Health insurance is a contract for which an insurer receives some or all of the cost of healthcare from the insurance company in exchange for a premium. A health insurance policy provides coverage against medical expenses due to an accident, illness or injury.
An individual can take out such policy with monthly or annual premium for a fixed period. During this time, if an insurer is involved in an accident or serious illness, the cost of the treatment is borne by the insurance company.
More specifically, health insurance typically covers the costs of medical, surgical, prescription medications, and sometimes dental treatment performed by insurers.
How does health insurance work?
Let’s take a look at how health insurance actually works. As with any insurance policy, health insurance can help you deal with the financial impact of an accident or emergency. The process begins when you apply to buy a plan. You will be paid a premium depending on your age, medical background, required insurance and the type of plan you have chosen.
In some cases, the insurance provider may ask you to undergo some medical examination before making a decision, to determine if they want to give you the necessary cover. Once the terms are finalized, you are offered a policy.
Each policy brings a few waiting times. The initial waiting period is only a few weeks or one month. During this time, you will not be able to make any non-urgent claims.
If you are able to get treatment at a network hospital, you can report the cost to the insurance company, and the company will contact the hospital directly to pay all costs. When you are discharged from the hospital, you only have to pay the extra costs that are not covered and the voluntary co-pay amount, if any.
Types of health insurance:
1. Personal health insurance: A personal health insurance policy, as its name implies, covers a person’s medical expenses. This cover can be used for you, your parents, including your wife and children.
Under this plan, each family member will receive a separate insurance. For example; If the sum insured of your plan is Rs. 10 lakhs, then each member of the family can use up to Rs. Millions.
2. Family Floater Health Insurance: Under this type of plan, a single insurance is available for all persons under one policy. This entire money can be disbursed for the treatment of an individual, respectively, in which case no further claim is covered in case of any other medical emergency.
Senior citizens are not eligible under the Family Floater Plan because their medical needs are more complex.
3. Senior Citizen Health Insurance: This type of plan based on all medical expenses for the elderly can only be availed by people above 60 years of age. Most senior citizen policies offer additional cover, such as admission to a residential hospital and even some psychological benefits.
4. Complicated Illness Insurance: There are a number of lifestyle related diseases that are on the rise. Long-term coping and management of health problems such as cancer, stroke, kidney failure and cardiac disease can be very costly. This is exactly why critical illness insurance policies have been created. These can be purchased either as a rider or as an add-on to your regular health insurance plan or separately as their own plan.
5. Group Health Insurance: In addition to personal and family plans, group health insurance plans for a large number of people can be purchased by a group manager. For example, an employer may purchase group insurance for all of its employees or for all occupants of the building secretary’s building. These plans are fairly affordable, but they often only provide cover for primary health issues. Employers often buy these plans as additional benefits for employees.
. Top-up health insurance: In many cases, the cost of treatment that you estimate when taking out health insurance cover may increase over time even if your insurance remains unchanged.
In such cases, you can buy a top-up for your existing cover, instead of buying a separate insurance plan. This top-up plan helps increase the overall insurance coverage that you can use in any emergency.
Health insurance benefits:
It is very important to buy health insurance for various reasons. Let’s take a look at the most important benefits of a health insurance policy:
1. Helps to avoid rising medical costs: People purchase health insurance policies to protect their finances against rising medical costs. An accident or medical emergency can cost you more than a few thousand rupees. With a medical insurance plan, you enjoy cover for everything from ambulance charges to day care, making it easy to get the care you need for recovery.
2. Cashless treatment: Insurance companies usually have contracts with hospitals, known as network hospitals which provide cashless treatment to insurers in case of hospitalization. These hospitals reimburse the costs associated with the treatment received by the insurers. This means that you can get medical treatment at these hospitals without paying anything, and the insurance company will refund you even after you have made a claim.
3. No Claim Bonus: Insurance companies provide Notice Claim Bonus (NCB) to policyholders who make a claim during the policy year. The No Claim Bonus applies to both personal health insurance plans as well as family health insurance plans.
4. Complex Illness Cover: Many health insurance policies will cover serious illness at extra cost. This is another important factor in view of the growing trend of lifestyle-related diseases nowadays. If you are diagnosed with a covered serious illness, you will receive a single payment. Tackling and managing these problems is often very expensive, so protection against serious illness is another important benefit of having health insurance.
5. Tax Savings: Under Section 80D of the Income Tax Act, 1981, premiums paid for maintenance of health insurance policies are eligible for tax deduction. For a policy for your wife, your children, and parents under the age of 60, you can claim a rebate of up to R 500 per year from your taxable income.