Before discussing how does health insurance work in India, I would like to put some light on what is current position of health insurance industry.
Health insurance industry in India has witnessed tremendous growth in the last one year.
Still, at present almost 500 million people in India are covered under any health insurance schemes.
And majority of them are covered under government sponsored schemes.
Personal health insurance penetration is still very low.
Covid 19 pandemic has become an eye opener for many families in India.
If you have not experienced it , You must have at least seen around that so-called permanent jobs are not permanent.
And how medical expenses can wash out years of hard earned savings.
Personally, it was an eye opener for me as a financial advisor.
But, any kind of insurance sounds like a negative product.
You have to remind your client about accidents, death, and severe illness to sell those products.
So, despite being completely insured, I avoided talking about insurance products with clients.
It gives negative vibes and I did not want it.
But, Covid 19 was an eye opener for me as an advisor.
I saw families broken because their sole earning member died in corona.
I saw people withdrawing their hard earned FD for medical expenses.
I saw financially distressed people without jobs.
I saw people withdrawing their long term deposits like PF because of high medical expenses and no jobs.
I took 2 lessons out of it.
First thing, Death is an inevitable thing.
So even if it is not good to talk about it, earning members must have life insurance to protect income for the family.
Second thing, Pandemic or no pandemic, medical expenses can eat all savings.
For both of these unforeseeable events, everyone should provide some part of their income for protection against risk.
And if we talk about India, I have seen high mis-selling in insurance products.
Policy holders do not even know the benefits of the policy they hold.
Because of this I thought of writing a detailed article on insurance products.
In this post I will provide a complete guide on how health insurance works in india.
After reading this post, You will have a clear idea about health insurance and why you need it.
This post will also help you in debunking prevalent myths and misinformation about health insurance.
So, First of all,
What is health insurance ?
Health insurance is basically a type of insurance that covers all medical expenses incurred due to illness.
It may cover these experiences either for you or a full family.
These medical expenses can be in any form like doctor’s fees, medicines , hospitalization.
Many hospitals provide cashless facilities, so you don’t have to spend money at the hospital, your insurance company will directly pay the hospital.
So, health insurance takes care of your sudden medical expenses that can make a big dent on your pocket.
Health insurance companies charge a small premium annually for the health cover.
How does health insurance work in India
Let’s try to understand it with an example,
For a single person in his 20s , a health insurance premium may be around 5,000 rupees per year, and for that premium he or she gets cover of 5,00,000 rupees.
It means he needs to pay just 5000 annually and he or she can spend 5 lakh rupees in a year on medical expenses.
If he doesn’t claim any medical expenses, he may get a discount in next year’s premium.
Health insurance is a type of general insurance, so it expires in 1 year.
After one year it is required to be renewed with premium.
With age, health insurance premiums increase.
And the reason is simple for that, with age health risks increases , so insurance premium also increases for the same cover.
For health coverage of more members in the family, the premium would be higher.
Health insurance just covers your medical expenses due to illness.
It doesn’t cover death like a term plan. Because it is general insurance.
Life insurance covers death benefits not health insurance.
Health insurance doesn’t pay back premiums like other bundled insurance products like ULIP
So, it was all about health insurance.
Now, question may arise
Why health insurance is required
I am sure Covid 19 pandemic has taught many people why health insurance is required.
Still, let us try understanding it with one simple example why health insurance is required.
We have two different scenarios
Two friends named A and B are going on a bike.
They met with an accident.
And imagine both got similar injuries.
Both were hospitalized.
After 7 days they both were discharged and they incurred 1-1 lakh bill for all the medical expenses during 7 days.
Friend A did not have any health insurance.
His salary is not that high that he can pay 1 lakh in one shot.
So, he had no option other than borrowing from relatives or friends ( which is actually a very bad idea).
As a second option, he could withdraw FD and forget interest or take personal loan on salary and pay high interest.
While Friend B had bought a health insurance cover of 5 lakh for a small amount.
Hospital was providing a cashless facility on health insurance.
So, he used health insurance card and claimed 1 lakh rupees under his health insurance coverage.
Insurance company paid directly to the hospital on behalf of B
And B went home peacefully.
Now , give it a thought.
If you faced a similar situation, Who would you like to be , Like A or B ?
This is the answer to why health insurance is required.
Now, if you are thinking that you would like to be like friend B
Then you will have a thought that
How much health insurance do I need ?
Now you are well aware of why health insurance is required.
Rise of lifestyle diseases , increasing accidents makes health insurance necessary for everyone.
Young people in their 20s should have health insurance cover of at least 3 lakhs.
Because at a young age chances of illness are low, so the premium will be low.
So having a cover of 3 lakh helps in increasing insurance cover more in coming years when it will be more required.
For a person with a family of 4 or health insurance for aged parents requires more coverage.
Generally I have seen, for the family of 4, combined insurance cover of 10 lakh is enough.
For aged parents, health insurance should cover cardiac surgery and heart diseases because they cost a lot.
Ideally, your health insurance coverage should be at least 50% of your annual income.
