PART3: Health Insurance
Why do you need Health Insurance?
Do you put a cover on your mobile phone or add a screen guard inspite of the screen being break free? Most of us do, right?
However when it comes to protecting or covering ourselves, we hardly look at investment options or take into granted the insurance provided by our employer. However, not taking a health insurance or having an insufficient one can wipe out all your life savings.
The current covid-19 pandemic has made each one of us realize that a medical emergency is unpredictable and can erode a good chunk of our savings. With the rising medical costs, availing good medical facilities could be financially exhausting. It can also affect your future financial goals.
Getting a medical insurance cover for yourself and your family would safeguard your wealth in such unforeseen situations and at the same time ensure timely medical treatment for your loved ones.
Also, with rising medical costs a comprehensive health insurance would help you beat medical treatment inflation.
Please remember like life insurance, health insurance is also meant to cover the medical risks and is not supposed to serve as investment vehicle.
What should be the ideal cover?
Some factors that you can consider while calculating the ideal cover are the Nature of your work environment (hazardous , prone to certain illnesses), your lifestyle, family medical history, average medical costs in your city etc .
Ideally the minimum recommended cover is around 3 lakhs for kids and 5 lakhs for adults with no major health concerns. However, this is just a figure for guidance. Choose a cover as per your needs considering all the factors mentioned above.
There are cheap family floater plans available. However, if 2–3 members of the family fall ill at the same time then the cover would not be sufficient. Some plans have a restoration of cover benefit at an additional premium. If there are seniors in the family, the premium for a family floater plan would be high.
One way of optimizing the cost is to include the senior members in a separate plan and other family members in a separate plan.
Below are three very important considerations that you should look for while choosing an health insurance policy:
1.Room Rent — In some policies there is a cap on room rent. Eg. Out of 5 lac ,maximum room rent charge allowed is 5000K /per day. If you choose a room pricier than this, you would need to pay the extra amount from your own pocket. In some hospitals other charges are proportional to room rent charges, so you would be levied higher charges on other costs as well.
For e.g. A surgery ideally costs 2.5 lac. However, since you choose or had to be admitted to a pricier room, the surgery cost would be higher and proportionate to the room rent of the pricier room. Same applies for other items like say PPE kit, medicines, drips, syringes etc.
All these proportionally higher costs would be required to be paid by you if there is a cap on room rent and it is mentioned in the policy document that extra charges linked to room rent would not be covered.
In case of emergencies you do not really have control on the room you would get. Whatever is available is where you would be admitted. Hence check the room rent clause very carefully in the document. Either there should be no cap on room rent or if it is there, it should not be linked to other costs.
2.Sublimits: Some policies have certain sublimit. E.g. Say for a Knee replacement surgery the limit is 1 lac or for a heart surgery it is 3 lac. Anything above these limits the policyholder is supposed to pay. Ideally one should avoid such policies where a certain limit is imposed on some diseases since they bring limitations to the overall policy.
However, if you have some issues with premium affordability you may go with such policies but read the policy document carefully and check if it suits your needs.
3.Co-pay : This means some part of the bill is paid by the insurance company and some part by you. It is better to avoid policies with a co-pay clause since overall it defeats the purpose of having insurance cover. But you can not afford the premium then 20% co-pay can be a fair deal. Again, choose what suits you.
Also take into consideration below points:
1.Claim Settlement Ratio: This is the number of claims settled by a company out of total claims filed. For example if the company has settled 98 claims out of 100 its claim settlement ratio is 98%. Anything above 96 or 97% is a good number. This number is generally available on company websites or you can search it on aggregator websites like ‘Policy Bazaar’
2.“Zonal v/s Pan India”: Some policies have a ‘Zonal’ constraint that they would settle the claims as per the rates applicable at the location that you have marked as your address while taking up the policy. They earmark a zone or a tier or a slab in the policy and rates vary with every zone.
e.g. If you claim for some treatment at a Bangalore hospital but have an address from Kota in your policy and say Bangalore and Kota are in different zones. Given that the medical rates are higher in Bangalore you may end up paying from your pocket.
Hence choose a policy that does not have such zonal constraints and has uniform claim criteria pan India.
3.Pre and Post Hospitalization: Many planned medical treatments may have needs for Pre and Post Hospitalization. Check if the policy includes any reimbursement charges for pre and post hospitalization expenses. Check the number of days included.
4.Day Care and Extended Coverage: There could be some treatments where you need not stay in the hospital like cataract surgeries. Check if the policy covers these. Also if you have any requirements for cosmetic surgeries or AYUSH treatments, check for extended coverage in the policy.
