Health is wealth. To protect your wealth when your health suffers, you need health insurance. The costs of hospitalization are high and having a health cover is of paramount importance. One must assess their and their family’s health conditions and opt for the best cover available.
One may assume health insurance covers the expenses incurred during hospitalization, but sometimes post-hospitalization expenses can be higher. So a typical health plan should aim to balance between hospitalization and post-hospitalization expenses.
Let us look at health insurance plans, comparing indemnity plans with defined benefits plan, and help you choose the most suitable plan for your need.
Overview of health insurance plan types
Health insurance plans are broadly classified into two distinct types, namely indemnity-based health insurance plans and defined benefits health insurance plans.
Indemnity plans offer a reimbursement of expenses incurred during hospitalization. When you opt for an indemnity-based health insurance plan, you are safeguarding yourself against any hospitalization expenses up to a pre-defined limit as per your health insurance plan. Most Mediclaim polices or family floater plans are indemnity-based health insurance plans. To seek a claim under the indemnity plan, you will need to submit actual hospital bills and all other relevant documents including discharge papers.
Defined benefit plans, on the other hand, offer a pre-defined lump-sum payout upon the occurrence of an ailment specified in the policy. You are free to use the money for pre- and post-hospitalization expenses as per your needs.
Critical illness plans are usually part of defined benefit plans where a pre-defined event is enough to trigger your health insurance claim. You need to submit your diagnosis report undersigned by a specialist doctor to claim under a defined benefit health insurance plan.
Recently, the IRDA had announced some new health insurance regulations, under which life insurers can no longer provide indemnity-based health insurance plans. General insurers will continue offering indemnity plans, but with incentive plans for policy holders.
Under an indemnity plan, you are paid out the actual bill amount as per your health insurance plan. For example, if your sum insured is Rs. 2 lakh, and your hospitalization bill is Rs. 80,000, you will be reimbursed Rs. 80,000 (or a percentage of Rs. 80,000, if your policy has a co-pay option) on submission of your bill, discharge summary, test reports, etc. The remaining Rs. 1.2 lakh remain available as cover for the remaining tenure of your health insurance policy.
For a defined benefits plan, you will be paid out a pre-determined sum as per your health plan whenever you are diagnosed with the disease for which you are insured. You can use the amount as you see fit to finance your treatment.
What to choose
Health parameters differ from one person to another. Therefore choosing a plan boils down to an individual’s requirements. In an ideal scenario, you should have both. The indemnity plan will cover your immediate hospitalization requirements while a defined benefit plan like a critical illness cover can cover the long-term costs of managing an illness such as cancer.
Things to look out for before buying health insurance
Here are some essentials when opting for a health insurance plan.
* Look out for your insurance type: Pick your health insurance plan as per your needs and make sure you know whether your health plan is an indemnity plan or a benefit plan. If you bought an indemnity plan and want a lump sum payout when faced with a serious disease, your claim will get rejected. The onus of choosing the right health insurance plan lies with you as an insurance seeker.
* Consider opting for ailment-specific insurance: The rise in lifestyle-related diseases like diabetes and cardiovascular diseases means you are better off covering yourself against such ailments. All disease-centric policies offer a specific cover for that disease that has broader protection than a general health insurance cover. The chances of claim rejection for a disease-specific ailment are also quite low. Apart from your general health insurance, top up with a disease-centric plan as per your health risks.
* Cover health risk as well as finances: A disease may or may not cost much towards hospitalization expenses but may require constant after-care and incur heavy expenses. It is recommended to a balance your health plan by opting both indemnity plan and a defined benefit plan so that you cover both hospitalization risk as well as get a financial protection from day-to-day expenses related to the disease.
Make your health insurance complete by covering all aspects including a basic health indemnity cover, an ailment-specific plan as per your medical risk assessment, and a defined benefit plan.
The Author is CEO, BankBazaar.com