What is Health Insurance: Meaning, Types & Benefits

You may have probably heard of Health Insurance multiple times, but what exactly does it mean, and why is it so important today? It is an investment that safeguards you against the constantly rising healthcare costs in India. Think of it as a safety net that shields you from financial stress during medical emergencies. Let us explore in detail what health insurance is, its different types & features, and why it is essential for your well-being.

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      What is Health Insurance?

      In a country like India, where healthcare costs are on a persistent rise, protecting your health and finances should be a top priority. Health insurance is an agreement between you and the insurer (the insurance company), wherein the latter promises to partially or fully pay for your healthcare costs against a sum paid to them (premium) to them.

      According to a World Bank report, out-of-pocket medical expenses were highest in India in 2021, amounting to almost 50% of total healthcare expenditure[1]. This illustrates that half of the Indian population usually faces sudden healthcare expenses.

      Health insurance is a financial tool that prepares you precisely for this.

      Who can buy a Health Insurance Plan?

      Anyone who is over 18 years can purchase a healthcare policy. For children, it starts from 1 day or 90 days, depending on the insurance provider.

      How Does Health Insurance Work?

      When you buy health insurance, the insurer provides financial protection up to a specified sum. The sum insured is the maximum amount you can claim from an insurer against the covered medical expenses within a year. For this, you have to pay the insurance company a premium amount, which is set according to your age, health condition, income, and the insured limit. This amount is paid at agreed periodic intervals, which can be monthly, quarterly, half-yearly, or yearly.

      When you incur medical expenses covered under your health policy, the insurer pays or reimburses this amount, subject to the terms and conditions of the policy.

      For instance, if you buy insurance of ₹5 lakhs annually, and after some months, you incur a medical surgery of ₹2 lakhs. If your policy covers this surgery in full, the insurer will pay the entire surgery cost to the hospital, and you will have to pay just the non-inclusion costs. Say, if the insurer covers only 80% of the costs, then the insurance company will pay ₹1,60,000, and you will have to pay only ₹40,000 out of your pocket.

      Healthcare policies in India cover a wide ambit of medical expenses, such as surgery costs, room rent, hospitalisation charges, day-care procedures, doctor consultations, etc. It is to be noted that not all medical expenses are covered under health insurance. Hence, you must thoroughly read the coverage details when buying a policy.

      Benefits of Health Insurance

      Here is why having health insurance is essential:

      • Fights Rising Medical Costs
        It helps you manage rising healthcare costs in India. Whether it is a planned medical treatment or an emergency, health insurance provides financial security in both situations.
      • Covers Hospitalisation Charges
        It covers charges associated with hospitalisation, such as room rent, medical procedures, surgery, diagnostic tests, day-care procedures, nursing, etc. It also covers ambulance charges in case of any medical emergency.
      • Covers Pre & Post-Hospitalisation Charges
        Health insurance covers not just the expenses incurred during hospitalisation but also pre- and post-hospitalisation charges. It covers expenses incurred within 30-60 days before hospitalisation and those incurred 60-90 days after discharge. Some policies may also offer post-hospitalisation up to 120 days.
      • Critical Illness & Modern Treatment Coverage
        It protects against critical illnesses that demand expensive, long-term treatment. Medical plans also cover modern treatments like robotic surgery, stem cell therapy, chemotherapy, immunotherapy, bronchial thermoplasty (BT), and deep brain stimulation, which are otherwise extremely expensive.
      • Cashless Claim
        With a cashless claim, you can undergo the required medical treatment without having to make upfront payments. The insurer pays the medical expenses directly to the hospital while you can prioritise your treatment.
      • Tax Benefits
        Health insurance allows you to receive tax benefits under Section 80D. The amount of tax benefits is calculated on the premium amount you pay and depends upon the age group of the beneficiaries (self & family and parents).

      Different Types of Health Insurance

      Below are the most common types of health insurance policies offered by insurers in India.

