How to select the right coverage for your Health Insurance?

Team Digit, 06 Jul 2021

 

When you think about taking a health insurance policy, you have successfully taken one step towards protecting your financial health from medical emergencies.

Now, comes the most important question: What kind of policy should you take? What is the Sum Insured you should take? Should it be an individual or floater policy? What are the benefits you should specifically look for, before deciding to buy the policy? What add-ons should you take?

Here are answers to all the questions you should consider before buying a health insurance policy:

How to select your Sum Insured

This should be your first decision when choosing a health insurance.

Many people try and go for a smaller amount as the higher the sum insured, the higher is the premium.

But for a minute, leave the premium aspect and think on the below:

1.       How much can I afford myself?

A lot of people say, they can afford expenses like 2-3 lakhs with the help of their savings & regular income.

But when it comes to hospitalization due to a big accident that requires multiple surgeries or a big disease like cancer, which by the way is getting common, the expenses become unaffordable. These expenses are sometimes around 10-15 lakhs or even more if you consider multiple hospitalizations over years for the same disease.

So, choose a sum insured which you think will cover the expenses you can’t afford.

Because you are buying insurance when the expenses go higher than what you can easily afford.

Fact check: Cancer cases in India is estimated to be 13.9 lakh in 2020 and may increase to 15.7 lakh by 2025. Surgery can cost around 3 lakhs and a single chemotherapy can cost around ₹50,000 and one needs multiple.

2.        Accounting for inflation

‘In our times, we could get this for just 10 rupaiya’, heard this often from our elders? They are not wrong, this is inflation, over years the value of money goes down or in simpler terms, things become more expensive. And if you live in a metro city, the inflation can hit much harder, hence the medical treatments being more expensive.

This means, if you are planning to keep health insurance for the next 20 years also, you need to have a much higher sum insured than what you are thinking is ‘enough’ right now.

Always think what you will need in future, now what you need now.

Fact check: Medical inflation is India is the highest contributor in the overall inflation, around 8%.

3.       Your Sum Insured is shared

If you plan to go for a family floater plan, the most common choice of Indians, then your sum insured floats or is shared by all members. For instance, if you are family of 4 and if there is an unfortunate incident where all members get hospitalized, a sum insured planned for only one person may be very less.

So at least plan double of what you feel is sufficient for one person.

4.       Taking Higher Sum Insured early in life

Some people feel they need a lower sum insured when they are younger. This is a myth.

Young people are more prone to accidents and most of the diseases have similar probability for a young person than an older one.

Also, when you are younger, an insurance company will happily give you a high sum insured without waiting periods. Also, the premium will be lower for the same sum insured when you are younger.

So, net-net, the earlier you buy a higher sum insured, in the long run, you are better secured at a lower premium.

Should you take an individual or floater policy?

This depends the number of dependents you have.

If its’s just you and your spouse or have a young family with your spouse and kids, you can opt for a Family Floater Policy with an adequate Sum Insured. This will be beneficial as the premium will be shared by the family members instead of having to pay for individual policies.

But note, when your kids become 25 years+, they will no longer be a part of a family floater policy as they are now adults. So, keep a reminder for that. You can’t get them their individual policy as of now as both your kids are minors and need a parent to be insured with them.

But if you plan to insure your parents or in-laws as well, we recommend choosing an individual policy for them as the insurance premium is determined by the eldest member’s age.

If you want to know more about the difference between a Family Floater vs an Individual Plan, here’s a quick comparison.

Should you opt for a Co-Payment in your plan?

This depends on the who you are taking the policy.

If you are buying it for yourself and your family, without your parents, we would recommend taking a policy without a co-payment, as that would mean you would have to pay a part of the claim from your own pocket.

But if you plan to take an individual policy for your parents, which we recommend, you can choose a co-payment to lessen the premium as their policy would be expensive owing to the higher age and probability of having pre-existing diseases. . Also, if there is an age-gap between your parents, you can choose to have separate individual policies for them.

How to decide on higher or lower waiting periods?

This depends on whether or not you have any pre-existing diseases.

If you don’t have a pre-existing disease, go for a higher waiting period & reduce your premium.

Often one looks for lower waiting period in a plan and pays a higher premium for it. But if you and your entire family is without any existing disease or condition, the waiting period is irrelevant for you. Go for a higher waiting period if available at a cheaper premium😊

If you or anyone in the family has a pre-existing condition and feel that there might be requirement of treatment in the next 2 years, look for an option that has the lowest waiting period. This will be a higher premium but will be worth it if by chance any hospitalization happens for that condition or disease.

What features should you look for before buying your policy?

·       Sum insured refill.

