Health Insurance: Why relying solely on employer-provided health insurance is a bad idea: A Comprehensive guide

PuneNow, August 22, 2023: In an era where the cost of healthcare is escalating at an unprecedented rate, many Indians are walking on a financial tightrope by paying for their medical expenses out-of-pocket. Despite meticulous financial planning, a single trip to the hospital can cause a major dent in your savings. In this article, we discuss the importance of buying a personal health insurance policy and why relying solely on employer-provided health insurance is a bad idea!

According to data, a mere week’s stay in a hospital could easily set you back by at least Rs. 5-8 lakhs. The scenario becomes even graver when you consider that out-of-pocket medical expenses do not offer any tax benefits. The solution to this looming issue? Comprehensive medical insurance.

Why Employer-Provided Health Insurance is Not Enough

While many companies offer health insurance as part of their employee benefits package, relying solely on employer-provided insurance can be a risky strategy. When you leave a job, that particular coverage ends, and the new employer may offer a different health policy with different benefits.

Furthermore, your company’s healthcare insurance policy entitles you to benefits and limits based on your designation in the organization, whereas a comprehensive personal healthcare plan offers you benefits irrespective of your working status and position.

Moreover after you stop working or start a venture of your own, acquiring a new health insurance policy may either be very expensive or outright impossible due to advanced age or lack of a track record. Most companies are hesitant to provide coverage to older individuals.

Pre-Existing Illnesses – Important

When you buy a new insurance policy, it will not cover any pre-existing illnesses that you may have acquired as part of your ageing process. However, if you have been buying health insurance policies regularly, your insurer will have no problem covering those illnesses because then they are not treated as pre-existing illnesses and treated as the liability of the insurer as you have been ageing under their care.

Building a Health Insurance Track Record

If you start early and are consistent in renewing your health insurance policy with a particular company, you create a favorable track record. This often enables the insurer to extend your coverage into your elder years, where medical expenses are typically higher.

The Benefits of Medical Insurance

Financial Security

Investing in a comprehensive health insurance policy provides the assurance that the bulk of your medical expenses will be covered, safeguarding you against unforeseen circumstances. From in-patient treatment to post-hospitalization expenses, medical insurance cushions you against high healthcare costs.

Expensive Investigations and Cashless Transactions

Today’s healthcare often necessitates a range of diagnostic tests, some of which are extremely costly. Health insurance usually covers these diagnostic tests, easing your financial burden. Additionally, most modern insurance policies provide the benefit of cashless transactions. This means that in case of an emergency, your family won’t have to scramble to arrange funds; the insurance company will directly settle the bill with the hospital.

Tax Benefits

In India, health insurance premiums are tax-deductible under Section 80D of the Income Tax Act. This not only makes the investment in health insurance financially wise but also provides you with annual tax benefits, a feature lacking when you spend on medical care directly from your pocket.

How to Choose the Right Policy

Given the plethora of options available, selecting the right health insurance policy can be daunting. It’s crucial to consult a financial advisor to assess your needs comprehensively and make an informed decision. Factors like premium amount, extent of coverage, inclusions and exclusions, and the reliability of the insurance provider should be carefully weighed before making your choice. Here is a comprehensive guide to help you choose the right healthcare insurance policy.

Step 1: Select the Appropriate Policy Type

Different types of health insurance policies offer varying levels of coverage. Your first task is to pick the one that best suits your family’s needs.

• Individual Health Plans: Cover only one person with a fixed sum insured. Best for those needing a plan for just themselves or a single family member.
• Family Floater Plans: Cover multiple family members under one sum insured. Ideal for young families and usually more cost-effective.
• Senior Citizen Plans: Designed for those 60 and above, offering benefits like outpatient care and coverage for pre-existing conditions.
• Disease-Specific Plans: Targeted coverage for particular illnesses like heart disease or COVID-19.
• Critical Illness Plans: Lump-sum payout for diagnosed critical illnesses regardless of actual medical expenses.
• Top-Up and Super Top-Up Plans: Supplemental plans that kick in after a deductible limit is met.

Step 2: Determine a Sufficient Sum Insured

Evaluate the health needs of all family members to decide the sum insured. While a higher sum provides better coverage, it also increases the premium. If budget is a concern, consider top-up or super top-up plans for extra coverage.

Step 3: Seek Comprehensive Benefits

Ensure the chosen plan offers a broad range of coverage benefits tailored to your family’s specific needs. For example, a newlywed couple might want a plan that includes maternity coverage.

Step 4: Examine Limits and Sub-Limits

Some plans may limit coverage in certain areas like room rent or specific treatments. Choose a plan with minimal sub-limits to ensure optimal coverage.

Step 5: Consider Optional Riders

Optional riders like personal accident cover or critical illness riders can broaden your coverage for a small additional premium.

Step 6: Inspect the Hospital Network

Select a plan that includes a wide network of hospitals, preferably ones convenient to your location, to avail cashless hospitalization.

Step 7: Review Pre-Existing Condition Waiting Periods

Plans usually have a waiting period for pre-existing conditions, ranging from 12 to 48 months. Choose a plan with the shortest waiting period if you have pre-existing conditions.

Step 8: Compare Premiums

Premiums vary across insurers and plans. Make sure to weigh the cost against the coverage benefits offered. Don’t compromise on coverage for the sake of lower premiums.

Step 9: Assess Policy Exclusions

Understanding what is not covered is as important as knowing what is. Familiarize yourself with any policy exclusions to avoid surprises later.

Step 10: Seek Premium Discounts

Many insurers offer discounts for no claims, adding multiple family members, or maintaining a healthy lifestyle, among others. Utilize these to reduce your premium costs.

Step 11: Explore Value-Added Benefits

Some plans offer additional perks like free health check-ups, telemedicine services, or even wellness programs. These can make your insurance experience more rewarding.

In summary, selecting a health insurance plan for your family involves considering several factors. By diligently evaluating each step outlined above, you’ll be better equipped to make an informed decision. For the most convenient experience, consider purchasing your policy online.

Conclusion

This article is a general advisory and not sponsored by any health insurance company. Health insurance in India is not just an optional financial tool; it’s a necessity for financial security and peace of mind. If you haven’t yet invested in a comprehensive medical insurance policy, now is the time to consult your financial advisor and secure your health—and your future.