While this expansion is good as it provides more choice to the consumers, it also confuses them to some extent because of the new set of clauses that keep on getting introduced in these policies. And most of these new clauses are included in the 'exclusions' section.
So, when making a claim, the policyholder needs to be aware of all the clauses in the policy and accordingly, produce the correct documentation. Otherwise, the claims could be fully or partly rejected. The latter is especially interesting to note because in spite of having a higher policy limit, the insurance company only makes a part payment.
The main reason why this occurs is due to the introduction of a concept called 'limits' that are put within the policy. In simple words, it means that the policy has pre-set clauses which specify the upper limit for a number of expenses.
There are two ways in which these limits are imposed. Either there is a percentage figure of the total sum assured. That is, if you have taken an insurance policy of Rs 3 lakh and there is a limit of 5 per cent of the expenses to be incurred as doctors' fees, then the total amount of fees that the policy will pay out is limited to Rs 15,000. The same can also be stated in numerical terms instead of a percentage figure.
This situation could get a bit complicated sometimes because of the language used. For instance, there could a limit of 2 per cent per day on say, room rent subject to a maximum of Rs 40,000. This basically means that you cannot check into a hospital which charges you more than 2 per cent of your policy amount per day. Also there is a cap on the amount of Rs 40,000 per day. Therefore, your actual expense has to fulfil both these parameters. The limits are commonly imposed on various types of doctors' fees, room rent and ICU fees.
Let us look at this scenario through an example. Assume that A has a medical insurance policy of Rs 4 lakh. The policy contains conditions that:
The room including boarding and nursing expenses are allowed up to 2 per cent of the sum insured per day
ICU charges are capped at 3 per cent of the sum insured per day (the total of the above two expenses should be up to 30 per cent of the sum insured per illness)
Fees of the surgeon, consultant, medical practitioner, specialist would be limited to 30 per cent of the sum insured per illness
Medicines, oxygen, blood, operation theatre and other items are limited to 40 per cent of the sum insured per illness
In this case assume that A is admitted to the hospital and has incurred charges like this:
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Room rent Rs 4,000 per day for five days (Total = Rs 20,000)
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ICU charges Rs 14,000 per day for three days (Total = Rs 42,000)
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Fees of the surgeon is Rs 25,000, consultants charges of Rs 8,000 per day for seven days (Total = Rs 56,000), specialist charges Rs 40,000 and doctor charges Rs 25,000 (Total = 1,46,000)
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Medicines come to Rs 65,000 while the other expenses end up with Rs 50,000 (Total = 1,15,000)
So a total expense of Rs 3,23,000 has been incurred here. Normally, a Rs 4 lakh policy should cover the entire expense. But the cap on different expenses makes sure that you will not be able to claim the entire amount.
This is how it will work. The ICU charges are 3 per cent of the sum insured that is Rs 12,000 per day. Clearly, while you have paid Rs 14,000 per day for three days (Rs 42,000), you will only get Rs 36,000 (a loss of Rs 6,000)
Since the fees of various specialists and doctors are pegged at 30 per cent of the sum insured which is Rs 1,20,000, your expense of Rs 1, 46,000 exceeds that limit. So you lose Rs 26,000. This means that a total of Rs 2,91,000 is allowed as claims in this case. And you will have to bear the remaining Rs 32,000. In other words, before making expenses for any medical treatment, you should be clear about the limits that are prescribed in you medical insurance policy. That will help you to make the claims properly.
The writer is a certified financial planner.
