Why should I take health insurance?
We’ve been getting a lot of questions on health insurance – from why should I take health insurance to how to find affordable health insurance to the costs involved.
Insurance is a fact of life that can seem like a burden – you know you should have it but you seem to avoid it. Particularly, health insurance is one of the most neglected areas with penetration of health insurance in India being very low. As per IRDA annual report 2012-13, non-life insurance penetration in Inida is 0.78% where as insurance penetration in same period in US is 4.5%.
Health Insurance is an absolute necessity for every individual – young or old. In this article we have tried to explain the importance and basics of health insurance. In case you have any further questions, you can write to us at: fp@arihantcapital.com
1. I am healthy. Why should I take health insurance?
An insurance cover is your protection towards any uncertain event. Similarly, a health insurance will protect you and your family against any financial contingency arising due to an unforeseen medical emergency. It will also release you from the burden of worrying how much to save for the rainy day.
The average life span of an individual has increased considerably in India, owing to improved medical facilities and increased awareness about one’s well being. However, at the same time the health care and medical costs of treatment and surgery have also skyrocketed, doubling every four years 10 months or so. Moreover, there has been an increase in incidence of medical problems due to lifestyle related issues like stress and eating habits.
Life is full of uncertainties; we do not know what lies in the future. With soaring health care costs, a serious injury accident or surgery that might require a hospital stay can set you back by lacs of rupees. Therefore, medical insurance makes complete sense. It is advisable to take a health insurance when you are healthy, as at this stage you have a number of choices available and you have the option of choosing the best and most affordable plan.
2. How does health insurance work?
To purchase health insurance, you need to pay an annual fee to the insurance company known as “premium”, for the coverage (sum assured) you require. The higher the premium, the more the coverage offered by the company. The sum assured can be used in one time or through multiple claims in one year. The payout by the insurance company for the health cost can be claimed in two ways:
a. Reimbursement: When you have undergone the treatment, you bear the costs first and then file a claim to the insurance company, who then reimburses the medical costs paid by you, to the extent of the sum assured as per the policy’s terms and conditions.
b. Cashless settlement: When the treatment is sought in a hospital that is associated with the insurance provider, the insurance company settles the bill directly. In this case you don’t have to pay the cost of treatment from your pocket.
3. What factors determine the premium amount of the health insurance?
Under health insurance, the age, health issues and the amount of cover are the factors that decide the premium. Usually, younger people are considered healthier and thus pay lower annual premium. Older people pay a higher health insurance premium as their risk of health problems or illness is higher.
4. How much health insurance I should opt?
Looking at the present medical cost one should take minimum sum assured of Rs 3 lacs (for single person). You should also keep in mind that once you suffer from any ailment or disease then sum assured will not increase, so you should also consider higher sum assured to cover inflationary medical cost for future.
5. Is there any tax benefit that I can avail of while buying a health insurance plan?
As per section 80D of Income Tax Act, you can claim annual deduction on premium paid for self, spouse and dependent children up to Rs 15,000 and if tax payer is a senior citizen then a deduction of up to Rs 20,000 is allowable.
6. What coverage is available under health insurance plan?
A health insurance plan typically cover the hospitalization expenses for treatment of disease and accident (minimum 24hrs of hospitalization required) and pre and post hospitalization expenses to the extent of the sum assured, depending on the policy you take. Hospitalization expenses include room rent, medicine expenses, specialist fees (surgeon, anesthetist, etc), diagnostic expenses and other medical expenses related to treatment.
Expenses that are usually not covered in your insurance policy are registration charges, service charges/nursing care chares, personal expenses such as telephone, refreshment etc., taxes levied by government and other expenses not related to treatment.
Conditions arising from diseases existing before the purchase of the policy are also not covered in the policy. These “preexisting” diseases are covered usually after 4-5 years of the policy being in force, depending on the policy terms & conditions.
7. Is a medical check-up necessary before buying a policy?
A medical check-up is necessary for a new health insurance policy for customers above the age of 40 or 45 years, depending on the health insurer’s norms. Medical checkups are usually not needed for renewal of policies.
8. Can I take health insurance plan for my parents who are senior citizen? Is there any tax benefit available if I pay premium for them?
Yes, you can take health insurance plan for your parents who are senior citizen and can avail tax exemption under 80D for the premium paid. If you are paying the medical insurance premium for your parents, an additional deduction of Rs. 15,000 per year can be claimed under section 80D. Again, if your parents are Senior Citizens, you can claim an additional amount of Rs. 20,000.
There are select insurance policies specially designed for senior citizens.