Health Insurance in India - An Introduction

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The term Health Insurance is used to describe a form of insurance that pays for medical expenses. It is used more broadly to include insurance that covers disability or long-term nursing or custodial care needs. In simple words, if you are covered under Health Insurance, you pay some amount of premium every year to an insurance company and if you have an accident or if you have to undergo an operation or a surgery, the insurance company will pay for the medical expenses.

It takes just one visit to a hospital to make us realize how vulnerable we are. It is a tough ordeal if you are diagnosed with an illness and need to be hospitalized, no matter if you are rich or poor, male or female, young or old. The list of lifestyle diseases like heart problems, diabetes, stroke, renal failure, some cancers just seems to get longer and more common these days. Thankfully there are more specialty hospitals and specialist doctors – but all that comes at a cost. The super rich can afford such costs, but what about an average middle class person? For an illness that requires hospitalization / surgery, costs can easily run into 5 figures. A Health Insurance Policy can cover such expenses to a large extent.

Types of Health Insurance:

There are mainly 3 types of Health Insurance covers which are as follows.

Individual Mediclaim:

• The simplest form of health insurance is the Individual Mediclaim policy. It covers the hospitalization expenses for an individual for up to the sum assured limit. The premium is dependent on the sum assured. It is a cover which takes care of medical expenses following Hospitalization / Domiciliary Hospitalization of the insured in case of sudden illness, accident and any surgery which is required in respect of any disease which has arisen during the policy period.
• This cover is a hospitalization cover and reimburses the medical expenses incurred in respect of covered disease / surgery while the insured was admitted in the hospital as an inpatient. The cover also extends to pre- hospitalization and post- hospitalization for periods of 30 days and 60 days respectively.
• Example: If a family has 4 members you can take an individual cover of Rs. 2 lakhs each for each member. Each member is now covered for 2 lakhs. If all the 4 members are hospitalized, all 4 of them can get expenses recovered up to Rs 2 lakhs each. All the 4 policies are independent.

Family Floater Policy:

Family Floater Policy is an enhanced version of the mediclaim policy. The policy covers each family member and the entire family’s expenses are covered up to the sum assured limit. The family floater plan’s premium is less than the separate insurance cover for each family member.
• Example: If a family of 4 takes a family floater policy of Rs. 8 lakhs, they can claim medical expenses up to Rs. 8 lakhs in that policy year. If one person is hospitalized and claims Rs. 3 lakhs, it will be paid, but they will be left with only Rs. 5 lakh worth of medical expenses that can be reimbursed in that year. The next year, the policy will start with a fresh Rs. 8 lakhs. So, in many ways the family floater plan offers flexibility in terms of utilizing the overall insurance coverage among the group.

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Unit Linked Health Plans:

• Health Insurance Companies have introduced Unit Linked Health Plans which combine health insurance with investment and pay back an amount at the end of the insurance term. The returns are dependent on market performance. These plans are new and still in development phase. People who can handle market linked products like ULIP and ULPP are only recommended to take this plan.
• For a number of reasons, it is advisable to stay clear of unit linked health plans. Treat insurance purely as an expense. Opt for an Individual Mediclaim policy if you are single and opt for a Family Floater policy if you have family. Health insurance premiums come under tax exemption under section 80D for a maximum of Rs.15,000/-.