Health insurance is one of the most but least discussed topics in India.
It is so important that it should actually be taught in schools and colleges. But if you go and speak with a typical college student as to what they know about health insurance, this is the type of a typical response you would get.
No, I don’t really have any idea about health insurance. My mom actually looks into all this stuff. I know it is important, but it all seems a bit daunting to me. And I really have no clue about health insurance. I’m going to cover three specific points.
Need of a Health Insurance
Number one, why do you need health insurance? Why is it critical to have health insurance?
Number two, what are some of these specifics in terms of buying health insurance? Because it is very complicated to buy health insurance. Third, and finally, I will show you which insurance do I use and how I have bought that? Now, just a very quick disclaimer that I’m not an insurance expert.
I did a lot of background research to prepare this topic. Some of the details might be off. My primary research comes from speaking with my friends at Sweta, which is an online platform for simplifying insurance buying solutions.
Just a very humble request that if you like these types of topics, please like and comment that would indicate to me that you appreciate this type of content. Thank you so much. And let’s get started. So let’s first quickly talk about that why is it that you need health insurance?
Let me explain this by narrating two very short anecdotes. So the first anecdote is about my neighbor. He is extremely rich. He is a property developer in Delhi and he makes an insane amount of money. During this pandemic, several of his family members got Covid and they had to be hospitalized.
Now, this was the peak of the second wave of coronavirus. And you might also relate with this story that many people who were admitted to the hospital, ended up amassing massive amounts of bills. So in his case, his family ended up spending 70 to 75 lakhs in terms of treatment, which even to a rich family is a huge amount.
So the point that I want to drive home is very simple, that the world is getting more and more uncertain. There are new healthcare-related challenges that are coming up and we don’t know what kind of emergency expenses might amass. Now, if as a middle class or an upper-middle-class family, if you had to, unfortunately, go through such a situation, it can put immense stress on your entire family for even a generation to come.
Now, you might say Akshat that you know what, coronavirus was a one-off event. It happens once in every generation, so to say. Then, and it has happened in our generation. So why should we even look and go buy health insurance now?
This brings me to story or fact number 2. There were 151 thousand people, one fifty-one thousand people who passed away due to road accidents in India last year. These 151 thousand people, unfortunately, passed away. But there would be a lot more people who would require hospitalization due to accidents.
Now, situations like accidents have the potential to wipe out the entire savings of your family. Now, you can make a lot of money in the stock market. I teach people how to make money in the stock market. I talk a lot about finance, how to grow money, how to save money.
Now imagine doing this for decades and all of this getting wiped out due to one single incident in your life that is really physically and mentally jarring for anyone. Now, these two simple stories should narrate the value of buying insurance and why every single person in India should have health insurance. Now, there are other peripheral reasons for buying insurance.
Let me just quickly cover it. So, number one, the cost of healthcare treatment in India is going up every year. India is actually becoming a big destination for medical tourism. More people are actually coming to India to get medically treated.
At least this was the case before the coronavirus. And this is going to become the case in a few years from now. So the point is that the cost of healthcare, due to the increasing demand and increasing pressure on healthcare, it is going to go up.
Now, if the costs are going up and if you are uninsured, then it can actually put a lot of stress on you in terms of availing of any medical treatment. Now, if you’re convinced that buying health insurance is actually the right step, which according to me, I highly advocate that you have health insurance, then comes a series of questions.
Which health insurance should I buy?
How much coverage should it have? Which hospitals will it cover? What type of diseases would it cover? Should I buy it for my entire family or should I buy it at an individual level? There are a host and hosts of questions. And trust me, buying health insurance is so complicated.
It’s so complicated that people get really bogged down in terms of the research. So let me break down this section into a Q and A format. So let me ask and let me go through some of the key questions or the most important questions that you need to be aware of before you are buying your insurance.
So the first question is that, hey, should I buy health insurance just for me as an individual or for my entire family? So in my case, I’m an individual and I have a family of three. So me, my wife, and my kid. Why am I not considering my parents?
Because I’m above 25 and I’m not dependent on my parents. So they would constitute a separate family. So am I better off buying individual health insurance for me or should I take one plan that covers all three members of my family? So the answer is that I should take health insurance that covers all three pools of members of my family.
And let me explain this via an example. So let’s say that I take a cover of 20 lakhs for my family, and if one of the family members gets sick, the expense, let’s say eight, then 12 lakhs are remaining. Now, if the second member also has to go through some kind of medical emergency, then the money from that 20 lakhs can again be availed.
