Health begets savings

Buying health insurance when you are still healthy saves you a lot of money and frustration

illustration of a insured familyRecently, my friend Ajay's father, who is 74 years old, suffered a heart attack. He was kept in the ICU of a leading hospital in Mumbai. In the middle of the night, while we were discussing the payment options with the admission desk, we were taken aback when we realised that the ICU room rent was a whopping `9500 per night. The health complications with Ajay's father were so many that we didn't have the choice of shifting him to another [read economical] hospital.

By now you must have started wondering whether Ajay's father had a health insurance cover. No! Ajay [who is a lawyer] did not have health insurance for his father. By the time Ajay woke up to the importance of health insurance, his father had crossed 70 and no insurance company was ready to offer him a health cover. In hindsight, it is also a fact that neither Ajay nor his father thought of buying a policy when he was younger and healthier.

With 12 nights billed at the ICU, Ajay had not only burnt a huge hole in his bank account, but was now in debt with his friends and relatives!

Somehow, we have an uncanny intelligence to instantly think of a solution just when the problem has arrived. Believe it or not, in my career as a health insurance professional, I have seen countless cases of well-educated customers planning to buy insurance, just before a claim, as if it is a sure lottery!

"My mother has to undergo a knee replacement, is there an insurance to cover it?" or "My wife is three months pregnant, can I get a maternity cover?" Moreover, when advised a health insurance policy there are those, who are quick to come back with, "Is there a money back health insurance available, what if don't claim, will all my money go waste?" These are their reasons for not buying health insurance…Phew!

According to me, buying health insurance when you are healthy makes the most sense. Why? I'll explain, but let's first understand the basics.

What does health insurance cover?

In India, health insurance is an insurance product that covers expenses related to a necessary hospitalisation for ailments or accidental injuries, as per the terms and conditions of the specific insurance product.

What does it exclude?

A health cover generally excludes ailments that are existing at the time of taking the policy. These ailments remain excluded for a period of four years starting from the commencement of the cover.

Some insurance companies also embed a permanent exclusion, which means that a particular ailment is not covered for life. Additionally, there is a waiting period of 2 – 4 years for some ailments or treatments; these vary from company to company.

What is the basis of the terms and the exclusions?

Just get hold of a health insurance proposal/application form, and you will realise how important a role your current health plays in the kind of cover you get. Check the table given above for some health information that is collected in a proposal form that you fill when you buy health insurance.

It becomes very clear that you and your family being healthy is a big win when you are buying a health insurance policy. Didn't I tell you earlier that buying health insurance makes more sense when you are fit? Here are more reasons for you to do so:

Why to buy insurance when you are fit?

A wider choice of products

Insurance companies welcome healthy families with open arms and give you a wider choice of insurance products to choose from because your chances of claim are low.

Savings on charges

If you have an existing ailment and you apply for insurance, some companies charge you a loading of 10 to 40 per cent of the standard premium [this depends on the type of ailment]. By being healthy, you save on these additional costs.

Incentives for no claims

Almost every insurance company incentivises you for a year in which you have made no claims. You get an additional sum insured or a discount on premium of 5 to 10 per cent, making your policy cost effective.

Free medical test

Most insurance companies provide a free medical check-up if there are no claims in a block of every four years. Some insurance companies cap the expense at 1 per cent of the sum insured, while others give you a fixed check-up package at a laboratory associated with them.

Lesser exclusions

As mentioned earlier, ailments that exist at the time of applying for health insurance are excluded for a particular number of years or, worse, permanently by some insurance companies. This restricts the spread of your cover. Being healthy gives you a much wider and quicker cover on treatments/surgeries.

Other benefits

Some insurance companies even offer discounts on various health institutions like gymnasiums, diagnostic centres and spas. Insurance companies are also toying with the idea of creating and monitoring a 'health score' to incentivise you to stay healthy.

If you are still not convinced that you should buy a cover while you are still healthy, let's do a simple calculation. At an approximate premium of `15000 a family comprising, husband, wife, two children and parents can be covered for around `4 lakh [sum insured].

If they even make a single hospitalisation claim of `50000 in the next three years, it covers the entire cost of premium that the family has paid. That's the money back component!

Before you buy health insurance

man filling formRecruit a specialist: Choose an insurance adviser who specialises in health insurance, and don't just base your decision on reference. Understand his philosophy on health insurance services and find out about his experience in handling claims.

Go basic: Beware of pseudo health insurance plans. Go basic and take a standard plan, which covers the larger risk.

Do not rely only on comparison: Buy an insurance policy after comparing various products and understanding the past service experience of the product. Do not merely rely on the advice given on comparison websites. Look for a specialised adviser who would explain to you the service experience you can expect, as well as the hidden clauses.

Take pains to fill the entire form on your own: Thou shall not rely on your agent blindly. If you have just provided signatures on a blank form, the agent tends to strike out everything as not applicable and submit the form.

Do not misrepresent or omit any health facts: Insurance companies have their own ways and means to find facts at the time of a claim, based on which they can terminate a policy.

Keep a tab on the expiry of your policy: Do not miss the renewal date of your policies, as this exposes you to the risk of losing continuity benefits. Which means that ailments developed after taking the policy may not be covered if you do not renew on time.

Health information collected in the form

  • Height and Weight [BMI]: If you have an abnormal BMI, most insurance companies will charge you an additional fee on premium.
  • Tobacco and alcohol usage: Excessive use of tobacco or alcohol or both can result in denial of your proposal for coverage or additional charges on premium.
  • Cholesterol, hypertension: Having high cholesterol or hypertension can result in a four-year or permanent exclusion of cardiac ailments. Some insurance companies can even deny you insurance.
  • Existing ailments like diabetes and thyroid: Depending upon the insurance company's terms and conditions, existing ailments can either be permanently excluded from cover or have a four year waiting period.
  • Major ailments: If someone has a life-threatening illness like cancer, or has undergone bypass surgery, most insurance companies may reject the proposal for insurance.
  • Family history of ailments: A family history of cardiac ailments or diabetes before the age of 50 could also hamper your cover or increase your charges.

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Mahavir Chopra
Mahavir Chopra is a Chartered Accountant and a specialist in Personal Lines Insurance. He currently is the Head - e-Business & Personal Lines at www.medimanage.com – India’s first Specialized Health Insurance Broking Company.

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