15 questions to consider before buying a health insurance policy
When you buy a health insurance policy, you probably look at features like sum insured, premium, health checkups, cumulative bonus etc. But perhaps you should seek answers to the following questions:
1) Does the policy cover Covid?
IRDAI has mandated the issue of “Corona Kavach Policy” by insurers. Now this is a policy which has to be bought separately. It allows for the following:
- hospitalization expenses
- homecare treatment expenses
- Ayush treatment expenses
- pre existing & post hospitalization expenses
What about your existing policy? Does it cover Covid treatment? The IRDAI in its circular dated 4th March, 2020 has stipulated that
I. where hospitalization incurred is covered in a product, insurers shall ensure that cases related to Covid shall be expeditiously handled
II the costs of admissible medical expenses during the quarantine period, shall be settled in accordance to the applicable terms and conditions of the policy.
The key phrase here is admissible medical expenses. Will the insurer cover CT scan, CRP blood test etc.? Find out from your agent. Or better still send a written query to the insurer.
2) Is it a benefit policy or an indemnity policy?
Before you buy a policy, you must be aware whether it is benefit policy or an indemnity policy? What are the key differences between the two?
A better option would be to buy an indemnity policy but also acquire a benefit policy for critical illnesses.
3) What is the waiting period for pre existing disease?
The IRDAI allows a maximum waiting period of 48 months for pre existing disease. Check the waiting period applicable in your policy. Many policies have a lesser waiting period of 36 months. Some policies provide for reduction in waiting period by paying an additional premium.
4) What about health checkups?
Most policies offer a free health check up facility starting from the second policy year. However only smaller tests like urine examination, simple blood tests etc. are covered under a free health check up facility. Your policy will not pay for more expensive tests like CT scan or MRI. Some policies specify that health checkups will be available only for a claim free year. Find out if this clause is relevant to your policy.
5) Is room rent capping applicable?
Let us explain this concept with an example. Supposing Mr. Kapur has an indemnity policy with sum insured of Rs.5 lakhs. He is hospitalized and the claim amount is Rs.320000 out of which Rs.20000 has been spent exclusively on medicines. A room rent limit of 1% of the sum insured is applicable in the policy. Mr. Kapur stayed in a room which cost Rs.7500 per day for five days.
What will be the claim amount payable to Mr. Kapur?
Expense Head Expense Amt Deductible Amt Payable Amt
Medicines 20000 Nil 20000
Room Rent 37500 12500 25000
Balance Amount 262500 87491 175009
Total 320000 99991 220009
Owing to rent capping, Proportionate deduction clause has been invoked by the insurer. Formula used for this deduction is as follows:
(Actual Rent-Eligible Rent)/Actual Rent) =(37500-25000)/37500=33.33%
262500*33.33%=87491.
Just imagine. Mr. Kapur has lost almost Rs. 1 lakh just by staying in a higher category room! It makes sense to stay in a room according to your eligibility. Or opt for a policy with no room rent capping. The flip side of no room rent capping is that you may end up exhausting a large part of your sum insured by staying in a higher category room and a lesser amount will be available for other medical expenses.
6) What is the restore/recharge benefit under the policy?
Does your policy have a restore/recharge benefit? What does it mean? Does it imply that once your sum insured and cumulative bonus is exhausted you will get an additional benefit amount in the form of restore/ recharge benefit? Yes, but there are conditions? Let us consider two policies with restore/reinstatement benefit namely HDFC Ergo & Optima Restore:
The Restore Clause of Optima Restore states that
“Instant addition of 100% basic sum insured on complete or partial utilization of your existing policy sum insured and multiplier benefit (if applicable). during the policy year. The total amount (basic sum insured, multiplier benefit and restore sum insured) will be available to all insured persons for all claims under in-patient benefit during the current policy year and subject to the condition that single claim in a policy year cannot exceed the sum of basic sum insured and the multiplier benefit if applicable”.
