And you thought buying insurance is easy!

While that may be easy, what is not easy is to buy the policy that is right for you, says Harneet kaur.

With a large number of options available in market, it is important to know and analyse what your need is and what will meet requirements of your specific case. Following critical points will help you while buying a health insurance policy.

Adequate cover

It is important that your health policy provides sufficient coverage for you and your family. The amount of coverage is dependant on various factors such as the city where the person is residing and her/his age. In metropolitan cities, medical costs are usually higher and therefore you should opt for a higher cover and similar will be the case if you are getting old since you’ll need higher coverage assuming increased risk for age-related illnesses.

Pre-existing illness

You should always disclose a pre-existing disease while buying an insurance policy. As per Insurance Regulatory and Development Authority (IRDA) pre-existing diseases is any ailment, injury or any disease in any form which was diagnosed within 48 months prior to purchase of the policy.

Generally, pre-existing diseases are not covered under the policy or most of the insurers impose a waiting period during which insurance coverage is not available for the diseases identified as such. The tenure of waiting period differs from insurer to insurer, so it’s a good idea to check what that period is for your insurer if you have any pre-existing disease.

It is this information that you provide to potential insurers that decides whether the insurance company will provide you coverage or not. In case of non-disclosure, insurance company is not liable to pay you any cover; hence it is advisable to be transparent when it comes to any such information being provided to the insurers at the time of purchase of a policy.

Exclusions

It is also very important that you read your policy documents for all possible exclusions, which basically define what will not be covered under the policy. There are certain standard exclusions such as cost of spectacles, dental treatments and injury under the influence of alcohol. Apart from this, many companies also choose to exclude certain disease from their coverage list such as general debility, congenital external defects, venereal disease and AIDS.

To get the maximum value for the money you spend on the insurance premium, it is in your best interest to understand what the exclusions for the insurance policy coverage are and how much it is expected to impact you.

Sub-limit

Certain policies have sub-limits, which mean that there is a cap on the amount of claim you will get. For example: on room rent or medical treatment of certain diseases.

Some policies cap the room rent to 1 or 1.5 per cent of the policy. So, if the medical policy is for Rs 1 lakh, you can only claim Rs 1,000 or 1,500 for room rent. Any amount higher than this sub-limit will have to be borne by the insured person.

Obviously, the policies with sub-limits will have lower premium compared to policies without sub-limits. Also, it is critical that you check if the policy has sub-limits on certain ailments because in such a case even if your total sum assured is high, you may not be able to avail the entire amount of hospitalisation.

This is another factor to give a deep though as it can help you reduce your insurance premium at the cost of lower claims upon any hospitalisation and vice-versa.

Cashless facility

Insurance companies generally offer two types of claim facilities -- cashless and reimbursement. Under cashless, the insurer pays directly to the hospital while in case of reimbursement facility, you pay the hospital bills from your pocket first and then claim it from your insurer.

It is generally advisable to take cashless facility as then you don't have to pay from your pocket and avoid the hassle of reimbursement from the insurance company and you don’t have to block your working capital till the time money is received from the insurance company.

Co-payment

Co-payment basically means you will have to bear certain part of the total medical bill that you will claim from your insurer. Suppose your hospitalisation cost is Rs 100 then you will have to pay, for instance, 20 per cent from your pocket. In case of a co-payment clause in your insurance plan, the premium is usually lower. However, experts believe that in case of high claim amount, co-payment can become a burden on the individual.

So while in the short term it can help you reduce your insurance premium amount, in the long term it can negatively impact you resulting in a huge co-payment on a high medical bill. Hence, you should give a deep thought to what is more important to you.

In conclusion, one should pay a lot of attention to the above factors and try to get a perfect balance between the cost and the benefits of the insurance coverage before purchasing a policy because in most cases, the commitment towards an insurance policy is a long term commitment and hence it is beneficial to spend some time to get the ideal policy as desired.

Illustration: Dominic Xavier/Rediff.com

Harneet Kaur is a chartered accountant, CPA and chief editor at taxzippy.