Common Misconceptions About Personal Health Insurance


Common Misconceptions About Personal Health Insurance

Personal health insurance misconceptions are common among people intending to purchase health insurance. Misconceptions about personal health insurance could be due to various reasons like the influence of past events or bad experiences with the insurance provider. Such events create a strong negative feeling towards personal health insurance and prevent you from buying a policy.

The Common Misconceptions About Personal Health Insurance in India are:-

High Premiums:

Whenever people think of health insurance, they think that personal health insurance policies come with high premiums. Insurance companies charge high premiums for a given sum insured, which is not affordable to us, a common misconception that most people can hear. But if you try to break down the premium charged per year to per day, it would not be more than the amount you spend on your cigarettes or chai! For example, if your health insurance premium is Rs.10,000/- per year for 2 members with a sum insured of Rs.5 Lakhs, then if you break it down per day, it would come to Rs.14/- per person. The misconception of high premiums comes when people do not look at the bigger picture by breaking down the premium daily.

Insurers try to address such misconceptions by offering installment payment options for the insured. The installment facility helps people who cannot afford to pay the high insurance premium in a single go. Therefore, health insurance premiums are not costly for people if seen on a per-day basis instead of a per-year basis.

No Hospitalization Means Waste of Money:

The other major misconception about personal health insurance is that if no claim is made during the policy period, the premium paid will go to waste without any benefits. Here again, people fail to understand that insurance works on probability. Your chance of being injured by a car the next day is around 50 percent. But when and if you get hit, would it not be better to have cover? The point to remember here is that the premium paid can cover your hospitalization. A premium of about Rs. 20,000 can cover you for hospitalizations up to Rs. 5 Lakh. If you do not shell Rs. 20,000, the Rs. 500,000 will come out of your pocket. Not undergoing hospitalization doesn’t mean a waste of money. Instead, one should consider it as an investment for the future.

Will Buy to Save Tax:

Most people associate personal health insurance with tax. They think that health insurance is a product to save tax. But it is completely wrong. Health insurance should be considered an important tool in financial planning as it could save your hard-earned money in case of unfortunate events. Health insurance comes with the advantage of tax saving, but tax saving should not be linked with health insurance purchases. The Government of India gives tax benefits to people to encourage them to buy health insurance.

Of Course, health insurance comes with a tax-saving advantage. The health insurance premiums paid for self, spouse, dependent children, and dependent parents are eligible for tax savings. The maximum amount of tax saving that can be done under personal health insurance plans is Rs.1 Lakh. Personal health insurance premiums paid are exempted from tax under Section 80D of the Income tax act. So, next time you think of buying health insurance, do not wait until you come to the Income tax slab where you start paying income tax. Rather purchase a health insurance plan as per the need.

Rejection of Proposal:

There might be instances when the insurance company rejected the proposal form of the applicant due to certain reasons, and the customer develops a belief that whenever she applies for personal health insurance, the proposal would get rejected. There might be several reasons for the proposal rejection by the insurance company, which should be examined in depth. For example, the insurance company might have rejected your proposal due to incomplete details or the risky nature of your proposal. There might be a risky element in your proposal, such as your BMI is high and you are suffering from diseases such as diabetes, hypertension, etc. which are considered as a risky proposal to the insurance company.

The insurance company would give written notice, if requested, of the reason for rejection of your proposal. If you think you have rectified the previously made errors, you can apply for personal health insurance again. Rejections could also happen if proper information is not given while completing the proposal form. Hence, filling out the proposal form with utmost good faith is advisable to avoid rejections.

My Friend Faced Claim Settlement Issues:

Most of us depend on product reviews by our near and dear ones. If our relative has had a good experience with the product, we decide to buy it. If not, we do not consider the product. But this method of assessment cannot be considered objective. Your friend might have been at fault for the claim settlement. He might not have furnished all the information while underwriting his proposal. He might have overlooked some policy terms, which led to rejection. There could be multiple reasons for rejection; looking at these objectively can help us make better decisions.

Health Insurance is for the Old:

The common misconception about a health insurance policy is that it is required for old people and not young people. This might be true to a certain extent, but it is important to note that certain diseases are associated with age, but few can develop at any stage of life. Non-communicable diseases such as heart attack, diabetes, and cancer are becoming common among youngsters due to changing lifestyles and food habits.

That said, if we keep waiting for us to get old to buy a health insurance policy, not only would policies get more expensive, but the likelihood of not getting a policy at all also increases. Insurance companies are not keen to insure old people, especially if they have a pre-existing condition; moreover, policies would also cost more at an advanced age.

I’ll go to Govt Hospital:

Many people think they would visit a government hospital in case of a health emergency. It is important to note that government hospitals have their limitations regarding medical treatment. They might be short on advanced equipment, or they might be short on good doctors. Moreover, the one thing that you can be sure of is that they would most likely be short on time. The average wait time for any average person could run into months. Can you afford to wait that long?

Private hospitals, on the other hand, have dedicated staff and advanced equipment to treat patients with the utmost care. Private hospitals even have a dedicated insurance desk where the insured customer just needs to submit the health insurance policy copy, after which the hospitals would take the approvals. While this is not an endorsement of private hospitals over government ones, you would be better placed by deciding objectively on parameters like service quality, wait time, and patient care.

I Have Group Health Insurance:

The other misconception among the working group is that they need not take a personal health insurance plan when they have an employer-sponsored group health insurance plan. It is important to note that a group health insurance plan would be valid only as long as you are with the organization. If you change the organization, you will have no health coverage until you join a new company. Depending solely on your group health insurance policy could spell disaster, especially if your industry is witnessing a downturn and people are being laid off.

Personal health insurance policy would continue as long as you pay the premiums, whereas group health insurance would continue until you stay in the company. Personal health insurance can be tailored to your needs, but group health insurance cannot be done as the organization decides. You may need maternity coverage as part of your health insurance, but your group health insurance might not offer it. In this case, taking a personal health insurance policy would be the only option left.

The group health insurance plan should supplement individual health insurance and should not replace it. Taking a personal health insurance policy early will satisfy the waiting periods before claiming it. But if you take personal health insurance after falling sick, you need to wait for a longer period of time before availing claim under the policy.

For further information about individual health insurance as well as group health insurance, please make an appointment with one of our experts in health insurance to help you with your purchase choice.

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Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Management.