image

health as it happens

9 Common Mistakes to Avoid While Purchasing Health Insurance - Forbes

In this era of high cost-of-living and rising medical costs, having a comprehensive health insurance plan is a much-needed investment for individuals across socio-economic classes. It’s an effective tool to safeguard against unforeseen medical emergencies and maintain financial stability.

The widespread consequences of the pandemic hurt the savings of many households as they scrambled to meet mounting medical expenses of hospitalized family members. Such circumstances reinforced the importance of securing health and financial well-being via adequate health insurance plans.

Without a proper understanding of the consequences of a health insurance policy and its clauses, hasty decisions could lead individuals to choose an ineffective plan that may not serve the purpose of opting for them. Here are the top nine common mistakes you should avoid when buying a health insurance policy in India.

1. Lack of sufficient research.

Many individuals buy a health insurance policy in a hurry without a thorough understanding of the policy terms and conditions. People also don’t always remember to compare different policies and rather buy the first policy that comes their way.

It is recommended that individuals undertake rigorous research before choosing a health insurance policy. For instance, families with two or more children should choose a family floater plan rather than an individual plan. Or, if grandparents are in the family, buying a senior health insurance policy with higher tax benefits could be more viable.

Individuals must take the time to understand their probable medical expenditures in the coming years and find a suitable policy that fulfils them.

2. Insufficient policy coverage.

The premium cost is of prime consideration to decide from a wide range of health insurance policies. However, many individuals choose sub-optimal coverage plans to have an economic premium outgo and select plans with restricted insurance coverage. The restricted insurance coverage may leave an individual to pay out-of-pocket at the time of a medical emergency.

The yearly cost of the premium is significant but not the only factor to consider when buying a health insurance policy. It is essential to consider the family size, medical history, expected medical expenses, hospitalization expenses, and flexibility before making the final decision. Adequate coverage will ensure financial security and save extra financial burden of medical expenses at the time of medical emergency.

What defines adequate coverage?

A few aspects must be checked in every health insurance policy to determine if the coverage is adequate:

  • Hospitalization expenses: It is important to note whether the health insurance policies cover the hospitalization cost. The expenses covered must include the hospital’s room rent, intensive care unit (ICU) charges, surgery charges, doctors’ fees and diagnostic test costs.
  • Pre and post-hospitalization expenses: A good health insurance plan must reimburse any expenses incurred 15 to 60 days before hospitalization. This clause should cover doctor visits, diagnostic tests, and any other pre-hospitalization treatment. Similarly, the policy must cover medical expenses incurred for follow up post-discharge from the hospital. Ideally, insurance companies specify a window ranging between 30 to 90 days after the discharge for costs to be considered post-hospitalization.
  • Health Check-ups: Good health insurance plans offer yearly preventive health check-ups to make policy beneficiaries cautious of their lifestyle and promote good health. It is essential to understand this clause and access yearly medical check-ups timely.
  • Waiting period: There are certain diseases for which insurance plans specify a waiting period of 1 to 4 years. It is prudent to know about this clause and you must look at buying a health insurance policy at an early life stage. 

3. Hiding accurate medical history.

Individuals commit the mistake of concealing their medical history while applying for health insurance policies fearing rejection or high premiums. Hiding medical history or lifestyle habits such as smoking can act against the insured at the time of claims. This could be detrimental as insurance claims can be denied on knowledge of undisclosed medical information.

Health insurance policy contracts are built on utmost good faith based on the information shared by the insured at the time of policy purchase. Disclosure of medical history might attract a slightly higher premium but will remove the possibility of claim rejection in the future.

4. Not taking a personal insurance cover.

A salaried employee gets several benefits from their employer and health insurance is one of the attractive perks of employment. But this quantum of coverage may not be sufficient for the entire family and is a contract that will terminate the moment an individual decides to quit their job. Therefore, it is crucial to have a separate health insurance plan unaffected by the terms and conditions of the current employment.

It is advisable to buy a low premium personal insurance cover to assure financial security and sufficient insurance coverage regardless of employment status. This could be handled in two ways: either have a parallel base insurance coverage for self and family or top it up with super top-up plans for additional coverage.

