How important is family health insurance

We make investment decisions based on the needs and for many of such needs we could estimate the possible costs, also the timelines. We even keep aside a contingent fund defined for some exigencies. But health emergency is one such which can't be predicted over the timing or estimated on the cost. And whenever this need occurs the prime most importance is given to ensure we spend how much ever possible to tide over that situation.

At times, if under prepared, forces us to divert from funds allocated for another need upsetting the entire planning. Health insurance thus comes as a financial protection tool against health exigencies and the associated costs of treatment. The range of protection provided is dependent upon the various plans offered by the insurance companies. But most of the plans cover the expenses incurred due to hospitalization. They allow for direct payment to the hospitals especially with those of their network (tied-up) and reimbursements (cash initially paid by the insured) of expenses associated with the cost of treatment due to illness or injury.

The health insurance plans could either cover individuals (adults) or children through the addition to their family members (elders). So, individuals aged 18 and above could be eligible to opt for a health insurance upon their name. Individuals aged over 60 are considered as senior citizens and most companies cover them post the medical evaluation, while the pre-medical check-up is limited or absent up to ages of 40. Typically, entry age is restricted to ages 65 while some specific senior-citizen oriented plans allow relaxation.

The coverage once opted could even last till age 100 in many companies. The premium of these plans is however, not fixed and would vary every year, though in some companies the variation in the premium is based age-bands. The tenure is always annual with premium could be paid for two or three years at once allowing for a discount provided by the insurer. It could also avoid the additional costing that could happen in case of change in rates during that period.

Sum Assured (SA) is the amount up to which the policy covers the extent of. This is the most important factor other than age that defines the premium of the plan. This is the limit once exhausted, the insured can't access for the expenses of hospitalisation and treatment costs. There are plans available in the market which automatically extend the cover up to twice the SA at no extra cost if the insured exhausts the base SA in a year. Year here refers to the policy year ie, the time between the policy begin date and the renewal date. A few plans come with an increase of SA linked to the inflation rate.

Health insurance policies come with certain conditions which once met would be eligible for claim and these vary across the policies. In most plans, hospitalisation ie, an individual's stay in a hospital for treatment equals or exceeds 24 hours is allowed to be covered. However, there could be a set of pre-approved procedures which are covered which may not require a stay for a day. Then many of these plans also cover the pre- and post-hospitalisation expenses up to 60 and 90 days respectively.

No claim bonus ie, a bonus accrued to the policyholder as a mark of retention or incentive for remaining healthy (no claim) during a year. This is provided as a discount in the renewal premium or through an increase in the SA, generally a percentage of 5 to 50 depending on the plan type. This is available in both individual and family floater plans but not in group plans. Like, there is a generic nature of inclusions or services covered under a policy, there are general exclusions that are considered in the plans. Pre-existing diseases or illnesses are not covered under all policies with a gap of at least two years. It's generally 48 months or four years from opting the plan.

Policyholders also have the option of porting ie, moving from one service provider to another. The porting of the policy is available at the time of renewal and insured should complete the same before the renewal date to enjoy break free services. Porting considers the vintage of the policyholder though the waiting periods begin from the date of port in case of any fresh change in the health conditions at the time of porting.

A top-up plan optimises the individuals or family by availing a higher cover at relatively lower premium. As the name suggests, this could be taken over an existing plan or base plan, which could be an individual, family-floater or a group plan. The top-up plan comes into picture only once the limits of the existing/base plan exhaust the limit of coverage. This is beneficial for those who've a group (employer) cover though a personal (base) plan is recommended as the terms of the coverage could vary with the employer, also in case of an unfortunate event of loss of employment, one could be bereft of an important contingency. The Government of India allows the premiums paid for health insurance for tax deductions u/s 80(D) with up to Rs 25,000 upon the assessee (including spouse & dependent children) and an additional deduction of up to Rs 25,000 on premiums paid for parents. For senior citizens, premiums are deductible up to Rs 50,000.

(The author is a co-founder of Wealocty, a wealth management firm and could be reached at knk@wealocity.com)