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Tips to Choose the Right Personal Health Insurance Plan
Personal Health Insurance Plans are those in which the insured pays the premium to cover their financial expenses in case of any hospitalization. It is essential to choose the right personal health insurance plan as it would be difficult to change the health insurance policy every year, unlike the motor insurance policy. Therefore the below tips can be helpful while choosing the right personal health insurance plan.
The most important thing to consider while taking the personal health insurance plan is the sum insured required. Sum insured is the total responsibility of an insurance provider in the event of hospitalization within the policy time. Unlike the motor insurance policy, the health insurance sum insured would not be the same even after the claim. The maximum liability per claim in motor insurance is the overall sum insured under the policy. Still, in the case of an individual health insurance policy, the insurance company’s maximum liability per claim would decrease after every claim made during the policy period.
For example, Mr.A has taken an individual health insurance plan with Rs.5 Lakh sum insured, he was hospitalized due to a heart attack and the hospital bill was Rs.3 lakhs. After the claim is paid, the sum insured of Mr.A would reduce proportionately to the amount of claim paid i.e., Rs.5 lakhs – Rs.3 Lakhs resulting in Rs.2 Lakhs sum insured. So for the subsequent claim, Mr.A would have Rs.2 Lakh sum insured and not Rs.5 Lakh sum insured. To have Rs.5 Lakh sum insured at every point of time in a policy year, Mr.A has to opt for an unlimited recharge/ refill facility which comes as an add-on and maintains the sum insured at the same level throughout the policy period.
Hence, deciding the sum insured or the coverage required under the personal health insurance policy is essential. The decision should be taken considering many factors such as medical inflation, family health issues, pre-existing conditions, other alternative health insurance support etc.
Claim Settlement Ratio/ Incurred Claims ratio
The claim settlement ratio or the incurred claims ratio are the metrics to understand the insurance company’s claim settlement capability and intention. Claim settlement ratio is the number of claims received to the number of claims, whereas incurred claims ratio is the amount of claims settled to the amount of premium received. A higher Claim settlement ratio would mean the insurance company pays most of the claims. A higher incurred claims ratio means the company is settling more claims than the collected premium amount. Claim settlement ratio and incurred claim settlement ratio are available for every insurance company at the end of the year.
As a thumb rule, a company with the highest claim settlement ratio can be taken as a good company with a high chance of claim settlement. But the disadvantage of these ratios is that they do not mention the timeline of claim settlement, i.e., the number of days the claim is settled after reporting and the quantum of claim settled. To provide more customer transparency, IRDAI has developed the age analysis of claims which will be discussed below.
Age Analysis of Claims
Age analysis of claims gives an overview of when the claims are settled. This data is provided by IRDAI and gives an idea about the timeline of the claim settlement. There are certain periods, such as claims settled in less than 3 months, 3 months to 6 months, 6 months to 1 year and so on till 5 years. This solves the issue of claim settlement time, which is also very important nowadays, as each passing day can push the insured into a debt trap. The ratio must be higher where more claims are settled in less than 3 months after reporting. There are certain instances where cashless claims are denied by the insurance company forcing the customer to go for reimbursement. These kinds of cases would increase the claim settlement time, an essential factor when considering the right personal health insurance plan.
Another thing to consider is network hospitals that have ties to the insurance company for the settlement of cashless claims. Below are factors that should be considered while looking at the network hospitals:
- Number of network hospitals in your area of residence or office. It plays an important role in case of emergency and also would be comfortable for planned treatments.
- Type of hospital. There are specialty, general, and multi-specialty hospitals in the market. It is essential to check if the hospital that can cover your potential hospitalization is present on the list.
- Regular Hospital. It is essential to check if your choice of hospital is available in the network list. Some customers prefer hospitals that they frequently visit and are comfortable with. Such hospitals should be checked if they have made it to the network hospital list or not.
The premium is the amount due to an insurance company to obtain health insurance for a specific time. Medical insurance premium depends on age, sum insured, pre-existing conditions, residence zone, add-ons opted, claim experience, etc. Individual health insurance policy premiums should be affordable for the coverage required. Higher health insurance premiums with nonobligatory coverage would make no sense to the insured when choosing the best personal health insurance plan. It is, therefore, essential to compare the premiums of different health insurance plans from other insurance companies before deciding on the final purchase of a health insurance plan.
Certain insurance companies increase health insurance premiums yearly, whereas few other companies increase the premium after every 2-5 years, which generally follow the age bracket concept. People falling in the same age bracket would pay the same premium.
Lower Waiting Periods
The waiting period is when the insurance company would not pay for the hospitalization expenses for certain diseases. The personal health insurance plan has specific waiting periods that should be checked carefully before purchasing. A higher waiting period implies that the customer has to wait for a more extended period of time before making a claim. A pre-existing waiting period is applicable for diseases or illnesses already before the policy’s inception and ranges from 1 year to 4 years. Specific disease waiting periods are applicable for certain diseases and range from 12 months to 24 months. The initial waiting period is appropriate for 30 days after taking the health insurance plan.
Choose a personal health insurance plan with a lower waiting period to increase the chance of availing claim.
No co-payments/ Sub limits
A good health insurance plan should not contain co-payments or sub-limits for certain diseases—the amount of the claim which must be paid in the event of settlement of the claim. The higher the co-payment, the lower would be the premium payable. An excellent individual health insurance plan should not have co-payments or sub-limits for certain illnesses where only a certain amount of claim would be paid, and the insured should bear the rest. Co-payment is voluntary for specific health insurance plans but compulsory for a few, such as Senior citizen health insurance plans. Therefore due diligence should be exercised before finalizing the personal health insurance policy purchase.
Ease of Renewability
Some health insurance plans are often discontinued, and the existing customers would be shifted to a new product launched by the company with similar features. Ease of renewability should be considered while selecting the best personal health insurance plan. Customers should also check if the plan offers lifelong renewability so that the customers can continue to renew the same or similar plan lifelong without worrying about changing the plans. Insurance companies now provide various premium payment opportunities such as online, cheque, UPI, etc., which eases the premium payment process.
After Sales Service
The other important thing to consider is the after-sales service offered by the insurance company. After-sales service includes endorsement support, renewal support, claim settlement support, etc. After-sales service also includes sharing hard copies of the policy documents with the customer. Health insurance plans have a cooling off period of free look period in which the customers can cancel the policy without any penalties if they are unsatisfied with the company’s service. So the after-sales service of the insurance company can be analyzed immediately after purchasing the policy from the company. But it is better to do some research on the after-sales service of the insurance company. The after-sales service would primarily depend on the insurance intermediaries the insurance company employs.
Why Choose the Right Personal Health Insurance Plan?
It is essential to choose the right personal health insurance plan due to the following reasons:
- Difficult to change yearly- A personal health insurance plan can only be changed sometimes every year and go with different insurance companies, unlike the group health insurance plan.
- High switching costs- The switching costs would be increased in the case of personal health insurance. Changing from one insurance company to another involves considerable effort in filling the forms, payment of premiums, undergoing medical tests etc.
- Loss of benefits– If you decide to abandon the existing policy and buy a new personal health insurance policy, then all the benefits accrued under the previous policy such as the waiting period waiver, no claim bonus would be lost. The only way to retain the benefits is to port your health insurance plan which again depends on the decision of the new insurance company. The new insurance company may accept or reject your port petition, leaving you with no choice but to retain the benefits.