5.Waiting Period for Pre Existing illnesses and slow-growing diseases: There is generally a waiting period of around 30 days post policy purchase. There are also certain waiting periods for pre existing illnesses (illnesses a person is already diagnosed with at time of policy purchase) and slow growing diseases as well. Check this information carefully.
6.Reasonable and Customary Clauses: Claims may get rejected due to this clause in policy. This clause essentially means that the insurance company would reimburse the amount that is inline with the general rate of treatment in that area.
For e.g., A person undergoes a heart surgery worth 3 lakh in Indiranagar, Bengaluru. The company may only reimburse 2.5 lakhs since the general rate in that area for a heart surgery of the same type is 2.5 lakhs. This term is anointed in the policy document as ‘Reasonable and customary’. So watch out for this phrase. Avoid policy with this or seek complete clarification from the insurance company on this and buy only if you are convinced.
7.Ambulance Charges: Check if ambulance charges would be reimbursed.
8.Hospital network: Check if the policy has an extensive cashless hospital network of reputed hospitals so that you do not have to pay money upfront for the treatment to begin.
9.Free Health Checkups: Check if there are any free health checkups available as a part of the policy
10.As mentioned in the Life insurance blog , do not hide any medical issues or any other information like drinking , smoking etc from the company.
11.Choose an established brand in insurance that you can trust.
Super Top Up
Super Top Up is over and above your base insurance.
For e.g., your base policy is valued at 5 lakhs, however your total medical expense for some treatment comes up to 7 lakh. So you have an additional expense of 2 lakhs over your base policy that you will have to pay from your pocket. A super top up would help you to cover those additional 2 lakhs as well.
A super top up comes into picture once your base cover is exhausted. Like in the above example if the expense surpasses 5 lakhs then the super top up is used.
Now, what is a deductible in ‘super top up’? Another jargon?
No, It’s simple!
Well, In the above example, 5 lakh is called ‘Deductible’ in your super top policy. This ‘Deductible’ is equal to your base policy limit or could be a different number that you have chosen in the super top up plan. Basically ‘Super top up’ takes care of the expenses above the deductible limit specified in the policy.
Below example explains how the super top up works.
All the below expenses are incurred in the same year.
Base Policy and deductible: 5 lakhs
Super top up : 5 lakhs
Treatment1 Total expense: 7 lakhs
Base Policy (5 lakhs) + Super Top up (2 lakhs) = 7 lakhs
Treatment2 Total expense 2 lakhs (Same year)
Covered by Super top up
There is a variation called ‘Top Up’ as well, however always go for a ‘Super Top up’. For the sake of simplicity ‘Top up’ is not explained here, however you can find information about this very easily online once you understand the ‘Super Top up’ well.
‘Super Top ups’ are standalone policies not necessarily related to your base policy and each of these can be from different insurance companies. It is recommended that both base cover and super top up be from the same company since it ensures that the claim settlement process is the same and both base and top up have the same set of network hospitals. However, it is ok to get them from different companies provided they both have a good network of hospitals.
What should people who already have Employer provided health insurance do?
Are you someone who has an employer provided health insurance? Most of us who have one rely on that insurance. However, before you do that ask yourself these questions -
a. Is the cover provided really sufficient?
b. Does it have room rent , co-pay etc clauses?
c. Am I ok with the exclusions in the policy?
d. Does the policy sufficiently cover your parents?
e. What will happen if I switch my job?
The employer provided health insurance may not be enough to cover you and your family in all cases. You may opt for another base policy if the employer provided cover has certain shortcomings like room rent clause , co-pay etc.
If the employer provided policy is good enough but has a very small cover, you may opt for a ‘Super top up’ plan in addition to the employer cover, keeping the deductible equal to the employer cover.
‘Super Top up’ can help you secure your health risks over and above the base cover provided by your employer (in case your employer provides one) or your personal base cover for as low as Rs.8000 per year for a 1 Cr. cover with a 5 lakh deductible for you and your spouse. The cost will fluctuate based on one’s age, health and cover, deductible opted and with changes in other aspects with time.
All in all a ‘Super Top up’ is a great way of fortifying your health cover. Especially in COVID times where treatment may go up to a month of hospitalization.
Conclusion:
To protect your investments and to ensure timely health treatments for you and your family, it is highly important to have adequate health cover.
Choose a cover as per your requirements considering all the above mentioned factors. Add a super top up to sufficiently cover all the risks.
Evaluate your employer provided insurance policy to check if it covers you well. If not opt for another cover or a super top up.
We have already looked at life insurance in the previous blog.
Up next! We will look at the emergency funds to cover other uncertainties.