Health Insurance, Key Terms, Dos and Don’ts, Benefits

Health insurance is a type of insurance that provides financial protection against medical expenses arising from illness, accident, or hospitalization. It helps individuals manage rising healthcare costs by covering expenses such as hospital bills, surgery, medicines, and diagnostic tests. By paying a regular premium, the insured transfers health related risk to the insurance company. In India, health insurance is regulated by IRDAI to protect policyholders. Health insurance ensures timely medical treatment, financial security, and peace of mind for individuals and their families during health emergencies.

Key Terms of Health Insurance:

1. Policyholder

Policyholder is the person who purchases the health insurance policy. He or she pays the premium and enjoys the benefits of the policy. The policyholder may insure self, family members, or dependents. All rights like renewal, claim filing, and changes in policy rest with the policyholder.

2. Insured

Insured is the person whose health risk is covered under the policy. The insured receives medical benefits when illness or hospitalization occurs. In family floater policies, more than one insured person is covered under a single policy.

3. Premium

Premium is the amount paid by the policyholder to the insurance company for health coverage. It can be paid monthly, quarterly, or annually. Premium depends on age, health condition, sum insured, and type of policy. Non payment of premium can lead to policy lapse.

4. Sum Insured

Sum insured is the maximum amount that the insurer will pay during a policy year. All medical expenses are paid within this limit. Higher sum insured provides better coverage but requires higher premium. It is fixed at the time of policy purchase.

5. Waiting Period

Waiting period is the time during which certain illnesses are not covered after taking the policy. Initial waiting period usually applies for the first 30 days. Pre existing diseases have longer waiting periods. Claims are not payable during this period.

6. Pre Existing Disease

Pre existing disease refers to any illness or condition that the insured had before buying the health insurance policy. These diseases are not covered immediately. Coverage is allowed only after completion of a specified waiting period decided by the insurer.

7. Hospitalization

Hospitalization means admission to a hospital for medical treatment for more than 24 hours. Health insurance generally covers expenses only if hospitalization conditions are met. Room rent, surgery, doctor fees, and medicines are included under hospitalization expenses.

8. Cashless Facility

Cashless facility allows the insured to get treatment without paying hospital bills directly. The insurer pays the hospital directly through a network hospital. The insured only needs to show the health card and complete formalities. This facility reduces financial stress during emergencies.

9. Network Hospital

Network hospitals are hospitals that have an agreement with the insurance company to provide cashless treatment. Treatment taken in network hospitals is easier and faster. If treatment is taken in a non network hospital, reimbursement claim has to be filed.

10. Claim

Claim is a request made by the insured to the insurer for payment of medical expenses. Claims can be cashless or reimbursement type. Proper documents like bills, discharge summary, and reports are required. Claim approval depends on policy terms and coverage.

11. Exclusions

Exclusions are medical conditions or treatments that are not covered under the health insurance policy. These are clearly mentioned in the policy document. Common exclusions include cosmetic surgery, self inflicted injuries, and certain diseases during waiting period.

12. Co Payment

Co payment means a fixed percentage of medical expenses that the insured has to pay from own pocket. The remaining amount is paid by the insurer. Co payment reduces premium but increases personal expense at the time of claim.

Dos and Don’ts of Health Insurance:

Benefits of Health Insurance:

• Financial Protection Against Medical Costs

The primary benefit is a financial safety net against exorbitant and unpredictable medical expenses. It covers hospitalization costs, including room charges, ICU fees, surgery, doctor’s fees, and medicine. By bearing the financial brunt, it prevents the depletion of savings, avoids debt, and protects the family’s financial stability. In the face of a serious illness or accident, the insurance company pays the majority of the hospital bill (subject to sum insured), allowing the insured to focus on recovery rather than the financial crisis. It effectively transfers the risk of a high-cost medical event to the insurer.

• Access to Quality Healthcare

Health insurance enables access to a wide network of quality hospitals and advanced treatments. Policyholders can seek treatment at renowned private hospitals, which might otherwise be unaffordable, without worrying about upfront cash payments through cashless hospitalization facilities. Insurers have tie-ups with network hospitals where treatment is directly settled between the insurer and the hospital. This ensures timely medical intervention, better facilities, and specialist care, leading to improved health outcomes. It democratizes access to high-quality care, ensuring financial constraints do not compromise health decisions.

• Comprehensive and Holistic Coverage

Modern health policies offer extensive coverage beyond basic hospitalization. This includes day-care procedures, pre and post-hospitalization expenses, domiciliary treatment, ambulance charges, and annual health check-ups. Furthermore, Critical Illness riders provide a lump-sum payout upon diagnosis of specified major illnesses (like cancer or heart attack), offering financial support for recovery and lifestyle adjustments. Maternity covers and Ayush treatment (for alternative medicine) are also common. This comprehensive nature makes it a holistic tool for managing a wide spectrum of health-related financial risks.

• Tax Benefits and Long-Term Savings

Premiums paid for health insurance are eligible for tax deductions under Section 80D of the Income Tax Act. This provides significant annual tax savings, effectively reducing the net cost of the policy. Furthermore, policies act as a form of long-term savings for health. By paying a manageable annual premium, individuals create a dedicated, large-sum corpus (the sum insured) for future medical needs. This is far more efficient than trying to save the full amount independently, as the insurance pool provides immediate access to a large fund in exchange for a relatively small, regular contribution.

• Peace of Mind and Security

Perhaps the most significant intangible benefit is the profound peace of mind and security it provides. Knowing that you and your family are protected against medical emergencies reduces anxiety and stress. It eliminates the fear that an illness could lead to financial ruin. This security encourages proactive health management, as individuals with coverage are more likely to seek preventive care and early diagnosis without cost concerns. This psychological well-being, coupled with financial and healthcare access, makes health insurance a cornerstone of responsible personal and family financial planning.