Costly health insurance errors

With a mind-boggling variety of health insurance products available in the market, and insurance being a long-term investment, there is bound to be anxiety while choosing the right product. A wrong decision can affect finances for a long term. Hence, it pays to learn from mistakes others make and avoid them when buying your next health cover.

Not finding the right advisor

Finding the right advisor is the first step to buying a good health cover. Go through all your existing insurance policies, and you will spot a trend—most policies would have been bought from some uncle, aunt, cousin or neighbour. In India, traditionally, insurance policies have often been sold and rarely been professionally ‘advised’. Insurance is a complex contract, which requires detailed understanding, before you sign up. Having a good advisor on your side can bring good long-term return on investment for you. An advisor is a critical source of important information for your purchase decision. One should spend good time in recruiting an advisor. Good advisors have two qualities: they are neutral [prefer an insurance broker who deals with all insurance companies rather than one that represents a single brand]; and they have rich experience in servicing and managing health insurance claims.

Waiting for that perfect product

Waiting till you find a perfect product is a common mistake the well-educated, well-read among us make. The research never ends, and a cover is never bought. If you are nodding your head right now in agreement, and saying, “Yeah, this is me”…believe me, that perfect product you are looking for is nothing but imaginary. Insurance is more about risk management, and less about investment. It is like finding a life partner; you need to settle for the most suitable option for your needs, rather than waiting for the perfect one to come by. You might have to wait forever.

Relying on health insurance provided by employers

Many employees and their families are covered by their employers as part of the employee benefits. It’s important to be aware of this benefit and avail it when the need arises. At the same time, it’s important to understand that this cover is owned by the employer, and hence continues as far as you are employed with this organisation. Once you part with the company, your cover ceases to exist, till you join another organisation and that company decides your cover. If there is a break in your career, you join a start-up or start on your own, your family and you will be left without a cover. Recent reports on employee benefits in the media suggest that more than 40 per cent of employers are reducing or restricting coverage, owing to increase in insurance premiums for corporates. Irrespective of the cover offered by your employer, you should always have your own cover.

Ignoring healthcare inflation

When taking a health cover, most people only consider current healthcare costs. They buy a cover of Rs3 lakh [or less] as most major surgeries cost that much. With inflation in healthcare reported at 18 per cent – 25 per cent, healthcare expenses, surgeries in particular, are set to double in the next four years. So, a bypass surgery, which costs about Rs 3,00,000 in a good hospital today, will cost Rs 6,00,000 by 2016. Since the commitment to health insurance is long-term [about 30 years], look at a 20-years scenario while fixing your health cover.

Remember, the option of increasing your cover at the time of renewal remains open to you till you are young [less than 40] and don’t have chronic ailments. Once you cross 40 or suffer an ailment, the chances of getting an ideal cover gets slimmer.

Cutting corners

Buying a product based on whether it comfortably fits your mind budget, may not be a wise decision. It’s like buying a cheap fire extinguishers. Health insurance is a service, which will support ‘quality’ healthcare for your family—the one thing you wouldn’t want to compromise on.

Not reading the policy terms and conditions

Nobody believes one can do this, but we see this happening every day. Numerous people get stuck with wrong policies, simply because they don’t read the terms and conditions. Remember, the brochure is a marketing tool, and is created to position the product for sales. It does not give the complete picture of the product. The policy terms and conditions, called policy wordings, are what you need to refer to. Most advisors do not share this document. Hence, we recommend that you insist on reading it, before signing up. Remember, if you are taking a pinch on your pocket, you need to take pains to go through the contract wordings.

Thinking short term

“My wife is pregnant; can I get a maternity cover?” “My father has been advised to go for a cataract surgery, is there a product which can cover this?” We regularly encounter customers asking such questions. The answer is: There isn’t any such product available that covers all your risks in the short-term. Insurance works on the concept of probability of risk. No insurance policy covers individual risk, which is certain to occur. There are no sure lotteries. You need to invest in a good policy, and I can assure you it will pay back in the long term.

Hiding information

A customer was advised by an agent to omit mentioning existing ailments in the proposal form so that his parents could get covered. Such a thing will not hold in real life. Insurance companies have the best of specialists to investigate and identify such omissions/misrepresentations at the time of claims. If any anomaly is found, your claim will be rejected and you’ll have to bear all the expenses from your own pocket.

Insurance works on a principle of “Utmost Good Faith”, which means you need to be as expressive as possible in informing your insurance provider regarding the current status of your health.

Buying health insurance solely for saving tax

Health insurance has benefits much larger than what an 80D deduction can provide. Don’t fall in the trap of agents in the hunt to sell tax-saving products, which have a higher ROI for him, rather than you. Enjoy tax benefits as an added benefit. If you keep tax-saving as your prime objective, you might end up buying a wrong product.

Getting impressed with frills

The glossy brochures sell frills more than the basic solution—full coverage of hospitalisation costs. There are products in the market that cover general medical expenses related to medical tests, pharmacy bills or dentist bills. For instance, a product that provides a free medical test coupon but covers a person only up to 60 years of age—a time when you need a cover the most. Hence, getting lured by a medical test coupon is not sensible. Ensure that your policy comprehensively covers your basic financial risk, rather than buying a glossy product, which is for problems you don’t have.