Also called Reinstatement of Sum Insured, this feature is for family floater policy holders. So for example, if you have a family of 4, in an unfortunate year, one family member uses up all the sum insured or a huge part of it, this feature, reinstates or refills the sum insured, almost like magic😊, to the initial amount for the other family members for hospitalizations in the same year.

In short look for a policy with ‘reinstatement’ or ‘sum insured refill’.

·       No room rent cap.

Room rent is covered in most health insurance policies. But you should see whether there is a cap on the coverage. So, if you are someone who prefers an individual room for your family, you may have an issue.

Also, the total claim amount is determined by which room you take, the higher priced room, has higher charges for the nursing, equipment, doctor consultation etc… But when insurance is paid, the final amount is calculated on pro rata. So, for example, if the room rent cap is 1% (which is common with many insurance companies) and you have a 5 lakh Sum Insured, only ₹5000 is covered. Now if you choose a ₹10,000 individual room, which is double of the allowed limit, the insurance company will be able to give only half of most of the room related charges in your final bill. In short, look for a policy with no cap on room rent.

Still confusing? See this example to understand better

·       No Claim Bonus

If you feel that you are healthy and don’t expect a claim every second year, then a No Claim Bonus makes sure that your sum insured is increasing for every claim-free year. Of course, there is an upper limit to the increase, but it can be up to 100% of your sum insured in good plans. So, look in for that in your policy. Also, check what is the yearly increase, what is the upper limit and how does it reduce when you make a claim (does it fall to ‘nil’ or reduces step wise i.e. the amount of additional sum insured you got in the last claim-free year, only that much is deducted).

Lastly, what are the addons you should add to your base policy?

This depends on your life stage and where you live.

·       Maternity & New-born benefit

This addon is for couples who are planning for their first kid in the next few years or are thinking about a second child. In such cases, checking for a lower the waiting period before buying is advisable. Like Digit Insurance has a low waiting period of 2 years i.e. you can plan a baby after 1 year and 4 months. This is considering 8 months would be needed to deliver.

·       Zone Upgrade

This addon would be for people living in any city except Mumbai and Delhi as they fall in Zone A, in case of which you are eligible to take treatment in any other city without the need of a Zone Upgrade or a co-payment.

Check if your policy covers you for a treatment in any Indian city without any cost or there is a co-payment. If there is a co-payment and if you think you’d want to get treated in a more expensive city, then go for a Zone upgrade option. For instance, since you are in Bengaluru, which is a Zone B city and you think you would want to see treatment options in Mumbai, you can opt for a Zone Upgrade option. If you don’t think you’d want to go for a more expensive city, then you can skip taking this addon and enjoy the lesser premium for Bengaluru.

·       Sum Insured Increase on Renewal

As we had mentioned above, you need to keep inflation in mind while choosing the sum insured. Either you can take a higher sum insured right from the start or opt for an ‘Increase in sum insured on renewal’ option that will steadily increase your sum insured yearly, without any additional waiting period on the new sum insured.

Well, these are the things that you need to keep in mind before taking a policy to ensure you and your family are completely covered. But there are also some common traps that you should look out for;

1.       Don’t fall for ‘so many benefits’

Benefits like road ambulance, hospital cash, annual health check-up are nice to have but they all amount to less than ₹10,000 so don’t fall for them. Choose the plan on the factors mentioned above.

2.       Don’t choose co-payment to reduce premium if you are not buying for your parents

A very common mistake. One falls for the honey trap of a lower premium on accepting co-payment. But co-payment is the share paid by you during a claim and if the claim is huge, you end up burning a hole in your pocket. The little premium saved turns out to be very expensive. So unless you are buying this for your parents where the policy is expensive, do not go for a policy that has co-payment.

3.       Number of network hospitals shouldn’t be a deciding parameter

You can any day opt for a reimbursement claim and people find it easier as well.

4.       Buy a separate Critical Illness benefit or cover

Just get a good sum insured in your core health insurance, you won’t need a separate Critical Illness cover. 

5.       OPD cover looks useful?

OPD cover’s premium is very high because it is almost a sure-shot expense a customer will claim for, so it just looks like a good benefit because customers don’t know how much they are paying for it really. So, better get a plan without it, with a lower premium.

6.       Buying a retail or group policy?

Make sure you are buying a retail policy and not a group one. The main advantage of a retail one is that you can never be refused renewal, even if a claim is made or the plan is discontinued.

Well, we know this was long, but details are the key! So, make an informed decision, take out some time from your daily routine every day, and do your research. We would advise not to hurry in buying your health policy, as this is a decision that can cost you your savings!

And to get a completely personalized report on your health insurance check-up, try out Insurance Guru: A tool made by Insurance Experts to help you understand and plan your health insurance protection.

 

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Team Digit

Digit is a General Insurance company on a mission to Make Insurance Simple for people. We are backed by Fairfax, one of the largest insurance companies in the world.

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