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Two Types of Health Insurance


INDEMNITY BASED HEALTH INSURANCE

In this kind of policy, the actual hospitalization expenses are covered. We can get this reimbursement from the insurer after the claim or we can get it as cashless at the time of claim if the hospital is having a tie up with the insurance company.

The insurance company will have a tie up with hospitals where hospitals will agree to a settlement of bills directly from the insurance company instead of collecting them from the claimant.

This way an insured can go for a cashless treatment and hence this is called Cashless. Such hospitals are called Network Hospitals.

It is not always a situation of choice but also the availability of cashless facilities. But in case we have a network hospital within reach, it is advisable to go cashless because

  • It is convenient
  • Some insurers have a negotiated tariff and hence the overall claim amount is reduced.

But the condition is that the insurer must be informed 48 hours before the planned treatment OR Within 24 hours after an unplanned hospitalization about the claim.

Almost all the hospitalization expenses are usually covered like Room Rent (Please check the room rent clause), Doctors fees, Intensive Care Unit, Nursing expenses, Surgical fees, operating theater, anesthesia and oxygen and their administration, Physical therapy expenses, Drugs and medicines consumed on the premises, Hospital miscellaneous (medical costs) services (such as laboratory, x-ray, diagnostic tests), Cost of Dressing, ordinary splints and plaster casts, Costs of prosthetic devices if implanted during a surgical procedure, Organ transplantation including the treatment costs of the donor but excluding the costs of the organ.

Non medical expenses like TV, Food, Fruits, transport charges, gloves, needles, cotton, disposable items, tissues, consumables are not covered in any Health Insurance policy. A sample list of these non medical expenses can be found here.

Some insurers restrict expenses on doctor fees, room rent or other medical expenses by a sub-limit clause. Be informed and try to avoid those policies.


BENEFIT BASED HEALTH INSURANCE

This policy pays the per day fixed cost calculated by the no of days the insured stays in the hospital for the recovery.

Some policies also pay a lump sum amount in case of any named disease as per policy gets diagnosed. Eg. Corona, Dengu, Cancer, road accidents, etc., These policies are also called critical illness policies.

Indemnity-based policies are always better as it covers the actual hospitalization expenses which can go to any extent.

Sometimes people misunderstand between these two types of policies and end up buying the benefit-based policy as it looks very cheap.

Most of the time, benefit-based policies are offered by Life Insurance policies. As per the latest Circular dated 12 May 2020 , Insurance regulator has asked all the life insurance companies to withdraw giving indemnity based policies for Health Insurance . That means only General or standalone Health Insurance companies can offer indemnity-based Health Insurance plans.