      • Individual Health Insurance
        An individual health insurance plan is a policy that provides medical coverage for a single person. If you want your family to be covered, you must purchase an individual health insurance policy separately for each family member, as its premium and benefits cannot be shared.
      • Family Health Insurance
        As the name suggests, family health insurance provides coverage to your entire family under a single policy. The policy is offered on a floater basis, implying the sum insured is shared among the family members. By paying the single premium, the benefits can be availed by any one or more members of the family in case of medical treatments and emergencies.
      • Senior Citizen Health Insurance
        It is an insurance explicitly designed to cover the medical expenses of people over 60. Senior citizens may require frequent medical aid, thus needing more financial protection. Regular health policies may not be sufficient to cover such hefty expenses. Hence, having separate health insurance for senior citizens is a good idea.
      • Critical Illness Insurance
        Treatments for critical illnesses, such as cancer, stroke, paralysis, renal failure, etc., are often long-term and exorbitant, requiring more finances than regular ailments. A basic healthcare plan may not provide adequate coverage for such huge costs. A critical illness cover allows you to pay for your medical bills and take care of other financial responsibilities in an unfortunate case of such serious, life-threatening diseases.
      • Maternity Health Insurance
        Maternity health insurance offers financial assistance for all pregnancy-related costs. This includes expenses incurred for normal or C-section delivery, hospitalisation, pre and post-natal care, medical tests, etc. It also covers newborn baby expenses.

      Basic Health Insurance Terms

      Let us have a look at some of the primary health insurance terms that everyone should be familiar with:

      Health Insurance Feature Meaning
      Waiting Period The time an insurer takes to cover specific ailments and pre-existing diseases (PED).
      Pre and Post-hospitalisation Coverage Treatment costs before and after hospitalisation.
      Co-payment It is the share of the claim (fixed amount or percentage) that you have to pay, while the insurance company pays the remaining amount.
      Exclusions Treatments and ailments not covered in the policy.
      Sub-Limits Refers to a claim limit imposed by the insurer on certain illnesses or medical treatments/services. It can be a fixed value or a percentage of insured sum.
      Lifetime Renewability It is a provision that allows you to renew your policy throughout your life span without your age and health conditions affecting the premium costs. The Insurance Regulatory and Development Authority of India (IRDAI) has made it a mandatory feature for healthcare insurance providers.
      Network of Hospitals It refers to hospitals associated with a particular insurance company that offers cashless treatment to policyholders.
      No Claim Bonus (NCB) It is a reward you get from the insurance company for not raising a claim in a policy year. This can be in the form of a bonus amount added to your sum insured/ coverage amount or a discount on your renewal premium.
      Insurance Portability It means switching from your current health policy to a new one from another insurer without losing the accumulated benefits.

      How to Choose a Right Health Insurance Plan

      With a swarm of policies offered by health insurance companies in India, it may become challenging to determine the right health policy. Below are some factors that you must consider while choosing the ideal medical policy:

      • Sum Insured
        With the inflating medical costs, choosing a plan that provides security against these expenses is essential. The higher the sum insured, the higher the chances of comprehensive coverage of medical expenses.
      • Coverage and Exclusions
        Another crucial influencing factor when choosing health insurance is its coverage and the exclusions, implying the medical services and treatments it covers and does not cover, respectively. Consider your medical history (or your family's medical history when buying a family floater plan) to ensure the policy covers all or most of the critical services you may need in future.
      • Age and Health Conditions
        Your sum insured and premium usually depend on your age and health conditions. Hence, they are among the most critical factors when purchasing a healthy policy. This is true especially in cases where you are buying a family floater plan as the premium is decided per the age and health conditions of the eldest family member.
      • Waiting Period
        Choose a plan with a shorter waiting period for pre-existing diseases (PED) to ensure all your medical needs are taken care of timely.
      • Co-payment
        If you choose a policy with a lower co-pay, your premium cost may increase, but the amount you need to pay at the time of claim decreases. And it is vice versa if you choose a higher co-pay, where your premium amount decreases, but the share you have to pay at claim settlement increases. Some plans may also come with a zero co-payment option. You must choose the option that best suits your budget.
      • Insurer's Claim Settlement Ratio
        It refers to the number of claims the insurer has settled against the received requests. Hence, it shows the trustworthiness and reliability of the insurer. A high claim-settlement ratio means that there is a higher chance of your claim to get approved.
      • No-Claim Bonus
        Choosing a policy that offers the no-claim bonus (NCB) provides additional financial security by increasing your coverage or reducing your premium. Thus it plays a critical factor when selecting a health insurance plan.
      • Network Hospitals*
        An insurer with an extensive network of hospitals ensures you have many options for cashless treatment as in this case the insurer will pay your medical bills directly to the hospital, and you will have to spend no or little money out of your pocket.

