Having a health cover is very much important for you and your family. However, it is even more important to understand the health insurance terms before you buy one. Without the correct knowledge of health insurance terms, there is always a high possibility of buying health insurance that is not suitable for you or falling prey to misselling.
However, before you buy health insurance, check the policy terms and conditions, and determine if it is the right fit for you. Having a policy that does not suit your needs is as good as not having a health cover at all.
Here is a list of health insurance terms that you should know before buying a health insurance policy.
1. Insurer
An insurer is an entity that agrees to compensate people or organizations for any financial losses they incur because of unforeseen or unpredictable circumstances. This compensation is given in exchange for a payment called Premium.
In health insurance, the insurer is the entity that compensates you for the expenses you incur in case you get hospitalized.
2. Insured
Insured is the person who is covered by the insurance policy. In health insurance, insured refers to the person/people who are eligible to claim for the hospitalization expenses they incurred.
3. Individual Policy
Individual health policy means there is only one person who is insured in the policy.
Example: If you have an individual health insurance policy with a Sum Insured of Rs.5 lakhs, it means that it entitles you alone for a hospitalization claim of Rs.5 lakhs.
4. Family Floater Policy
Family Floater health policy means that it insures multiple people of the same family under the same policy. The Sum Insured is like a common cover for all of them, with a cap equal to the Sum Insured. There is no defined percentage allocated for each of them.
Example: Assume that you have a family floater policy with a Sum Insured of Rs.5 lakhs, and you have insured yourself, your spouse, and your two children under the policy. Any of you can claim a maximum of Rs.5 lakhs as cumulative hospitalization expense.
If the limit of Rs.5 lakhs is exhausted by the hospitalization of one of the family members also, the entire Sum Insured is assumed to be utilized. The rest of the family members may not be compensated for the rest of the policy tenure if at all they get hospitalized.
5. Sum Insured
Sum Insured is the pay-out amount that your insurer/Insurance Company is liable to pay to you in case of any eventuality. In health insurance, it is the maximum amount that your insurer will compensate you for the premium you pay.
Example: If your health insurance has a Sum Insured of Rs. 5 lakhs, and you incur a hospitalization bill of Rs.6 lakhs, the insurer will pay you only Rs.5 lakhs.
Know the difference between Sum Insured and Sum Assured
6. Network Hospital
Your insurer will have a tie-up with many hospitals across the country to benefit from cashless hospitalization. If you are hospitalized in any network hospital, then you do not have to run around raising money to settle the bills. Instead, your insurer will directly settle all your hospital bills.
7. Non-Network Hospital
Non-network hospitals are those who do not have a tie-up with your insurer. If you get hospitalized in such hospitals, you will not get the benefit of cashless hospitalization. You have to settle the bills on your own and then claim for reimbursement.
Some insurers reimburse only up to a percentage of the hospitalization bills if you get hospitalized in a non-network hospital.
8. Pre-existing diseases
It refers to the diseases or ailments you are suffering from at the time of buying a health insurance policy.
All About Pre-existing Diseases in Health Insurance
9. Waiting Period
A waiting period is a specific period during which it restricts you from filing a claim for hospitalization because of a pre-existing disease specified at the time of buying the health insurance.
The time duration of the waiting period may differ based on your medical condition and the insurance provider as well.
10. Riders
A rider is basically an amendment to an insurance policy by paying an additional premium. It can be included in your health insurance to expand the benefits of your policy at a lower cost.
The insurance regulator, IRDAI, has capped the premium on the riders at 30% of the premium of the basic health insurance.
5 Important Health Insurance Riders you should know
11. No-claim Bonus/multiplier
A No-claim bonus is a way your insurer rewards you for not making any claim in a policy year.
It can be given as either
Cumulative bonus – increase in the insurance cover
Or
Discount on premium – decrease in premium.
12. Copayment
Co-payment is an arrangement in which you have to pay a portion of the medical expenses and your insurer will pay the rest. The co-pay specifies the terms of the percentage of the claim amount.
Some health insurance policies have a mandatory co-payment clause, and some have a voluntary co-payment option, which allows you to pay a lesser premium.
Example: Assume your policy mentions co-pay as 20%. If your hospital bill is Rs.1 lakh, you can claim Rs.80,000 to the insurer and then settle the remaining Rs.20,000 to the hospital.
Difference between Copay and Deductible
13. Deductible
A deductible is an amount you have to pay before you make the claim to your insurer. It specifies the amount you have to pay for every claim you make to the insurer.
Example: Assume your policy mentions deductible as Rs.30,000. If your hospital bill is Rs.1 lakh, then you have to first pay Rs.30,000 to the hospital and then make the claim for the rest of the amount along with the proof of your deductible payment. Here, you can claim Rs.70,000.
14. Grace Period
A grace period is a time or the number of days that you can take to make your payment towards the premium even after the due date has got over.
Post the grace period, your insurer may reject your renewal application even if you wish to renew. You may not get health coverage benefits during this period. Also, the waiting period for any pre-existing illnesses may restart again.
15. Exclusions
Exclusions are certain medical conditions for which the insurer does not give health insurance cover. It is also referred to as Permanent Exclusions.
Example: Cosmetic procedures like plastic surgery, orthodontic treatments, etc.
Common Exclusions in Health Insurance
16. Premium
In health insurance, a premium is an amount you pay to your insurer to cover the risk of financial losses because of hospitalization.
17. Nominee
A nominee is an individual you can mention in your policy who will receive the policy benefits in the unfortunate event of your demise. In health insurance, a nominee is a person who can make claims on your behalf to your insurer in the unfortunate event of your demise.
18. Cashless Hospitalization
Cashless is a facility in which the insurer settles your hospitalization bills with your healthcare provider/hospital if you get treated at their network hospitals.
19. Premium Loading
Many insurers charge higher premiums to provide health cover if you have any pre-existing disease. The additional premium is to cover the financial risk of providing health cover to a person with a known medical condition.
According to IRDA rules, Premium loading is allowed only during issuing the policy, and not allowed if it is diagnosed when the policy is in force.
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