Consider an example:
Mr. A has a Optima Restore policy with sum insured of Rs.5 lakhs. Multiplier benefit or Cumulative bonus is 50% for a claim free year (max. of 100%). He made the following claims in the 2nd policy year. Let us assume that the 1st claim was made for Angioplasty, 2nd for CABG and the 3rd for injuries due to an accident.
Claim no. Claim amount Claim received Restore applied
1 100000 100000 nil
2 800000 750000* 100000**
3 500000 400000# 400000##
Total benefit amt. 1250000
* After claiming the first amount of Rs. 1 lakh, amount available to the insured was Rs.11.5 lakhs (500000 sum insured+500000 restore benefit+250000 multiplier benefit -100000 sum insured utilized), but single claim is restricted to 7.5 lakhs(sum insured + multiplier benefit).
**sum insured balance=4 lakhs & multiplier benefit=2.5 lakhs; hence 1 lakh used from restore benefit)
# sum insured of 5 lakhs & multiplier benefit of Rs.2.5 lakhs is fully exhausted and 1 lakh from restore benefit is also used up . Therefore 4 lakhs are left from the restore benefit which is settled against the 3rd claim.
## 4 lakhs are paid from the balance in the restore benefit.
Thus out of the total claim amount of Rs.13 lakhs, 12.5 lakhs have been received from the insurer.
Thus we find that a total of Rs.12.5 lakhs have been paid for the 3 claims.
Now let us consider Reinstatement of Sum Insured under New India Mediclaim policy. How is it different from Optima Restore?
It is applicable for sum insured of Rs.5 lakhs or more
it cannot be used for claims resulting from other illnesses
Consider another example:
Mrs. Kapur had a policy with a sum insured of Rs. 5 lakhs. She was hospitalized for heart disease and the hospital bill amounted to Rs.6 lakhs. A 2nd claim was made by her in the same policy year for removal of stones in the gallbladder. The hospital bill was Rs.2.5 lakhs. In this case for the 1st claim Rs.5 lakhs will be paid. And in the 2nd case nothing will be paid by the insurer.
But if the 2nd claim was for heart disease (same as 1st claim), the full amount of Rs.2.5 lakhs will be paid by the insurer.
Thus we find that understanding the policy wordings is crucial to avail a benefit under a policy. Most agents are not aware of the significance of clauses and conditions in the policy document. This might lead you to believe that recharge or restore benefit (or any other policy benefit) is similar but it usually not the case.
7) Is there any provision for bonus in the policy?
Most policies offer a bonus if there is a claim in the policy year. It can be vary from 5% to 100%. In case of a claim the bonus reduces by the same percentage as it had increased.
Let us consider a policy with a sum insured of Rs.5 lakhs. The cumulative bonus inherent in the policy for a claim free year is 10% subject to a maximum of 50%.
Year Claim Cum. Bonus Benefit Amt(next year)
1 No (+)50000 550000
2 No (+)50000 600000
3 Yes (-)50000 550000
Note that the amount of claim is not important. If there is a claim bonus will reduce. However some policies do have non reducing bonus for instance the Max Bupa Money Saver.
8) Which option is better: a bonus or a discount in premium?
It really depends on personal cash flows. If you have a decent income it makes sense to go for a cumulative bonus option as a higher premium will entitle you to more tax savings. However, if cash flows are a problem, discount in premium is a better option.
9) What is the maximum age of entry and copayment, if any?
The IRDAI allows a maximum age of entry of 65 years. Some policies have no maximum age of entry.
Watch for the copayment applicable. In many policies, you will find copayment of 10-20% if the age of entry is 60 years or more.
Copayment may also be applicable if you choose to undergo treatment in a higher category zone. For example, if you have purchased a policy in Patna and subsequently decide to undergo treatment in Delhi NCR, a copayment will be imposed.
10) What is the premium being charged and is it equivalent to the premium charged by similar plans?
