It is a given fact that everyone needs medical insurance. Not just a company policy, but your own personal medical insurance policy. If anything, the pandemic has brought us face-to-face with this harsh reality.
Deepak Khemani, financial planner and author of Compounding: The 8th Wonder, has participated in the distribution of financial products since the late eighties.
I presented him with various factors that one must consider when looking at medical insurance. He either debunked them or gave an analytical view.
- Claim Settlement Ratio, CSR
The CSR reveals the percentage of claims the insurer has paid out during a financial year. Meaning, the percentage of insurance claims settled, compared to the total number of claims received. Many financial advisers suggest that this important factor be taken into account when deciding on an insurance provider.
DK: I disagree. If a company has a 95% claim settlement ratio, but if your claim falls in the 5% of those denied, how does it make sense for you? In your experience it will be the worst insurance company. But in another’s experience it may be a great insurer.
This is a health insurance plan that covers the entire family on the payment of a single annual premium. The sum assured covers the entire family – spouses and 2 children - and can be used in multiple hospitalizations, in the case of that eventuality. Newer variants could also cover extended family members such as in-laws, grandparents and grandchildren.
DK: Floater policies have advantages and disadvantages. One advantage being one policy for all members.
The key disadvantage is that one member could use up the sum insured in a year, leaving the others exposed with extremely limited or no cover. Imagine that in today’s scenario if more than one family member gets tested positive for COVID19. Should they have to get hospitalized, that too in ICU with a ventilator, just one individual can exhaust the entire cover.
However, most insurance companies now offer a restore feature which helps take care of this problem.
This is extremely convenient. The insured does not have to make any payment to the doctor or hospital upfront, and then claim reimbursement. The provider can bill the insurance company directly and the plan makes the payment directly.
DK: Most insurance companies advertise a network of 4,000 to 5,000 hospitals with a cashless facility. How does that matter to you? You need to check whether the hospital nearest to you or the one you would prefer to get hospitalised for treatment is on that list. Only then that policy needs to be considered. Also, do not use this as the sole reason to select the policy, because the network hospital list keeps getting changed over the years.
What is more convenient than buying a policy online with the click of a button?
DK: In the event of a claim, who will help you file the claim with the company? This is all the more important in the case of reimbursement type where one needs to intimate the insurer about hospitalisation, submission of the original papers, and follow up till the claim is paid. It may be a good decision to buy your policy through an experienced adviser who may be invaluable in times of hospitalisation. I would prefer one that insists on a medical check-up before buying the policy to avoid issues of claims being denied due to non-disclosure of material facts.
You need to buy a plan where the premium is one that you can afford.
DK: Health Insurance policy premiums increase with age. In some policies, it increases every year. In others, it is every 3 or 5 years. You need to make note of that.
Also, policies with lower premiums may have terms and conditions which need to be understood. For example, a policy of Rs 5 lakh sum insured for a 40-year old, can vary from Rs 10,000 to Rs 25,000, depending on the insurer and the variant of the policy purchased.
Policies with no room rent limit have higher annual premiums. Let’s say there is a 1% room rent limit. If someone has a Rs 3 lakh policy, she gets Rs 3,000 per day per room. In a big city, how will you get a hospital room for Rs 3,000 in a decent hospital?
Also check for fixed pay-outs for procedures like cataract. The policy may pay only Rs 25,000 to Rs 35,000 irrespective of the sum insured, even if you have paid Rs 1 lakh for your operation.
Most health insurance providers offer a co-pay clause. Co-payment in health insurance means that the insurer will have to bear a percentage of the claim from his/her own pocket. So let us assume that you have a policy of Rs 5 lakh with a 10% co-pay. For a bill of Rs 3 lakh, you will have to pay Rs 30,000.
DK: I personally feel a policy with co-pay makes no sense. To save on premium, people opt for such a policy. Why do you want to make any payment when the entire tab can be picked up by the insurer?
For every claim-free year, the bonus money is added to the sum insured. It is like a reward that policyholder receives for not making a claim on his health insurance.
DK: Most insurance policies offer a no-claim bonus for every claim free year. It used to be around 5% every year but has inched up. So you will find 10% and 20% and even 50% as a no claim bonus.
Never make a high no-claim bonus as the only reason for buying the policy. Look at this in conjunction with other factors. Also check for exclusions and waiting periods for pre-existing diseases.
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