So that’s a 20 lakh cover for the entire family. On the flip side, if I’m buying insurance just for me, then I can’t use that 20 lakh cover for my entire family. I can just use that 20 lakh cover just for me. So if you buy health insurance that covers all three or four members or five members of your family, that entire pool of the money can be utilized by different family members.
Now comes the second question that how much should I take?
Should I take a 10 lakh rupees policy or should I take a 20 or 30 or 40 or 50 lakh policy? What type of cover should I take? Now, cover essentially means, let me quickly explain that, that, for example, if for some reason, like one of the members of my family has to get hospitalized and we end up spending 30 lakhs.
Right And if my cover is only 10 lakhs, then I will be reimbursed only up to 10 lakhs because the cover that I had bought was only 10 lakhs. So should I have taken 30 lakhs to cover? Let me discuss this point briefly. First and foremost, this really depends on your individual circumstances, your age, your health condition, number of family members, etc.
But my friend from Ditto, who is a specialist in terms of healthcare insurance, She told me categorically that people usually take a cover of, 3 lakhs to 20 lakhs. That’s the general range. Now, it’s needless to say that if you take a higher cover, you will have to pay a higher premium every year. Just to share some numbers.
If you take a cover of 10 lakhs for good insurance, then your premium amount will come out to be approximately 20000 per year. But now you would say that hey Akshat, you know what? What if a bad situation like coronavirus happens where people actually ended up being 60, 70, 80 lakhs hospital bills, what do I do then? I only have a cover of 10 lakhs.
So in such a situation, you can actually adopt a hybrid plan. A hybrid plan essentially means that you buy a Base cover, for example, 10 lakhs, and then you take a top-up. It is called a super top. Companies term it differently, it’s usually a top-up, and you can buy a top-up of 50 lakhs.
So let’s assume that you wanted an entire cover of 60 lakhs. Buy a Base cover of 10 lakhs and buy a super cover of 50 lakhs. Now in these hybrid plans where you’re having a base cover and a super cover, you can buy the super top-up separately.
That’s the first key advantage. And the second key advantage is that the super top-up premium rates are actually on the lower side. So you actually end up saving money. For example, if you want to buy a one 1 crore base cover, that will cost a lot more premium compared to you buying a 10 lakh base cover plus a 90 lakh super top-up.
Now, this might sound a little confusing, so you can check the links in the description box and you can schedule a call with people from Sweta and understand your own specific requirements and purchase a plan accordingly. But hopefully, this small discussion should have given you an understanding of what type of base cover to take and what type of super topup to take in case you require that.
Now comes a very important question that what type of diseases and what type of facilities are covered under your health insurance. So you must be very, very mindful of this. Now, first and foremost in general, since I’m speaking generally here, it would depend on your plan and specific policy that you purchase. But generally speaking, if you are a healthy individual and if you are taking health care insurance, then almost all the diseases are covered from cancer to hypertension, diabetes, etc.
So if such disease occurs after you have bought health insurance, you will be covered by your health insurance. That is one. Hospitalization is generally covered. Daycare is generally covered. Usually consultations with doctors where you’re just going and speaking with a doctor and, you know, getting that bill and getting it reimbursed.
This is not covered by the majority of the policies. So if this is important to you, please check with your policy provider. Second thing, sometimes people have special requirements. For example, I want to be treated only through homeopathy or I want to be treated only through Ayurveda. Now, these types of insurances also exist.
So please identify whether these are your requirements or not. If these are, then buy a policy that matches with this. You must also check whether your health insurer provides domiciliary care. What that means, as you might have heard, is that during coronavirus times people were not getting beds in hospitals. So what they used to do was that they use to set up home ICUs.
Now, that used to cost a lot of money. That comes under domiciliary care. So you can actually just get treated from home. Now if a hospital is refusing you, if you have some emergency, you go to a hospital. The hospital refuses you that we don’t have any beds. Go, set up a home ICU. Then whether your health insurance covers that or not.
So domiciliary care, especially in regions where there is health care infrastructure shortage, it becomes very important. And you must look at it before buying insurance. You must look at room types. Because what you might imagine is that I have bought premium insurance. Now, I’ll get an executive suite in some hospital, then you go and fight that why am I not getting it?
So that situation should not arise. Please check what type of rooms you will be eligible for if you’re buying health insurance from a certain provider. There is something called a sub disease to spend clause. Now, what it essentially means is that, for example, if I’m buying health insurance and that health insurance covers, hypothetically speaking, 10 diseases.
Right. But that policy also indicates that, hey, you know what? If you get this particular disease, let’s say a kidney transplant, we will only reimburse five lakhs. Now, that’s a sub disease clause spend. hey, are assigning a certain dollar value to that particular disease. So be very, very mindful that you don’t get into policies where this sub disease clause is there, especially if you are prone or if your family is prone to such diseases because it might wipe you out.
