needed – Unlike life insurance, there is no specific formula to calculate the amount of sum assured needed in a health insurance policy. However, with medical inflation at more than 15%, we would better be over insured rather than under insured. At this inflation, a surgery which costs us INR 2 lakh today would cost us INR 4 lakh after 5 years. Also, with more and more hospitals resembling five star hotels we need to choose an amount which will suffice for the next 15-20 years.

4) Guaranteed renewal benefit – One of the most important things to note is whether the insurer is ready to offer us a guaranteed renewal of the policy for life. This clause obligates the insurer to continue the coverage as long as premiums are paid on the policy. However, premiums can rise based on the filing of a claim, injury, or other factor that could increase the risk of future claims.

5) No claim bonus – Usually, insurance companies offer a bonus if there has been no claim made in the previous year. The bonus would be a discount in the next year’s premium. The common discount offered is 5% for a claim free year and can go up to 50% for 10 consecutive claim free years. This is good for a person who is healthy and doesn’t make claims often. But, it doesn’t really suit someone who suffers from illnesses quite often and requires making claims.

6) Cashless hospitalization – Cashless hospitalization is an excellent facility which takes away stress from us during hospitalization, especially during emergencies. Such a clause would help us in emergency hospitalization wherein we need not run for money. However, such facility would only be available in network hospitals. In case of non-network hospitals, we need to pay first and then claim for re-imbursement.

7) Sub limits – Quite a lot of health insurance companies have scrapped the sub limits on room rents, doctor fees and so on which they started imposing three years ago. But, how about the existing policies which we have been renewing since the past few years? There is a definite need to know the sub limits in our policy document. In case there are sub limits, we need to make sure that we know the network hospitals near us whose cost structure is in line with these limits.

    Apart from these, we can also look for personal accident or critical illness policies which cover us for treatment towards temporary/permanent disablement, loss of income due to disablement, death benefit. An individual/family health insurance is highly recommended despite of being covered under a group health insurance from the employer, primarily because of uncertainties in jobs. We can also opt for a top up insurance which will make sure that any claim above the limit offered by the employer would be taken care of.

Prakash Nair

Certified Personal Financial Adviser (CPFA)