Six points to consider while buying Health Insurance

Mr Joshi, age 43, working with an MNC having an annual income of about Rs 15 lacs, wants to buy a health insurance policy for his family consisting of his wife and two children’s and also his parents (age 62 & 63). But he got confused with so many policies available around with complex features, like him, I have seen people struggling to decide which policy to buy especially when it comes to buying a health insurance policy. So, let’s see five important points before you buy a health insurance policy.

What would be the appropriate sum insured?

Sum insured would depend on the city you live in, lifestyle and preferred class of hospitals. For same treatment, different hospitals charge different amounts and bigger hospitals may probably charge a much higher amount than a smaller hospital. Also, the category of the hospital room you choose may also determine the total cost of your expenses.

Room Rent Capping

Majority of the policies in the market come with 1% room rent capping that is if your sum insured is Rs 5 lacs then the maximum eligible room rent would be Rs 5,000 and not more. If someone opts for a hospital room having a rent of Rs 10,000 instead of Rs 5,000 in that case insurance company will deduct flat 50% of the entire claim amount, instead of deducting only the excess rent paid as a normal person would have expected, it is relevant to choose a policy with higher sum insured. Hence it is essential to choose a policy with the right sum insured or a buy a policy which comes without any room rent capping.

For Mr Joshi who lives in the city of Pune, he may go with a sum insured of at least Rs. 10,00,000/- for his family and at least Rs 5,00,000/- for his parents, considering their age and medical insurance cost.

How much income tax benefit U/s. 80D?

The health insurance premium paid towards health insurance policies qualifies for deduction under Section 80D of the Income Tax Act, for up to Rs 25,000 for self & an additional amount of Rs 50,000 for the financial year 2018-19 onwards, if premium paid is towards a health insurance policy of a parent who is a senior citizen.

Which company to go with?

There are about 30 general insurance companies including a few standalone health insurance companies and four public sector insurance companies offering medical insurance policies. All companies offer cashless facility but the four public sector insurance companies are governed by separate PPN/GIPSA network which could restrict the availability of network hospitals. If you are on a tight budget then PSU companies like National Insurance, Oriental Insurance or a United India could be a good choice. Standalone health insurance companies, i.e. Apollo Munich, Star Health, Max Bupa, Religare, Cigna TTK could be a good choice if you would want to go with specialized health insurance company, added the advantage of all these standalone companies is that they settle health claims in-house without using any TPA service provider. You could also consider mediclaim policies from companies like HDFC, ICICI, Bajaj Allianz, Apollo Munich, Max Bupa, IFFCO-Tokio, TATA AIG, Liberty, etc. which come without any room rent capping.

Pre-existing disease and Waiting Period

A pre-existing disease is something you are aware of on the date of taking the policy. Any such illness or disease can be covered in a medical insurance policy only after two/three or four years waiting period depending on the policy terms, provided that the said disease or illness was disclosed to the insurance company at the time of taking the policy for the first time. All health insurance company’s policies come with waiting period i.e. claims will not be paid for certain specified diseases or illnesses in first 30 days, one or two years, hence it is important to read through the list of diseases for which claims will not be paid during first few years of the policy.

Claim Rejection:

About 70% of the claims in health insurance industry are rejected on grounds of pre-existing condition, to put it in simple words, if Mr X had an accident in the year 2010 and a steel rod was inserted in his left leg, later in the year 2012 if he takes an insurance policy without disclosing the said fact that he had an accident previously and a steel rod has been inserted in his left leg, in most probability he will get a medical insurance policy. But let’s assume if he has another accident in the year 2018 and he suffers injury on the left leg again the insurance company in all probability will reject the claim on grounds of pre-existing condition or misrepresentation, hence it is always better to disclose all medical conditions prior to taking an insurance policy.

...& ANALYSIS

• For same treatment, different hospitals charge different amounts and bigger hospitals may probably charge a much higher amount than a smaller hospital.
   
• About 70% of the claims in health insurance industry are rejected on grounds of pre-existing condition

The writer is a chartered accountant and chief gardener of Money Plant Consultancy