What is Health Insurance?
If we rewind our lives by few decades, when the blessing of Health insurance was not showered in your country, what was the scenario? The patient who was treated for some illness was expected to pay for all and every medical expense that was incurred to cure his illness. Patients were expected to pay for such expenses from their own pocket as a fee charges against the services provided by the hospital. So, to ensure that patients are saved from paying for such high costs, this risk is covered by Health Insurance.
In simple words, health insurance avoids the situation where you might have to sell your assets or dig deep into hard saved money to pay for medical expenses. It can cover individuals as well as families.
Health insurance covers against the risk of incurring medical expenses for individuals. The overall medical expenses are estimated and that becomes the sum assured for which the premiums are to be paid as long the insured wants the cover to remain active. It is a year on year contract that needs to be renewed and premiums generally increase with age as the cost of providing such insurance rises. In many countries, health insurance is a must and many a times the government sets up some initiative to provide basic health cover and promotes to opt for private medical insurance for higher benefits against health expenses. Health insurance in India is offered by many private as well as government backed Health Insurance Companies
Some Rules of Health Insurance
- The minimum age limit to be eligible for health insurance is 18 years
- For family floater policies, the primary person insured has to be 18 years or more and other family members if below 18 years are covered
- If the applicant is above the age of 45 years, mandatory medical tests are applicable
The policy works as a legal contract between the insured and the insurer and all legitimate and authentic claims made against the amount of health insurance cover are to be considered. These days employers can also provide such basic health insurance to their employees as an added benefit.
There is no deep thinking or complex logic required to understand the importance of health insurance. With raising inflation figures, it is quite obvious that medical expenses are far more costly than they were a few years ago.
Types of Health Insurance
For health insurance, there two main types of covers available.
- Individual Cover
- Family Floater
The basic difference between the two is given in the below table
|Feature||Individual Cover||Family Floater Cover|
|Health Cover||Just Yourself||Self + Spouse + Kids + Parents|
|Eligibility||Must be above 18 yrs||The primary insured needs to be above the age of 18 years|
|Sum Assured||Covers the Insured only||Covers all the members listed under the policy|
|High compared to Family Floater||Little low as the Sum Assured Floats between 2-3 (or more) members|
|Till the individual reaches maximum age of renewal allowed by insurer||Till the oldest member covered under the policy reaches the maximum age of renewal allowed by insurer|
|For children||Minimum age of entry is 18 years||Children will be covered up to the maximum renewal age allowed for children usually 21 to 25. Thereafter separate insurance policy is to be bought for them|
|Advantages||Separate Medical history is maintained Sum Assured is only for the individual||All the family members are covered under one policy. Sum Assured floats between members so the cost works out a little cheaper|
|Notes||It is always advisable to buy individual health insurance cover for all the family member||Family Floater is to be chosen if you have kids in your family.|
Ideal Health Insurance Cover
It is never a surety that when and how much money will be required for medical expenses. If proper and adequate health insurance is not in place then such un-surety can disrupt one’s financial life by a great extent. The level of health insurance cover required varies from person to person and the financial circumstance and the number of family members and their respective ages.
The most important point to note here is that the premium cost is not the criteria to decide the level of health insurance your need!
Jimmy is 30 years old and has health insurance cover worth $2000 since last 7 years. He bought the basic cover thinking that he will never require hospitalization that would cost more than $2000 and he was reluctant to pay little more premiums to get a higher cover. 2 years later, he is hospitalized for some surgery and the bill is $4000. Now, the insurer will only reimburse up to the limit of the Sum Assured i.e. $2000 and the balancing $2000 needs to be borne by Jimmy.
- Health Insurance cover should be such that if hospitalization is required then the dependents are not footing all the healthcare bills out of the savings or by selling assets or redeeming investments. All such expenses should be covered through health insurance policy (depending on the exclusions and conditions of the health insurance). Also note that many health insurance policies provide additional benefits such as daily allowance, ambulance charges, etc. for hospitalization. Not only are such benefits superfluous, they tend to drive the premiums higher. So it is best to avoid such plans and stick to something basic and simple.
- To calculate the amount of health insurance required, a small exercise can be done. Calculate the average cost of common medical procedures carried on in the locality. This average cost acts as the prime assumption for the ideal health insurance cover. Next, assessment of self health condition and any prevailing medical history in the family should be accounted for and add this to the previous calculation. Sum of all these two steps will work out as the ideal cover for an individual.
Health Insurance is a must because
- Health is Wealth! So insuring your health is equivalent to insuring your wealth
- Any and every medical emergency doesn’t strike with prior warning
- Costs of Medical treatments are rising in double inflation figures
- It acts as a safeguard against your assets and investment getting used up to pay for medical expenses
- So that while getting treated for any illness you are not worried about monetary issues and can concentrate fully on recovery
- It is proved long-term benefits as you might be fit and healthy now but you don’t know what will happen after a few years
- Health only deteriorates with age
- Lastly, because you have read and understood all the above points! 🙂