Check sub-limits within covers

Insurers put these sub-limits in health policies to ensure that their liability is limited

A crucial investment that anyone can make is health insurance, more so since health costs continue to grow rapidly and are a significant financial risk that one needs to address. Apart from the likelihood of illnesses, unforeseen expenses and varying cash flows are likely to take a huge chunk out of one's savings. Even two to three days' hospitalisation can burn a sizeable hole in one's pocket.

When it comes choosing a medical insurance policy, one now has a problem of plenty. Such a variety of insurance plans are now available that one has to be careful when selecting a suitable plan. Several aspects of health insurance plans need be evaluated before selection. In India, medical/health insurance typically cover hospitalisation expenses. A few insurance companies provide cover for critical illnesses as well. No customised insurance packages are available or possible; hence one should select a policy that comes closest to the requirement.

Remember that premiums for health-insurance policies are not always comparable (on a similar, apple-to-apple basis). The terms and conditions of an insurance contract are varied and differ. Hence, it makes sense to peruse the contract document, its coverage and cost, before deciding on a policy to be availed of.

While premiums, deductibles, co-pay terms, etc., need to be examined, other lesser-known areas also need to be checked before purchasing a health-insurance policy. One such is the hospital network; obviously, the more the number of member hospitals, the better the policy is likely to be. Always check the conditions. Some cover medicines, doctor's fees, and a stipend during the recovery period. Others cover only hospital costs; still others might cover non-traditional treatments (ayurveda or homeopathy). A good medical cover should include hospitalisation, doctors' visits, medicines, emergencies, dental and vision issues, accident cover, lab tests, rehabilitation expenses, and a stipend/cash cover for the duration that you are out of action due to an illness or injury.

Insurance companies are likely to limit the total cover, with sub-limits for sub-categories. For example, the insurance cover may be for Rs 5 lakh, but there could a limit of Rs 50,000 for medicines, and Rs 3 lakh for surgery. This break-up needs to be taken into account when choosing health insurance cover.

Most insurance companies include the condition of deductibles and co-pay. This means that you would have to bear a portion of the cost. For example, if the deductible is 10 per cent, and your medical expense is Rs 1 lakh, you would need to pay Rs 10,000 before the insurance company pays the balance Rs 90,000. Ideally, one should look for insurance plans that cover 100 per cent of the expenses, even if the premiums are a shot higher. In the long run, this could be worthwhile.

Often 'pre-existing' clauses are part of the cover. In this, illnesses/ailments (diabetes, a heart condition etc.) that one already has may not be covered. This depends on each insurance company; some companies flatly refuse insurance for these ailments, others provide cover at an additional premium; still others may provide cover with a nominal increase in the premium after a 'waiting period,' which may range from a few months to a few years, depending on the illness/ailment.

One should ideally opt for family-floater plans. As the name suggests, this covers the entire family thereby saving money and hassles in the event of any unforeseen illness. Even if the family consists of a husband and wife, a family floater plan is advisable. It offers higher cover and benefits, including the advantage of utilising the entire cover for one of the insured if such need arises.

Renewal age is another factor to be considered. In your twenties, the premium is low. As one ages not only do premiums increase, but also in many cases the cover ceases. It is important to choose an insurance policy which has the longest renewal age, so that you can benefit from medical insurance for as long as possible. Most insurance companies have a maximum renewal/entry age. This is the age at which a policy will be discontinued or one at which a new policy cannot be taken out. This has recently been set by the Irda at 65 years and senior citizens can take advantage of this by renewing their health insurance for the longest duration possible. Government-owned companies offer the longest renewal ages, with some of them going up to 80 years.

The latest regulations allow portability of medical-insurance policies. At the time of renewal one can carry over the cover to another insurance company, through written communication (at least 45 days before the renewal is due) to the insurer requesting the shift and specifying the new insurance company.

The other great benefit of health insurance is the tax benefit. Under Section 80D, health insurance premiums (up to Rs 20,000 for senior citizens, Rs 15,000 for others) are deductible from one's income.

HOW TO CHOOSE A HEALTH COVER

* Health insurance is important and one should obtain the maximum benefit possible - in terms of cover and age till which coverage applies

* Possible cover for the entire family in one policy

* Tax benefit by investing in medical insurance

* Look for policies with maximum cover in terms of doctors' visits, laboratory tests, etc

* Insurers with more hospitals in their network are supposedly better

* Check conditions regarding pre-existing illnesses

* If unhappy with the current health insurance provider, one can carry over an insurance policy to another provider

The author is Founder & CEO, Right Horizons