      *Note: Per the new government initiative ‘Cashless everywhere,' you can now get cashless treatments even at the insurer's non-network hospitals, provided you meet all the other terms and conditions. Yet, we recommend you choose a health insurance plan with a wide network of hospitals for the much-required peace of mind at that time.

      In nutshell, selecting the right health insurance plan can safeguard you from incurring sky-high medical expenses, helping you save your hard-earned money and prioritising your health.

      FAQs

      • Q1. What does it mean to be covered by health insurance?

        Ans: When you buy health insurance, your insurer (the company providing insurance) takes care of the expenses associated with medical treatments and emergencies. It includes costs such as hospitalisation, surgery, room rent, nursing care, and ambulance services. Hence, your health insurance covers most of the medical bills you may incur.
      • Q2. Is ₹20 lakh health insurance coverage enough?

        Ans: Your health insurance should be enough to cover the rising hospitalisation and modern treatment costs. Ideally, the sum insured for your health insurance should be 2-3 times your salary. For an individual health policy, an amount of ₹20 lakh should be enough. Remember, you should consider your age and health conditions before finalising your sum insured.
      • Q3. What is the importance of health?

        Ans: Good health allows us to live a fulfilling life. Without good health, we cannot achieve our economic and social goals. It not only refers to our physical health but also includes the well-being of our mental health.
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      Disclaimer: The list mentioned is according to the alphabetical order of the insurance companies. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website www.irdai.gov.in

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      *Product information is authentic and solely based on the information received from the Insurer. Policybazaar is acting only as a facilitator and claims settlement shall be at the sole discretion of the Insurer. Policybazaar does not provide any medical or surgical advice or diagnosis and is not responsible for your interactions / treatment by a medical practitioner/hospital. Please consult a registered medical practitioner for any medical or surgical advice. The Information that you obtain or receive from Policybazaar, and its employees, or otherwise on the Website is for informational purposes only. As per the Insurance guidelines, you are allowed to cancel the policy with-in 30 days from the date of Issuance of policy.This option is available incase of policies with a term of one year or more.

      *All the health insurance plans cover hospitalization expenses including COVID-19 treatment cover up to the specified limits. You can also buy specific COVID-19 health insurance policies such as Corona Kavach Policy and Corona Rakshak policy.

      **All savings and online discounts are provided by insurers as per IRDAI approved insurance plans. #Tax Benefits are subject to changes in tax laws. GST Exemptions depend on fulfilment of qualification criteria and submission of relevant documents.

      *₹1748/month is the starting price for a 1 crore health insurance for an 18-year-old male, with no pre-existing diseases. Discount on renewal premium is subject to the number of wellness points earned in the health insurance policy. For more details about the plans, please read the sale brochure carefully to get upto 100% discount on renewal premium.

      *₹400/month is the starting price for ₹ 5 lakh Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹541/month is the starting price for ₹ 10 lakh Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹762/month is the starting price for ₹ 1 Crore Health insurance for a 30 year old male & 29 years old female, living in Delhi with no pre-existing diseases

      *₹243/month(₹ 8/day) is the starting price for a 5 lakh health insurance for a 20-year-old male, non-smoker, living in Bengaluru with no pre-existing diseases

      *₹2020/month is the starting price for ₹ 1 Cr Health insurance for a 50 year old male & 50 years old female, living in Bangalore with no pre-existing diseases rounded off to nearest 10.

      *₹390/month (₹13 per day) is starting price for 1 cr. Health insurance for 25 years old male, with pre-existing diseases, residing from tier 1 city rounded off to the nearest 10.

      *No medical tests are required unless requested by the insurer’s underwriter. In-case of pre-existing diseases relevant medical proof would be required as per the terms and condition of the policy opted.

      *The values taken for effective cost calculation are indicative values and may change as per the selected plan.

      *Coverage upto double the amount of Sum Insured is available on certain covers for a minimum plan of Rs. 5 Lakh on the first claim only to an individual of upto 45 years of age with no pre-existing diseases. The benefit is available with or without extra cost depending on the plan chosen.

      *Coverage of pre-existing diseases is provided by insurer as per their underwriting policy.

      *The scope of coverage may vary from plan to plan.

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