Financial advisors suggest that having a health insurance cover is important as one trip to the hospital can wipe out all of your savings. Apart from that, premiums paid on the health insurance cover also offer tax benefits.
Most people buy health insurance for the purpose of saving tax. One can avail tax benefit of up to Rs 25,000 in a financial year for the premium paid for self, spouse and children under section 80D of the Income-tax Act, 1961. If you have paid premium for your parents, then you can avail an additional tax benefit of Rs 25000 or Rs 30000 (depending on the age of the parents), thereby making maximum tax saving of Rs 50,000 or Rs 55,000 in a year.
However, don’t buy just about any health insurance plan to save on tax. A health insurance policy is a long term commitment and is used to take care of you and your family in case of medical emergencies. So, here are a few factors to keep in mind while buying one.
- Percentage of no-claim bonus benefit and maximum limit
Health insurance companies offer no-claim bonus (NCB) at the time of renewal of the policy if no claim on the policy has been made by you during the year. Recently, public sector insurers like The New India Assurance and Oriental Insurance have stopped offering this benefit but private insurers such as Apollo Munich, Cigna TTK are still providing it.
For every claim free year, NCB is the percentage of the sum insured which is added to the policy and is capped up to certain limit, say 100 percent of the sum insured. For instance, Apollo Munich Optima Restore plan offers no claim bonus of 50 percent of the basic sum insured for every claim free year accumulating up to 100 percent.
Therefore, if you buy this policy with a sum insured of Rs 5 lakh, then your sum insured will be double in two years up to Rs 10 lakh if no claim has been made during the two years of the policy. Similarly, Cigna TTK ProHealth Insurance Protect plan offers to increase the sum insured by 5 percent for each claim free year up to a maximum of 100 percent of the sum insured.
- Pre- and post-hospitalisation expenses
Health insurance plans also covers expenses incurred prior and post hospitalisation. These expenses are covered for certain days before the hospitalisation and certain days after the discharge for the disease for which hospitalisation took place. The number of days covered varies from one
health insurer provider to another.
Dhruv Sarin, Head of Health Insurance, Policybazaar.com says, “Before getting hospitalised for any treatment, a person might need to undergo certain tests or procedures that will be covered under pre-hospitalisation.”
The pre-hospitalisation period usually ranges from 30 to 60 days whereas post-hospitalisation treatments get covered from 60 to 180 days, depending on the policy you buy, says Sarin.
Benefits offered by health insurers
Source: www.policybazaar.com, Not an exhaustive list
Most health insurance companies put limits on the type of expenses such as room-rents, preventive health check-up, ambulance charges etc. These expenses can be restricted to a percentage of the basic sum insured or mentioned in rupee term or number of times the benefit can be availed.
For instance, Apollo Munich Easy Health Standard plan has a restriction of Rs 2,000 on the ambulance cover. Health check-up offered in the same plan is restricted to up to 1 per cent of sum insured per insured person, only once at the end of the block of every continuous four claim free years.
Max Bupa Heartbeat plan offers maternity benefit after continuous coverage of two years under the policy. Further, under the Gold variant of the plan, the maternity benefit is available up to two deliveries only.
Sarin adds, “If you buy a health cover which has sub limit on the room rent of Rs 5,000 per day and you take a room of Rs 7,000 per day for two days, then the extra Rs 2,000 will have to be borne by you.”
- Waiting period for existing diseases and specified illness
Pre-existing diseases are not covered by insurance companies from the day one of the plan. These diseases get covered under the plan after a certain period of policy coverage. The waiting period also varies from plan to plan offered by a health insurance company.
Specified illnesses, as mentioned in the policy document of the health insurance plans, usually starts after 24 months.
Max Bupa Heartbeat plan starts the coverage of pre-existing diseases after two years. Similarly, HDFC Ergo Health Suraksha Gold Insurance covers the pre-existing diseases after four years of continuous coverage.
The number of years for which a pre-existing disease will not be covered is important because any expenses incurred during those years will not be borne by your health insurer until its coverage starts.
Sarin says, “One must look for policies which have minimum waiting period and minimal exclusions, even if one has to pay a little extra for that.”
- Number of cashless network hospitals
While buying health insurance, it is important to know about the number of hospitals that are covered under your health insurance plan and the total number of hospitals that are close to your house.
In case of an emergency, a person always looks for a convenient option which is near-by and if such hospitals are not covered under your policy, you will not be able to get the benefit of cashless treatment and later look for reimbursement, says Sarin.
- Co-payment clause
Most health insurance companies have either mandatory or optional co-payment clause after a certain age. Though co-payment clause reduces the amount of premium paid by you, at the time of hospitalisation, certain part of the total expenses will be borne out of your pocket.
- Restoration benefit
Restoration benefit means restoring the original sum insured, if you exhaust your yearly health insurance sum insured and no claim bonus. However, this benefit only applies to unrelated illnesses.
One must look for a policy which has automatic restoration of the sum insured. In case, a person is hospitalised twice in a row for different health issues, this feature will help in saving the hospitalisation expenses, adds Sarin.
- Other benefits offered
While buying a health insurance plan, there are certain other benefits you should look out for. Some plans may offer maternity benefit while others may not. Similarly, some may cover the expenses of a hearing aid and others may not.
Therefore, while choosing a plan you should look for the features offered and select the one that will suit your needs.