Health Insurance Explained: What You Must Know Before Choosing
Health insurance pays for your hospitalisation costs. That is its core job, and understanding this distinction matters more than comparing premiums. Yet, many focus on the premiums when choosing a plan. While this might seem adequate on the surface, in time, a careful reading through the policy document reveals countless challenges.
Health Essentials
Plan Categories
Key Metrics
Sub-limits, waiting periods, and exclusions are some of the many important factors of the fine print. They can impact claim settlement and risk your financial security if not assessed carefully early on. A low-cost plan makes it easy on the pocket, but a well-chosen coverage shields you from the risks.
Health insurance explained means understanding all the factors that impact the final coverage.
Health Insurance Explained: What It Actually Does
Inflation in healthcare is constantly on the rise. On the one hand, consultations and treatments are becoming more expensive. On the other hand, modern lifestyles contribute to greater health risks.
The primary function of health insurance India is to tackle these problems. It helps pay or reimburse the costs a policyholder or their family incurs for medical treatments.
What Health Insurance Covers
Health insurance plans usually cover:
- Appointment fees, doctor’s consultations, diagnostic tests
- Charges and fees incurred for surgeries, including ICU treatment
- Ambulance charges and nursing care
- Pre-hospitalisation expenses (30 – 90 days)
- Boarding fees and room rent (subject to pre-specified limits)
- Medicines and other consumables during treatment
- Post-hospitalisation expenses (60 – 180 days)
- Daycare surgeries or procedures that do not require 24-hour hospitalisation (like chemotherapy, dialysis, cataract surgery, radiotherapy, and piles treatment)
So, why health insurance is important
A wide range of expenses that you, as a policyholder, may have had to pay out of your pocket are covered by your insurer. In the long run, this translates into huge savings and enduring financial security.
What Health Insurance Does Not Cover
Common health insurance exclusions include
- Diagnostic tests, treatment and medication in case of epilepsy
- Treatment of Sexually Transmitted Diseases (STDs), such as HIV/AIDS, syphilis, etc
- Treatments of external congenital diseases, such as down syndrome, cleft lip, and other conditions present from birth
- Routine dental care procedures, unless they are necessary due to an accident/injury
- Injuries or medical conditions resulting from self-harm or substance abuse, for example, liver damage
- Procedures for weight loss, such as gastric bypass and sleeve gastrectomy
- Cosmetic surgeries, such as Botox, implants, and liposuction
- Dietary supplements and non-allopathic treatments such as naturopathy, homoeopathy, and Ayurveda
- Consumables such as syringes, needles, cotton bandages, PPE kits, and more
A Pro Tip: Decode any plan’s fine print to understand what’s not covered by carefully reading through your policy document. It is essential for planning expenses for future treatments.
Who Genuinely Needs Health Insurance
Since everyone is prone to health risks, all of us need health insurance.
Age, income, dependents, and medical history are some of the key factors that make health insurance an absolute necessity for certain groups.
Age
- Younger age groups with low health risks benefit financially from purchasing policies early
- Middle-aged groups face increasing health risks with age
- Senior citizens require medical insurance for countless treatments of conditions that emerge with age
Income
- Potential policyholders with expanding families who may face health risks in the future
- Lower-income groups may be able to reduce overall out-of-pocket expenses and save on taxes through a health insurance plan
Dependents
- Policyholders with dependents need comprehensive medical coverage for themselves as well as their family members. It’s why employer insurance is not enough.
- Critical illness covers are important. They may provide significant financial support in the form of a lump sum payout to beneficiaries in the event of a policyholder’s passing
Medical History
- Individuals with genetic disorders or potential for developing such diseases need health insurance
- Senior citizens with past ailments need medical coverage and may also require critical illness riders
Types of Health Insurance Explained
A quality medical insurance guide has to begin with the explanation of different types of health insurance in India.
Individual Health Insurance Explained
These types of plans cover the medical expenses and hospitalisation costs incurred in the treatment of a single person, that is, the policyholder. In case you were looking to cover all the members in your family, each member would need a separate policy in this type of plan.
Key Features:
- Offers medical coverage for a single person only
- Provides a pre-determined sum assured for a single beneficiary
- Usually covers expenses for inpatient and outpatient care, surgery, daycare treatments, medicines, etc.
- Premiums are uniquely priced based on the individual’s medical needs
Best-Suited For:
- Young, unmarried individuals
- Individuals with pre-existing diseases (PED)
- Individuals who need comprehensive coverage beyond family plans
Family Floater Explained
This insurance serves as a contract between the insured, their family, and the insurance company. Unlike individual health insurance plans or mediclaim policies, these types of plans provide broad medical coverage for all members under a single plan and a shared sum assured.
Key Features:
- Multiple beneficiaries covered under a single plan
- The sum assured is generally distributed among the members listed in the plan
- Usually provides coverage for doctors’ consultations, hospitalisation fees, surgery fees, nursing care, and daycare treatments
- Single premiums need to be paid, which are typically priced lower than premiums in individual plans
- Come with a policy renewability limit based on the age of the oldest member
Best-Suited For:
- Young couples considering family planning
- Families looking for affordable health insurance plans
- Nuclear families with one or two children
- Families with newborns
Senior Citizen Health Insurance Explained
As people age, they require greater medical attention and nursing care. Senior citizen health insurance plans are opted for elderly people above the age of 60 or 65 years. It is aimed at providing medical coverage for senior citizens with pre-existing conditions and offers financial support for expensive medical emergencies.