You might imagine that I have got very good insurance. It’s one crore cover and everything. But check this sub disease clause spend. That is a very, very important point for you to understand. So in summary, your health care insurance would have a bunch of clauses, so pay a special emphasis on it, understand the terms and only then buy the insurance.
Let me also quickly touch upon two very basic concepts here. One is around network hospitals. So essentially what happens is that if you buy insurance from HDFC. Now HDFC has a partnership with Apollo Hospitals. So Apollo hospitals have a range of networks. If you buy the HDFC policy, you will get covered under the network hospital called Apollo and a bunch of other hospitals with HDFC would have a tie up.
So this is called a network hospital. Now the majority of the network hospitals offer something called cashless facilities. Cashless facilities essentially mean that while taking your treatment, you don’t need to put up the entire amount.
They might ask you for a little bit of security sometimes, but you don’t need to put up the entire amount. Now, this is very different when you are getting treated at a non-network hospital. What happens at a non-network hospital is in majority of the cases you will have something called a reimbursement clause. So you will be reimbursed.
There is no cashless facility there. For example, if you have bought a policy Z, a health care policy Z, now you go to the hospital, ABC, you go there, you have some issue. And if that ABC hospital is not a network hospital of policy Z, you will have to put up the entire amount upfront, in the majority of the cases.
So that can become a big headache. So before buying a health care policy, please check whether your insurer has enough network hospitals and they offer cashless facilities and what are the reimbursement rate and reimbursement clauses are like.
So please be very, very mindful of these minute things because you might go and invest a lot of money right now. And then, when the dire situation comes that insurance might not be very useful or fruitful for you. Now, the final two things that I want to touch upon here is something called a co-payment clause.
A co-payment clause means that, for example, sometimes at the time of selling insurance, your insurance agent might tell you that hey Sweta, buy this policy. The premium is twenty thousand. But if you opt for the co-payment option, we will give you a 10 percent or 20 percent discount on premiums annually.
Now, what happens in the co-payment plan is very simple, that let’s say that you go to a hospital, you have to get hospitalized and the total bill comes out to be one lakh rupees. If the total bill comes out to be 1 lakh rupees, your insurer will say that, hey, you opted for this co-payment option.
Now you’ll have to pay 10 percent of the entire amount. We will only pay 90 percent. Therefore, it is called as co-payment because both parties are paying. Right. So be very, very mindful of that. Now, don’t go for a policy where there are co-payment options. Finally, you must take a look at the claim processing time and claim processing rates.
These days, almost all the major health care insurance providers have a very good claim processing rate, but they can really mess you up in terms of claim processing time. This is especially true in situations where you get reimbursed, where you put up the money first, and then ask for reimbursement from your insurance provider.
So please be wary of how much time do they process such reimbursements. So check all these points and then buy your insurance. I have tried to break it down. This is a super complex topic. And again, a very quick disclaimer that these are points for your own understanding, for you to understand how to buy health insurance.
What are some of the key points to keep in mind? But at the end of the day, do your own due diligence as well. Now, finally, let me show you which health insurance am I buying and why. So I am buying HDFC Ergo and this is the health insurance that I’m buying.
If you go on Ditto, you will find all the good things simplified in a very simple manner. They have been doing a wonderful job in terms of bringing out financial news. You might have heard of Finshots, which is again a free platform for developing your financial acumen and financial knowledge.
They are doing the same thing in the insurance space. So just give it a read. It’s very easy to follow what will be covered versus not. For example, you can see I spoke earlier about that you can pick any room that you like. This is a very important concept. So this is important to me. You will never have to split the bill. So this is the co-payment option that I was explaining to your earlier. You will have full coverage of the disease.
You will have pre and post-hospitalization expenses and a bunch of other things. You can read it up more. And finally, what is lacking here? So you can see that no cover for alternative medicines. Now I respect Ayurveda, homeopathy, etc.
But I’m buying the health insurance to actually get covered for slightly more expensive emergency-like situations. So if I have to take homeopathy and Ayurveda, then probably it might not lead to a lot of expenses, to begin with. So, therefore, not having this feature is OK with me.
So this is the option that I’m opting for. What is the cover that I am taking? I’m taking a 30 lakhs cover. So I can actually go here, I can buy from Sweta, or I can speak with an executive, and then I can directly buy. So I’ll buy a family plan. And then I’ll fill out my information, I will finally get the hold of the premium and I will buy this policy. So I’m picking up the HDFC insurance because HDFC is a good brand.
That’s my personal opinion.