Health insurance, at its core is not a privilege nor a financial option, it is a basic necessity that we need in today‘s world. It is our financial contingency plan to get health and medical expenses covered when an unforeseen accident, sickness or a major disease hit us. Barring insurance coverage, a huge medical bill can wipe out an entire life‘s savings in a flash, push you into high interest debt or break long term financial barriers.
The foremost reason the need for health Insurance is because of medical inflation. Medical costs are escalating at a much higher high rate than normal inflation level. Procedure charges, diagnostic tests , operations, hospital stay charges etc. are too high compared to normal fees.with health policy you need not think about quality of treatment and the money involved, it covers nothing but cashless hospitalization including Doctor‘s consultation fee, the room charges, ICU charges, and the post hospitalisation treatment. The simple way of looking at it is health insurance is for your health and your money.
For the untrained, there are three major terms they need to understand in order to get the hang of health insurance. The first one would be Premium. A premium is the amount of money that an individual pays to the health insurance company, usually on an annual or monthly basis, in order to maintain an insurance policy.
You need to pay this premium on a regular basis, whether you fall ill or not, have a visit to a doctor, or hospitalized during the year of policy. The premium you pay depends on your age, health issues, existence of other health related issues, lifestyle choices, place of living, Sum Insured. In general, the younger and healthier you are, the much lower premiums you need to pay, as you are at a lower risk from the insurer‘s point of view. Also, paying your health insurance premium entitles you to receive benefits under local tax laws, which makes it a tax-wise financial decision. When you purchase the insurance policy at a young age, you will be able to access lowest premiums, while waiting out your downtime periods before chronic health problems develop, thereby providing the maximum and lesser financial burden.
Another important term that every novice must understand is the Sum Insured. Sum Insured is the maximum amount the insurer shall pay to you for your claims of medicinal expenditure in a policy year.
For instance, suppose you are perusing a policy with a Sum Insured of $10,000 and in the course of the year, you end up being hospitalized for treatment costing $7,000. The insurer will pay the full cost of $7,000. If however, the treatment costs turn out to be $12,000, the insurer will tend to accommodate the first $10,000 and the remaining $2,000 would have to be paid by you from your own pocket. Choosing the right Sum Insured when purchasing a policy is a vital decision that you need to make. Be too low and you end up paying hefty amounts during major treatments. Be too high and the premiums will be very costly. A good range for novice buyers would be to choose an Sum Insured that would comfortably cover hospital treatments in your local area plus major procedures according to your age group.
The third important concept is cost sharing procedures ‘Deductible’ and ‘Copayment’ (Copay). They specify what part of an insured person‘s bill is paid by insurer and what part comes out of insured person‘s pocket. These types of policy are used to control the abuse of insurance schemes and to promote the use of the scheme by policyholders.
Deductible: A stated dollar amount you are responsible for paying before your policy will pay. An example of this would be a $500 deductible that means the patient pays the first $500 in doctor‘s bills until the insurance will become involved.
Copayment: This refers to a set proportion of every hospital/doctor bill you will pay. For instance, with a 10% copay, on a bill of $1,000- you will be required to pay $100, the insurance company takes $900.
Final Takeaway : Read the policies diligently for deductibles, copays, waiting period for pre-existing diseases and caps on room rent. Selecting a policy with a higher Sum Insured, reasonable premium and low copay ensures genuine peace of mind in the hour of need.
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