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Zone-Based Health Insurance - Demystified

If you think age, health and sum insured are the only factors deciding health insurance premium, think again. The city where you reside also determines the cost of health insurance. The hospitalization cost is much lower in smaller cities than metro cities where there are more cases of lifestyle diseases. Most of the insurers pass on the benefit to customers of small cities.  Zones are classified under 1,2 and 3. Typically, metro cities fall in Zone 1, tier 1 cities are in Zone 2 and the rest of India is in Zone 3. However, the classification varies between insurers.

Zone based health insurance pays premium as per the treatment cost prevailing in your city. Here are the details:

  1. Premium: - It is based on the medical costs prevailing in a particular city. All cities are classified under Zone 1, 2 and 3.  The advantage of zone-based pricing is that it can lower your premium by up to 10-20%. For instance, if you are 30 years old living in Delhi (under Zone 1), you would have to spend Rs 10,043 to buy Rs 10 lakh coverage under Health Insurance Plan. However, if you buy the same plan in Agra (falls under Zone 3) the premium will come down to Rs 8995. At present, premium structure by zone is offered by L&T Health Insurance, Max Bupa, Star Health Insurance, SBI General Insurance, New India Assurance, and Cigna TTK.

  2.  Change in Residence: - If the policyholder changes his residence address from a metro to a small city, the same has to be informed to the insurer so that appropriate zone pricing can be worked out. There will be an endorsement and the insured can take a complete refund. Today, people prefer to avail healthcare facilities in metros. If a customer shifts to a small city but wants to continue treatment in a metro city, he can opt for it by paying for the extra premium.

  3. Advanced treatment: - Some insurers restrict the coverage if a policyholder from a Zone 3 city moves to a Zone 1 city for advanced treatment. For instance, in SBI General Health Insurance, if a person having Zone 2 coverage moves to a Zone 1, he will get 80% of the claim amount. There are policies that insert a co-payment clause for undergoing treatment in bigger cities.  The quantum of restriction varies from policy to policy. Find out how your insurance policy will work if you need advanced treatment.

The Final Word

City-based health insurance policies reduce premium cost. But before deciding in on a policy, you need to understand how payouts are made for the treatment carried outside the residence city. In higher age brackets, it is advised to pay an extra premium to get Pan India coverage. Make your decision after weighing in all the options.

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