Remember that a policy charging higher premium may have add on features. If you are opting for a lower premium, you may get a no frills policy. You can compare features of various policies on sites like policybazzar.com.
11) Which illnesses are temporarily or permanently not covered by the policy?
Specified diseases:
Every indemnity policy has a list of diseases which are not covered for a certain period usually 24 months. Some examples are: Cataract, Hernia, Knee/hip joint replacement, piles, Hydrocele etc. Most of these diseases are categorized as slow growing.
IRDAI permits the following diseases to be permanently excluded from a policy:
· Sarcoidosis
· Malignant Neoplasms
· Epilepsy
· Heart Ailments
· Cerebrovascular disease (stroke)
· Inflammatory bowel disease
· Chronic liver disease
· Pancreatic diseases
· Chronic kidney disease
· Hepatitis B
· Alzheimer’s disease, Parkinson’s disease
· Demyelinating disease
· HIV & AIDS
· Loss of hearing
· Papulosquamous disorder of the skin
· Avascular necrosis
12) Does the policy cover Ayush treatment?
Treatments such as Unani, Siddha, Homeopathy, Ayurveda, Naturopathy etc. are covered under Ayush treatment. But the treatment has to be undergone at an authorized center. Is Ayush treatment covered under your policy? If so, to what extent of the sum insured? Some policies provide a fixed percentage of sum insured for Ayush treatment for e.g. 25%. Others may not have such restrictions.
13) How many network/ppn hospitals are there in your area?
This is important as cashless facilities can be availed only at network hospitals. This list would be available on the insurer’s website. A lesser number of hospitals in the network may cause distress in case of a medical emergency. Also, public sector insurers may be following a PPN Model where pre-existing determined prices are fixed for treatment of specified illnesses. Unless you follow the norms, you may end up paying a substantial amount from your own resources. Ask your agent if it is PPN hospital and plan your hospitalization accordingly.
14) Have you answered the questions in the proposal form correctly?
Never ask the agent to fill up the proposal form. Do it yourself. Answer all the questions truthfully. If you have any other health policy say so. If you have any If you have past or present illness, provide the details. If you are overweight, the underwriter will look closely at your BMI. And if you are a smoker, mention it in the proposal form.
Please understand that the proposal form is the basis of the insurance contract. Any wrong answer may lead to cancellation of the policy and forfeiture of all premiums paid. Once your policy is cancelled, it will be quite difficult for you to buy another policy from any insurer.
The Supreme Court has stated that in the “Reliance Life Insurance Complainant. & Another vs. Rekaben Nareshbhai Rathod: “Now it is clear that a person who affixes his signature to a proposal which contains a statement which is not true, cannot ordinarily escape from the consequence arising therefrom by pleading that he chose to sign the proposal … without reading or understanding it … In filling up the proposal form, the agent normally ceases to act as an agent of the insurer but becomes the agent of the insured”. And in the much cited case, Satwant Kaur Sandhu vs. New India Assurance Complainant. Ltd. the Supreme Court observed that “In a contract of Insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept it or not to accept is a material fact…. any inaccurate answer will entitle the insurer to repudiate his liability.
15) What is the claims ratio?
Claims ratio is the number of claims settled against the number of claims received. Insurers love to show their claim ratios which range from 85% to 95%. But does the ratio convey the real story? Many claims are only partially settled. For instance, if you have made a claim of Rs. one lakh but the insurer settles it for Rs.40000, it will be treated as a settled claim by the insurer (unless you choose to file a case against the insurer). Therefore the claims ratio might not be a true indicator of the number of claims being settled by an insurer. However there is no harm in being aware of it. At the least it indicates the claims settlement process of the insurer.
Conclusion
Seek answers to these questions before you buy a health insurance policy. Try to get written answers to your queries from the insurer if possible. Above all, disclose everything honestly in the proposal form. And in all probability, you would have made the right decision.
Comments
Post a Comment