Key Features:
- Covers individuals above the age of 60 or 65 years
- May come with a pre-policy screening requirement
- May come with a waiting period of 1-2 years, depending on PED
- Typically comes with lifetime renewability
- May provide extensive medical coverage, including inpatient and outpatient hospitalisation, illnesses, accidents, psychiatric treatment, physiotherapy, and more.
- Premiums are high since senior citizens are prone to health risks
Best-Suited For:
- Individuals who have turned 60 years old
- Individuals who want to plan for retirement early
Top-up Health Insurance Explained
Top-up health insurance explained is best understood as a supplement to your base health insurance plan. These policies provide additional medical coverage when you’ve exhausted the sum assured by your base policy. They typically come with a deductible or threshold limit. An insurance deductible is the amount a policyholder is required to pay out-of-pocket before they can file a claim for the rest.
Key Features:
- Offers additional medical coverage above the sum assured by the base policy
- Operates on a cost-sharing mechanism through mandatory deductibles
- May not come with restrictions or sub-limits on room rent, hospitalisation expenses, and consultation fees
- Typically provides coverage for surgery fees, organ donor expenses, ambulance charges, nursing care, and daycare treatments
- May allow conversion of the plan to a regular policy during renewal
- Usually, pre-policy screenings are not required
- Charge lower premiums compared to individual plans or base policies
Best-Suited For:
- Individuals who need a high sum assured for major medical treatments
- Individuals who seek peace of mind through additional coverage
- Middle-aged to older people with moderate health risks
Super Top-up Explained
Super top-up plans function similar to top-up plans with a slight difference. The claims in super top-up plans are calculated as an aggregate. In practice, this means that all medical expenses incurred by a policyholder above the deductible amount in a year are paid for by the insurer under this plan. In case of top-up plans, the deductible applies to each claim separately.
Key Features:
- Typically provides a high sum assured in comparison to top-up plans
- Provides coverage for a wide range of medical expenses, including hospitalisation, doctor’s fees, surgery charges, daycare procedures, and many more.
- Requires policyholders to pay the mandatory deductible only once
- May allow policyholders to choose deductible limits based on their needs
- May cover AYUSH treatments and critical illnesses
- Enables policyholders to avail of cashless treatment at network hospitals
- Premiums are typically priced low in comparison to senior citizen plans
Best-Suited For:
- Senior citizens above the age of 60 years
- Individuals who need additional coverage
- Individuals with employer health plans that are not adequate
Critical Illness Health Insurance Explained
As the name suggests, these types of health insurance plans provide medical coverage for serious diseases and critical illnesses. Liver failure, strokes, cancer, and similar diagnoses are a precondition for the insurer with these plans. On diagnosis, they pay a lump sum payout decided at the time of policy purchase. The policy does not take into account the actual medical expenses shouldered by the insured.
Key Features:
- Typically provides coverage for up to 100 critical or life-threatening diseases
- The lump sum payout can be used as per the needs and wishes of the insured
- May come with a waiting period of 90 days
- May come with a survival period of up to 30 days
- Premiums are typically calculated based on the sum assured, age, PEDs, etc.
Best-Suited For:
- Individuals with a medical history of serious ailments
- Individuals with genetic disorders or at risk of developing one
- Senior citizens or people planning for retirement early
Key Features to Understand Before Choosing
Here are the health insurance basics that make these policies a crucial part of long-term health and financial planning.
- Sum Insured: Known as policy coverage, too, the sum insured is the maximum amount an insurer is liable to pay to the policyholder when a claim is filed. When total medical expenses exceed the sum insured, the policyholder has to pay them out of his own pocket. Careful evaluation of medical needs is necessary to decide the right coverage for you and your family.
- Waiting periods: Waiting periods apply when an individual with pre-existing conditions seeks health insurance. Ranging between 2 and 4 years, waiting periods are a precondition for policyholders seeking coverage for critical illnesses and expensive medical treatments. Choosing policies with shorter waiting periods provides quicker coverage.
- Room Rent Limits: Typically treated as part of inpatient hospitalisation expenses, the room rent limits specify the amount covered by your health insurer for your stay in a hospital room. These may be calculated as a percentage of the total sum insured or separately capped at an amount.
- Co-payment Options: The co-pay feature in health insurance policies works just the way it sounds. The policyholder and the insurer pre-determine the portion of expenses to be covered by each. It is typically calculated as % of the claim amount. For instance, if the total claim amount is ₹50,000 and the policyholder is required to pay 10%, he’ll cover ₹5,000. The insurer pays or reimburses ₹45,000 worth of medical expenses.
- Sub-Limits: Sub-limits are monetary limitations that health insurance service providers can include in your policy. In practice, this means that for certain medical expenses, the insured cannot get coverage beyond the specified monetary cap. It is expressed as a fixed value or as a percentage of the claim amount.
