One of the first financial investments which is a must-have by every woman is to get her and her family’s health insurance in order. Given that medical costs increase by 10% every year, a health insurance plan is no longer avoidable.
But it is no easy task to choose the right policy. If you feel overwhelmed while choosing a health insurance plan, worry not – you are not alone! With several plans to choose from, loaded with confusing jargon, it can be intimidating for just about anyone.
Don’t just get carried away by the low premium while choosing a health insurance plan.
Here are 5 checkpoints which will make it easier for you to narrow down your options –
1) Knowing how much coverage is needed
The starting point of choosing a sufficient health cover is your current age (younger, the lesser), your current health record (any pre-existing conditions) and the number of members who would be covered under the plan (more the number of adults, higher the cover).
One of the suggested way to decide the amount of coverage you and your family requires is to check up the cost of treatment for a heart disease in the hospital of your choice in your city. Doing some homework now, would make sure you are well covered if the need arises.
2) Deciding the type of plan
There are broadly 2 types of health insurance plans – indemnity based or fixed benefit based.
Indemnity plans are the ones which compensate for the actual expenses incurred in the treatment. For example, suppose Rita has an indemnity health insurance plan worth Rs. 10 lakhs. Unfortunately, she gets admitted for a surgery and her hospitalization expenses amount is Rs. 2 lakhs. In this case, her health insurance plan would cover for this Rs. 2 lakhs i.e. the actual amount spent on treatment.
Indemnity plans are more commonly available & sold. These further include
- Individual policies
- Family floater policies (covers several family members together)
- Group insurance plans (provided by companies to their employees)
- Senior citizen plans (specifically for those above 60 yrs)
- Women-specific plans (specifically for women-specific needs like maternity)
- Top-up plans (added on to a base policy – kicks in only after a certain threshold expense has been paid up by the insured)
Fixed Benefit plans are the ones which offer a fixed amount of benefit, irrespective of the treatment expense. These policies include accidental cover, critical illness cover, hospital cash policy. These policies should ideally be used as an add-on, once an indemnity policy is in place.
Femoneysta Tip: Use the cake-layering approach for your health insurance plan too! First, get the Base Indemnity Plan, then consider adding a Top-up plan which would be low-cost, and finally, if needed, layer up a fixed benefit plan.
3) Choosing a credible brand
There are 31 insurance companies in India providing health insurance – 4 PSUs, 21 private & 6 standalone health insurance companies. The largest in size are ofcourse the top 4 PSUs – New India, United, National and Oriental, given their existence since the 1900s, compared to the private & stand-alone companies which were launched in early 2000s.
One of the top criteria to check for a reliable brand is to check their Incurred Claim Ratio (ICR). This ratio shows the amount of claims paid during a year by an insurance company against the amount of premium collected. For Example, if a company collects Rs. 1 lakh worth premium in a year, and pays out Rs. 70000, it would have an ICR of 70%. A very high ICR (above 100%) is a clear red flag i.e. the company is paying more claims than it is collecting. An ideal range of ICR for a company would be 50-90% which ensures, company is maintaining a healthy balance of claims and profitability. An ICR below 50% indicates the company is either charging high premiums or is not paying out claims, or has a strategy to go after a healthier audience, such as more young customers.
This data is easily available on Annual Reports published on the IRDAI website ( https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.aspx?DF=AR&mid=11.1)
4) Check for out-of-pocket expenses
Ever heard of a situation, where despite having a health insurance plan, at the time of need, there are so many clauses which had not been informed by the agent? Unfortunately, this is not uncommon. Instead of depending on the agent to explain all clauses, learn to ask the right questions, few of them being :
- What is the waiting period on pre-existing diseases?
- Are there any specific illnesses for which the policy isn’t immediately valid?
- What is the limit on the room rent?
- Will the policy cover any pre & post-hospitalization expenses? If yes, then for how many day? Till what limit?
- Would the ambulance costs be included? To what amount?
- Are any annual health check-ups included?
5) Know all about the No-Claim Bonus
Many health insurance policies reward their customers with additional coverage for every year with no claims, available at the same premium payable. One of the reasons to buy health insurance early and also stick to a good policy. Comparing the benefits offered from various insurance companies regarding the No-Claim Bonus could help you decide a lower coverage at a young age, which would eventually increase over time. For example, you have purchased a policy which offers NCB of 10% coverage enhancement for every year where no claim has been made. This means that an initial coverage of 5Lakhs would become 5.5 lakhs in year 2 at the same premium.
Being aware of the right questions to ask is the first step in making a smarter choice. Women who focus on their financial education, instead of depending on their male counterparts or simply the blind advise of an agent, are more likely to make their money work for them.
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