As you are now knowing how much health insurance cover you should have, you should check
How to buy health insurance
In India there are so many options from where you can buy health insurance.
You can either buy it online from platforms like policy bazaar or from websites of general insurance companies.
Or you can buy it from registered insurance brokers or from banks.
When you do it online, you will have to study all the health insurance products on your own.
While claiming insurance too, you will have to do it on your own.
This method of buying is only recommended if you have good knowledge about health insurance products.
You can buy it from a registered broker or from a bank as well.
They will provide you services like advising suitable health insurance products, fill forms for you and help you in settling claims.
In my opinion, buying health insurance from registered broker is better option because,
Health insurance is that kind of product which a person may not be in condition to claim if he is severely ill.
So, there should be any person aware about his health insurance who can help in settling his claim.
Registered brokers can be a good helping hand in that situation.
When you buy health insurance, you should disclose existing long term illness if you have any.
You are required to give ID and residence proof.
For an older age, health tests will be required.
Insurance consultant will guide you about all the documents you will be required to submit.
One more important thing is , Health insurance policies come with certain terms and conditions.
- Surgeries are covered after a specified period of time, after buying health insurance.
- Upper cap or no cap on daily cost of hospitalization
- Some illnesses may be covered after specified period of time
- Free annual health check up.
Terms may differ from product to product and insurance company.
So, you should ask about all the benefits and terms and conditions to your insurance advisors
Which is best insurance company in India?
After the entry of the private sector in insurance there are so many options in health insurance.
In my knowledge, Star health insurance, Religare, HDFC Ergo, Bajaj Allianz provide nice health insurance plans.
Personally I like the policies of star health insurance.
Star health insurance is one of the oldest health insurance house in India.
They offer very good policies at cheaper cost.
Now, Let’s have a look at some
Frequently Asked Questions
What is the minimum and maximum age for buying health insurance in India ?
There is no minimum age to buy health insurance in India.
Even though newborn babies are not eligible for individual health insurance, they can be included in family floater or group insurance.
But generally, health insurance companies allow newborn babies in family floater schemes, only after 90 days of birth.
For upper limit, Health insurance companies provide health insurance products for senior citizens.
Where the minimum entry age is 60 years and upper age is 75 or 80, it varies from company to company.
Some companies provide renewability up to the age of 90.
What is the difference between Mediclaim and health insurance?
In India the majority of salaried people are covered under Mediclaim by their employers.
Mediclaim is a corporate group insurance policy and not individual health insurance.
Often salaried people misunderstand Mediclaim for health insurance, but there are some differences. Like,
1. Mediclaim provides narrow coverage like hospitalization cost, accidents or some predefined diseases other costs like treatment will have to be borne by the person. Mediclaim does not offer any additional riders for critical illness.
While health insurance is a comprehensive insurance plan, it covers pre and post hospitalization cost, treatment, surgery, and ambulance. Health insurance provides riders for critical illness and loss of income due to accidents.
(In insurance, rider means add-on to basic policy, riders provide some extra benefits like accidental death, critical illness for little extra cost. Riders are completely optional as per your requirement)
2. Mediclaim do not offer flexibility in terms of coverage and duration, if it is provided by the employer, then it ends with term of employment.
While health insurance provides all flexibility to increase or decrease coverage and premiums. Policy duration can also be increased with health insurance.
3. Mediclaim do not cover critical illnesses
While health insurance covers almost 30 critical illnesses like cancer.
4. For Mediclaim you need to be hospitalized, otherwise it can not be claimed..
In health insurance, not just hospitalization, even day care treatment are also covered. And it is big advantage of health insurance over Mediclaim.
In my opinion, one should have individual health insurance regardless of having Mediclaim or not.
What is waiting period in health insurance ?
Waiting period is the specific period of time buying health insurance, during which you can not claim all or certain benefits of health insurance.
Purpose of the waiting period is to stop people buying health insurance, when they are already aware of their illness and its high cost. It is unethical and you should not do that.
Waiting period may differ from company to company.
What is Copay (Co payment) in health insurance with example ?
In health insurance, there is a clause named Copay or Co payment.
It applies to some illnesses and the copay clause may differ from company to company and policy to policy.
Copay simply means that cost of that specific illness will be borne by both, policy holder and insurance company in pre defined ratio.
Let’s try to understand it with a simple example.
Person A is hospitalized for some illness. He incurred 1,00,000 rupees for treatment.
Now just assume that illness has a Co payment clause and Copay is 10%.
It means that 10% of 1 lakh rupees, 10,000 rupees will have to be borne by person A and the rest 90,000 will be paid by the insurance company.
Health insurance policies with Copay clause have lower premium than regular premium.
So, before you buy any health insurance, it is necessary to check all copay clauses in the product.
So, that’s it about health insurance.
I think I have covered most of the things you should be knowing about how health insurance works in India.
We covered everything from what is health insurance to why health insurance is required.
You should buy health insurance as soon as possible for yourself and your family, if you have not taken it yet.
What do you think about it? Let me know in the comment section.