- Network Hospitals: Cashless treatment is ensured through network hospitals or medical institutions that have partnered with the insurance service provider. The more extensive the network, the easier it is for policyholders to access cashless treatment, especially in case of emergencies.
- Cashless Claims vs Reimbursement Claims: Claims are financial requests made by a policyholder to their health insurer for receiving financial benefits under their policy. Cashless claims enable the insured to get medical treatment without paying any upfront costs. Reimbursement claims, on the contrary, require the policyholder to pay their medical expenses first and then file claim requests.
- No Claim Bonus (NCB): NCB can be viewed as a renewal bonus offered to policyholders for filing no claims in a year. It may be applied as a discount on premium payments or as an increase in the sum insured under the policy. NCB can also be collected for several years to gain substantial benefits.
- Restoration: Also known as the refill benefit, restoration benefits ensure that the sum insured or the coverage provided by your policy is restored after a claim. This means that your health insurance cover is never permanently exhausted. Some health insurance providers may offer restoration as an add-ons cover or through a supplementary policy. Check health insurance plan ratings before signing up.
How Health Claims Actually Work
Cashless Process
In cashless claim processes, policyholders can avail medical treatment from any hospital within the insurance service provider’s network. They are only required to carry their cashless health card. Steps typically include the following:- Step 1: Choose a network hospital.
- Step 2: Inform the third-party administrator well ahead of hospitalisation.
- Step 3: Provide your membership number and fill out the admission forms.
- Step 4: Provide documents and cooperate during the inspection of the same.
- Step 5: Wait for approval.
Reimbursement Process
Reimbursement claim processes require policyholders to pay the medical expenses upfront and then file a financial request with the insurance provider. The reimbursement procedure usually involves the following:- Step 1: Fill out the hospitalisation/admission forms along with the membership number.
- Step 2: Settle the medical expenses at the hospital.
- Step 3: Fill out the claims form digitally or on paper.
- Step 4: Attach prescriptions, discharge summaries, doctor’s notes, and all required documents.
- Step 5: Submit the form and wait for the claim to get processed.
What Delays Claims
Delayed health insurance claim approvals may financially strain individuals and families. Here are the common reasons to look out for when claims get delayed:
- The claim was filed too late.
- Important documents, such as medical prescriptions, may be missing.
- The health insurance policy may have lapsed.
- Expenses that the claim has been filed for exceed the policy period.
- The policyholder did not disclose all pre-existing conditions at the time of policy purchase.
Common Health Insurance Mistakes & Their Solutions
Even when health insurance explained provides clarity, knowing everything about the insurance world can be a challenging task. This, however, may lead potential policyholders to make mistakes.
Overemphasis on Insurance Premiums
While low premiums may be tempting, they can lead to long-term financial losses.
Solution: Assess the policy based on its usefulness during health emergencies and expensive medical treatments.
Excessive Reliance on Employer’s Group Health Insurance
While your employer’s group health insurance may provide decent coverage for your family, it tends to fall short in the face of unforeseen health risks.
Solution: Supplement these plans with add-on covers or individual health insurance to meet the unique medical needs of your family.
Skipping Clauses About Waiting Periods & Sub-Limits
Waiting periods and sub-limits provide a practical view of the financial expenses shouldered by you and your insurance company.
Solution: Do not overlook sections with waiting periods explained and sub-limits specified. Understand whether sub-limits and waiting periods align with your monetary needs and treatment schedules.
Lack of Disclosure about PEDs
Falsifying medical history or a lack of disclosure about pre-existing conditions may lead to low premiums in the short term, but in the long term, your claims may get rejected.
Solution: Be transparent and honest during the medical underwriting process and choose health insurance providers that meet your expectations.
Postponing Policy Renewal or Letting It Lapse
Many insurance buyers forget to renew their health plans. A lapsed insurance policy has the same effect on your health and finances as if you were not insured at all.
Solution: Schedule reminders before the policy period comes to an end.
How to Decide If a Plan is Right for You
Refer to the following checklist when you compare health insurance plans. Ask questions like:
- Is the policy coverage adequate for medical inflation in my city?
- What are the room-rent limits, sub-limits, and co-pay conditions?
- How long is the waiting period for the policy?
- Is my preferred hospital a part of the insurer’s network?
- What is the claim settlement ratio of the insurer for the last few years?
Want help choosing a health insurance plan?
Speak to an independent health insurance expert — free, no obligation. Or use our plan decoder to review any plan’s fine print.
Frequently Asked Questions
Which surgery is not covered by health insurance?
Coverage of treatments and illnesses usually varies between insurers. However, common exclusions may be cosmetic surgeries, liposuction, and surgeries required due to self-harm injuries.
What is the PMJAY?
The Pradhan Mantri Jan Arogya Yojana (PMJAY) is a flagship health insurance policy offered by the Government of India. It comes with cashless coverage of up to ₹5,00,000 for vulnerable families for secondary and tertiary hospitalisation.
Is MRI covered under health insurance?
Most health insurance plans typically cover diagnostic tests, including MRIs, X-rays, and blood tests.
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