Things to look for while buying a mediclaim

Increasing medical costs and a sedentary lifestyle in recent times have made health insurance necessary for families in India.

In fact, realising that the health of the citizens is crucial for the progress of the country, the finance minister announced the launch of the National Health Protection Scheme under the Ayushman Bharat scheme during the Budget speech of 2018-19, which envisages providing health insurance to 10 crore eligible families with coverage of Rs 5 lakh per family. Mediclaim as Health Insurance is popularly called in India, has become an essential part of financial planning of every family.

Mediclaim has become a necessity

While a mediclaim is a necessity, buying one is a difficult choice as you are confronted with many jargons. What are the features that you need to consider and what are the jargons that you need to understand other than the Tax Benefits under Sec 80D of IT Act when you buy a mediclaim?

Basic Sum Assured

This is the maximum amount up to which hospital expenses are reimbursed by the insurance company. While Cigna TTK Prohealth plus provides a maximum basic sum assured of Rs 12.50 lakh, under Apollo Munich Easy health, the maximum sum assured is Rs 50 lakh. Make sure that you choose a floater policy with a Sum Assured, which is sufficient to cover hospitalisation expenses of all the family members.

Age restrictions

Different insurance companies have different restrictions on entry age and policy ceasing age. In Star Health Comprehensive policy, the maximum entry age is 65 years which is the case with most companies.

However, in Max Bupa Health Companion policy, there is no maximum age limit. This is useful for senior citizens since it is after 65 years that the need for a mediclaim is the most.

While many insurance companies have a ceasing age of 70 to 75 years, the stand-alone health insurance companies have come as a relief and provide lifelong renewability to policy holders.

Co-payment

Co-payment is the amount that you pay to the hospital during hospitalisation. If the policy that you bought has a co-pay of 10%, during hospitalisation you need to pay 10% of the total expenses and insurance company will pay 90%. There is no co-pay in Apollo Munich Easy Health Policy. Look for a policy that has no co-payment. The flip side is, premium goes down with increase in co-payment.

Policy term and discount

Usually the policy term is one year in most of the mediclaim policies, which means you have to renew the policy every year to prevent the policy from lapsing. To avoid the hassle of renewal, some companies are providing longer policy term say 2 to 5 years along with discount on premium. You can choose a policy term of 1 to 3 years under Cigna TTK Prohealth plus policy and a discount ranging from 7.5% to 10%.

Waiting period

The next feature that you need to check is the waiting period for preexisting ailments which is normally 3 to 4 years and waiting period of 1 to 2 years for certain ailments like cataract, hernia etc. Choose a policy with the shorter waiting period.

Claim settlement ratio

This ratio tells you the number of claims settled by the company. The higher the ratio the better it is, as it means the company trusts you and settles claims in good faith.

No claim bonus

This is the increase in sum assured if you do not make a claim during the policy term. The sum assured keeps increasing every year with the premium remaining constant.

You can accumulate the bonus if there are successive claim free years. The maximum you can accumulate however is restricted to 100% of the Basic Sum Assured. It is normally 5% but Apollo Munich Easy Health provides a 50% increase in SA during a claim free year.

Incurred claim ratio

Though this has no bearing on the features of a policy, the Incurred Claim Ratio (ICR) tells you how profitable the company is. ICR is calculated by dividing Net Claims incurred by Net premium collected. For example, if the insurance company has paid (incurred) a claim of Rs 8 lakh under health insurance and has collected premium of Rs 10 lakh under health insurance, the company is said to have ICR of 80%.

What if the company has an ICR of 110%? It means the company has paid more claims than it has received.

An ICR of 40% means that the company has either rejected claims of many policyholders under mediclaim on flimsy grounds or the age profile of mediclaim policy holders is so young that the claim ratio is low.

(The writer is a former banker, and is currently with Manipal Academy of
Banking, Bengaluru)