5. Overlooking the small print.

While an insurance company must explain the inclusions and the exclusions in a policy document, it is also the responsibility of customers to understand the policy thoroughly. Often, buyers pay attention to what is included in the policy and forget to understand the exclusions. Neglecting the exclusion list when buying an insurance policy will cost dearly during claim settlement.

Having a thorough understanding of a health insurance plan is mandatory to know the inclusions and exclusions specified. This clarity is crucial to avoid unpleasant surprises at the time of settlement, and it also aids in making an informed decision when buying a health insurance policy.

Every health insurance plan comes with an option of a free-look period of 15 days. This period provides an opportunity for the insured to review the policy after buying and understand the minute details of the policy. The insured has the benefit to cancel the contract in case of some unacceptable clauses, and the insurance company shall refund any amount paid if the policy is cancelled in the free look period subject to no claims being made in the policy.

6. Misreading the Co-Pay Clause.

Most buyers don’t account for inflation and lower purchasing power of money in the future when agreeing to a co-pay clause. With the co-pay clause, the insured is responsible for covering a specific portion of the claim and the insurer covers the amount over and above the co-pay limit. The clause is usually for expensive medical treatments, for senior citizens and treatment in metro cities. Under this clause, the insured shares the claim amount up to the co-pay limit, which could range from 10% to 20% of the claim amount.

The policies with the co-pay clause tend to have low premium outgo as compared to the other policies. Understanding this clause is essential to buy a cost-effective health insurance policy that is viable in the long run. The co-pay clause is beneficial at an early stage of life wherein probability of a medical emergency is fairly low.

7. Purchasing insurance only to save taxes.

Although health insurance premiums reduce taxable income, it cannot be the basis to decide the health insurance policy. The primary purpose of getting health insurance is to have comprehensive coverage of health issues and be financially secure during medical difficulties. Buying a health insurance policy with a singular focus on tax saving will lead a customer to invest in policies with inadequate coverage.

The health insurance premiums paid by an individual is subject to tax deduction under Section 80D of the Income Tax Act, 1961. It is recommended policy’s tax benefits are fully understood but evaluating an insurance policy solely based on the tax quotient isn’t prudent. An individual must purchase an insurance cover worthy of meeting their family’s health requirements during a medical emergency.

8. Investing in health insurance only during old age.

Many people believe that health insurance plans are for the elderly or are needed only during old age and make the mistake of not investing in the health insurance policy at an early stage of life. No one can predict medical emergencies and not having adequate coverage at a young age could lead to wealth erosion at the time of an unforeseen medical emergency or making high premium outflows for coverage later. To avoid either scenario, individuals must consider investing in health insurance plans at an early stage of life.

There is a wide range of policies for individuals below 45 years, and these policies are easy to obtain and usually involve a lower premium payment. The additional benefit of buying health insurance at an early age is that one can easily cover up the waiting period in the times when the probability of triggering a health insurance is minimal and hence can enjoy maximum coverage at an early age.

9. Overlooking the sub-limits.

It is common for individuals to overlook the sub-limits clause while evaluating and choosing health insurance plans, only to regret it at the time of claim where the expense is beyond the sub limit as stipulated in the policy coverage.

The insurance companies specify threshold limits on their liability in specific circumstances by including sub-limits. They are defined as a maximum value for a particular illness/expense or as a percentage of the sum insured. Health insurance plans with sub-limits are cheaper in comparison to the other plans. Sub-limits can be imposed on a hospital room rent, ambulance charges, doctor’s consultation fees, or any major medical treatment such as knee replacements, kidney transplants, etc. It is advisable to review the sub-limit clause before finalizing a health insurance policy.

Bottom Line

Health Insurance is an essential investment to navigate unscathed through unforeseen medical emergencies. With the high-stress, hustle and bustle lifestyle we lead today, buying a health insurance plan with comprehensive coverage and benefits is no longer a luxury but a necessity.

However, given the number of insurance products available in the market today, individuals need to be well informed to make a wise choice. Avoid making the mistakes as mentioned above and secure the future and wellbeing of yourself and your family with the right health insurance.