Health Insurance: A stitch in time saves nine!

Have you ever wondered what will be the cost of treating an ailment without having an adequate health insurance? The answer lies here – the health insurance inflation is ~15% compared to ~6% average price inflation in India. With such surge in medical costs, it is pertinent to have a health insurance cover for the entire family. 

A health insurance policy takes care of not only immediate hospitalization costs but also pre and post hospitalization expenses as well. With cashless plans now in place, individuals can now avoid spending any money from their own pockets and get the required medical care from the network of hospitals.

Before we delve into some general check points before buying a health insurance, it would be good to understand a bit about this industry.

The health insurance falls under the “General Insurance” or “Non-Life Insurance” category and is governed by Insurance Regulatory and Development Authority of India (IRDA). There are 34 health insurance companies as on December 2020.

FinFact: The history of insurance in India dates back to 1818 with the establishment of Oriental Life Insurance Company in Calcutta. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business.

The general insurance business was nationalised in 1972 and 107 insurers were amalgamated and grouped into four companies, namely

• National Insurance Company Ltd.,

• New India Assurance Company Ltd.,

• Oriental Insurance Company Ltd. and

• United India Insurance Company Ltd.

IRDA was incorporated as a statutory body in April 2000

Types of Health Insurance Plans:

Indemnity Plans:

• It is a plan where actual hospitalization costs are reimbursed to the individual.

• Within indemnity plans, there are two categories:

  • Family Floater Policy:

    • More than one member covered under the same plan.

    • For instance, both parents and their children can be covered together and only one single premium is to be paid.

    • This is generally cost effective but only issue is that if one member in the family uses a part of the sum insured for any hospitalization, then only balance unutilized sum insured is available to other members of the family.

  • Individual Policy:

    • The individual plan is purchased under each individual name of the family.

    • Though individually it is more expensive than family floater plan, it can provide independent coverage to each family member.

    • The premium will be as per each individual’s age and sum insured.

    • 5%-10% discount is provided if more than one family member is insured simultaneously.

Defined Benefit Plans:

• These are critical illness plans.

• It is a plan where lumpsum is paid to the individual irrespective of the actual hospitalization expenses.

• The policy contract defines which specific illnesses are regarded as critical illnesses.

Some Key Players:

• An Insurance Company is a company in the business of creating insurance products and selling them to customers. Eg: HDFC Ergo

• An Insurance Aggregator is a third-party entity who list all available insurance options, along with relevant data for potential customers to compare. Eg: Policy Bazaar

• An Insurance Broker is an intermediary between an insurance company and its customers. Eg: Turtlemint

FinFact: Insurance penetration is calculated as the percentage of insurance premium to the GDP. India’s insurance penetration has increased from 2.71% in 2001 to 3.76% in 2019. However, it is much below the global average of 7.23%.

Of the total insurance penetration of 3.76% in 2019:

• Life insurance penetration was 2.82% in India compared to global average of 3.35%

• Non-Life Insurance penetration 0.94% in India compared to global average of 3.88%.

Key aspects to look out for before buying a health insurance:

Now let us jump into the most important part of this article – the key aspects to keep in mind before buying a particular health insurance product!

Before I conclude my article, I would like to highlight one added benefit of getting health insured – tax deduction!

• As per section 80D of the Indian Income Tax Act, any individual who buys a health insurance for himself / herself gets a maximum tax deduction of INR 25,000

• In case he / she buys a cover for dependant parents, an additional INR 25,000 is allowed as maximum tax deduction from the income.

• In case the dependant parents are above 60 years of age, the maximum tax deduction allowed increase to INR 50,000/-.  

• Over and above this, a further maximum deduction of INR 5,000 is available for any expenses incurred for preventive health check-ups.

Each and every member of the family, irrespective of age, should be adequately insured to tide over any unforeseen exigencies. So why wait for any eventuality, do buy a health insurance (also life insurance) for yourself and your loved ones 😊

Hit the button below and share the article with your friends and family!

Please do drop in your comments on the article in the link below:

And lastly, do subscribe to FinFacts to receive the newsletter directly in your inbox! :-)