Buying Health Insurance - Guide to Pre-Requisites

More than 80% of financial crisis arise due to medical emergencies. Thus, a medical insurance policy is necessary to protect financial health and not merely as a tax saving device. However, here are a number of factors that must be considered before and after purchasing a policy –

• Invest now: The insurance companies are likely to charge higher premiums from the elderly. Since young people are deemed healthier, there are fewer risks involved and they are readily covered. Buying a policy with lifetime renewability makes sense, otherwise, an individual might end up without a cover at old age, even though he/she bought a policy quite early in life. Additionally, younger individuals tend to accrue a no-claims bonus as they are unlikely to seek medical attention.
• Cashless settlement v Reimbursement: In the case of cashless settlements, the insurance company has a list of approved hospitals where a policyholder can seek treatment. The insured should make sure that these hospitals are nearby or he/she might end up travelling across the town when seriously ill. If it’s a reimbursement policy, then the insured should ideally have a substantial bank balance in order to meet the expenses of the treatment. The expenses are reimbursed after bills are submitted and that takes some time.
• Waiting period: A pre-existing condition is a disease that existed before the purchase of a policy. In most cases, insurers have a 3-5 year waiting period for a pre-existing disease. If there are two insurance providers and one is charging a higher premium than the other but has a shorter waiting period, then it makes more sense to purchase its policy.
• Individual cover: These days, most organizations have health insurance policies for its employees. Usually, group policies have no waiting periods for pre-existing conditions. However, that policy might lapse if a person retires or quits or the company might choose to withdraw this benefit. Therefore, it’s prudent to purchase an individual policy. But the insured must always make a full disclosure of all the existing policies (group and/or individual) to the insurer or his/her claims might be dismissed on account of fraud.
• Ailments not covered: It’s always wise to ask for the list of diseases that are not covered by the policy. For example, a policyholder might submit bills for an expensive dental surgery and then end up discovering that they not eligible for reimbursement under the existing plan. Additionally, it’s important to check out the conditions under which an insured can make claims. In most cases, outpatient treatment does not qualify for payment.
• Avoid claim loading: In case of a critical illness, that requires treatment over a protracted period of time, claim loading can turn out to be un-affordable.
• Claim settlement ratio: It’s the ratio of total payments made by insurance companies against the total number of claims received by it. If a company has a low claim settlement ratio, it makes no sense to buy its policy irrespective of how cheap its premium is. However, one must keep in mind that claim settlement ratios are influenced by factors like fraudulent claims.
• Cooling-off period: During the first 30 days, the insurer will not cover the cost of hospitalization due to illness. This period is called the ‘cooling-off’ period. However, a policyholder must make sure that the expenses of hospitalization due to accident are covered.
• Review the policy: Once a policy has been purchased, it’s very important to review it from time to time and keep an eye on other providers in the market. Due to the IRDA’s guidelines on insurance portability, a policyholder will not have to sit through a waiting period for pre-existing diseases if he/she decides to switch to another insurer.

An individual must always be careful before investing in a health insurance policy. It always pays to do a thorough market research and read the fine print carefully before taking a decision.