In today’s world, medical expenses are rising exponentially and making healthcare very expensive. Even a single hospitalization can put a notable financial burden on individuals and their families. To overcome this, we need to buy health insurance.
What is Health Insurance?
Health Insurance is a contract between you and the company. An individual pays a regular premium, and in exchange for it, the company covers all their medical expenses. In easier terms, health insurance manages hospital bills and ensures you receive the best treatment without any financial stress.
How does health insurance work? (step-by-step guide)
- You buy a health insurance plan
- You pay premiums
- Your policy becomes active (usually after 30 days from the day of purchase)
- Unfortunately, if you get hospitalized, the insurance company will pay for your medical bills
- You can choose between a Reimbursement claim and a cashless claim
Types of Health Insurance Claims
1. Cashless Claim
In a cashless claim, you will not pay hospital expenses from your own pocket.
- The treatment should be done in a paneled hospital, which must be approved by the insurance company
- Now, it’s the insurance company’s obligation to settle the bill with the hospital
- You may only need to pay for non-covered expenses (Like gloves, PPE kits, syringes, injections, etc)
Example:
If someone’s hospital bill is ₹1,00,000 and he is admitted to a paneled hospital, the insurance company pays it directly to the hospital.
2. Reimbursement Claim
In a reimbursement claim, the hospital bill must be paid by you first.
- After the treatment, you collect all the bills.
- Submit the bills to the insurer (insurance company)
- The insurer verifies and reimburses the amount directly to your bank account.
Example:
Someone pays ₹1,00,000 for treatment, submits bills to the company, and the company later refunds the amount to the insured.
Quick Comparison (Cashless Vs Reimbursement)
| Characteristics | Cashless claim | Reimbursement Claim |
| Hospital Types | Only Paneled (network) hospitals | Any Hospital (must be recognized) |
| Payment | Directly paid by company | You pay first |
| Documentation | No major requirement | More paperwork is involved |
Types of Health Insurance in India
- Individual Health Insurance – It covers only one person, having lesser premium, and provides personal protection.
- Family Floater Plan – It covers the whole family in one policy (provided children must be under 18)
- Critical Illness Insurance – It covers critical diseases like tumors, cancer, heart attack, etc.
- Senior Citizen Health Insurance – This plan is specially designed for people aged 60 years and above.
- Group Health Insurance – It is provided by companies to their employees at a very low premium.
Benefits of Health Insurance
- It covers hospitalization expenses
- Provides a Cashless claim in paneled hospitals
- Income Tax rebate under Section 80D (upto ₹50,000)
- Also, it covers pre & post hospitalization expenses
- It provides a sense of security and peace of mind during any medical emergency.
Common mistakes to avoid while buying health insurance
- Buying a lesser Sum Insured plan (minimum coverage for an indian family must be 10 lakhs)
- Not checking the 30-day waiting period
- Not understanding the policy terms
- Not disclosing the previous medical history to the insurer
- Choosing a plan by just looking at a low premium, but not considering the actual need.
How Much Coverage Do You Need?
- For an Individual: minimum ₹5–10 lakhs of Sum insured
- For a Family of 4 members, a minimum of ₹10–20 lakhs of Sum insured is recommended
- In Metro cities (like Delhi, Mumbai), higher coverage (₹20 lakh+) is recommended, given higher medical expenses.
Pro Tip: You can enhance your coverage by not paying a higher premium with a top-up plan
For example:
An individual has a base policy of ₹10 lakhs, but he wants higher coverage (Sum insured). Instead of increasing the base plan (which will be expensive), he can opt for a top-up plan.
- Once the base sum insured is exhausted, the top-up plan will be active and cover the remaining hospital expenses.
- Thus, the top-up plan helps you get higher coverage at a very low cost.
