There
is no doubt the cost of healthcare is on the rise. It is fast approaching a
stage where it may become too expensive to afford. Health insurance policies
are the ideal solution to help pay for expensive treatments. Health insurance provides protection against financial
adversities arising out of necessary medical treatment.
How it works
- You pay an annual premium in return for which you are covered for a certain
amount. If anything unfortunate was to happen to you, the insurance policy will
make sure your medical expenses are taken care of, within the limits of the
cover. This, of course, is the most basic advantage of
health insurance. Its other advantages would include things like comprehensive
financial protection for the whole family, covers for expenses like medical
checks etc.
While the benefits and importance of life
insurance are obvious, the various terms one encounters when buying health
insurance can be difficult to understand.
They can seem overly technical and
intimidating.
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Listed below are 35 common health insurance terms
you should know and what they mean -
1. Premium
This
is the cost of the policy. It is the amount a policyholder pays to the insurer
(the company providing health insurance services) for their services. Premiums
are determined based on the sum assured or cover offered or chosen under a
particular policy.
2. Health
insurance policy
The
health insurance policy is a document which is legally a contract between the
insurer and the insured. It defines the extent and limitations of the health
insurance that you have just bought i.e. it stipulates all terms and conditions
of the policy including details on the premiums payable, the cover or sum
assured, the type of cover availed and the exclusions among other details. It
is required when making a claim or as proof of purchase.
3. Grace
period
If
premiums are not paid on time, policyholders are offered a grace period i.e.
the time during which outstanding amounts can be cleared. If dues are not
cleared within this time, the policy lapses. It is also the extra time provided
to policyholders to renew their policies if they have missed the stipulated
renewal date.
4. Freelook
period
This
period starts from the day you receive the policy and continues for the next 15
days. During the free look period you can return the policy if you are not
satisfied with the terms of the policy for a refund of the premium paid
(subject to deductions).
5. Policy
period
Also
known as policy term, this is the period for which the health insurance policy
is in effect. It starts from the time that the first premium is paid and ends
when the policy expires. The policy period can be extended by renewing it.
6. Policy
renewal
Each
health insurance policy comes with an expiry date at which time the insurance
cover provided ends. The policy period can be extended by renewing the policy
i.e. by paying for a fresh term. This act of paying a premium to keep a policy
in force is known as policy renewal.
7. Continuous cover
Since
each policy has an expiry date, it needs to be renewed from time to time. Once
it is renewed the period for which it has been in effect, past and present, is
referred to as the continuous cover. For example, if you have a health insurance
policy that needs to renewed every year and you have done so for 4 years then
you continuous cover is 4 years.
8. Sum
insured / Sum assured
This is the amount that you are
covered for under the chosen health insurance plan. In the event of making a
claim, you will be paid out the amount stated as sum assured in the policy.
This may or may not be more than the actual expenses incurred.
9. Sub-limit
Some policies limit the amount you
can claim under certain circumstances i.e. the entire amount chosen as sum
assured will not be paid out if a sub-limit applies to such claim. For e.g.
hospital room expenses can be claimed up to Rs.1,000 a day or ambulance charges
can be claimed up to 1% of the sum assured.
10. Third
party administrator (TPA)
Third
party administrators or TPAs are companies associated with insurance companies
which provide services in relation to processing claims. TPAs are licensed by
the IRDA (Insurance Regulatory and Development Authority of India) to operate
in this capacity.
11.
Claim
A
claim is a request made by a policyholder to the insurance company to fulfil
its financial liability when an event stipulated in the health insurance policy
occurs. Claims are always subject to the rules and regulations outlined in the
policy.
12. Co-payment
It
is a cost-sharing model in which the policyholder pays a certain percentage of
the medical expenses and the remainder is paid by the insurance provider. When
policyholders opt for co-payments, premiums are reduced as the company doesn’t
bear the entire risk of meeting expenses. For e.g. a co-payment option of 20%
limits the insurance company’s liability to 80% of the claim amount while the
policyholder pays for the remaining 20%.
13. Portability
Portability
is a facility provided to policyholders allowing them to transfer or switch
their health insurance policy from one provider to another. These transfers may
be governed by certain conditions but ensures that continuity and other
benefits earned under the current policy are not lost when switching to a new
policy.
14. Cashless
facilities
If
a health insurance policy offers cashless facilities it means you won’t have to
pay your hospitalisation expenses outright.
Once you inform the insurer of your hospitalisation they will make the
payments directly to the hospital. This is contrary to reimbursements where
policyholders pay the hospital and then claim the amount from the insurance
company.
15. Cumulative
bonus
A
cumulative bonus is a facility offered by an insurer where the sum insured can
be increased without the need to pay additional or higher premiums.
16. Continuity
benefits
Continuity
bonus is a reward given to policyholders for holding the policy for a certain
period of time or having renewed it on a regular basis.
17. Floater
policy
A
floater policy generally refers to a policy that let’s policyholders cover more
than one person under the same policy. Under this policyholders will be able to
cover their family members under their policy instead of getting each person an
individual policy. It is an economical option wherein all members are covered
by a single sum assured.
18. Overseas
medical policy
This
is a policy that extends medical insurance cover to the policyholders even when
they are outside the country.
19. Personal
accident policy
This
is a policy that covers instances of personal accidents and helps with paying
for medical expenses for injuries along with providing assured payouts in case
of death or total permanent disability. These payments may be subject to
conditions set forth by the insurer.
20.
Reimbursement
If
you make a claim for any amount that you have spent on medical treatments and
the claim is honoured, the money spent by you will be refunded. This is what is
known as a reimbursement.
21. Room
rent
When
you are hospitalised, you have the option to take a room rather than being made
to stay in a ward. The rent for that room will be covered under some insurance
policies.
22. Waiting
period
The
waiting period is the period that has to lapse from the date of policy purchase
in order for the policy to take effect. The policy is not always activated
immediately but generally a 30 day waiting period applies before claims are
entertained. For certain pre-existing conditions, a period of 2 years to 4
years from the date that the policy is bought applies.
23. Exclusions
There
are some ailments or events which are not covered under a chosen policy. These
are called exclusions and are stipulated in the policy. Exclusions may even extend
to the factors that lead to ailments or injuries.
24. Day-care
procedures
These
are procedures that do not require hospitalisation beyond 24 hours. Many
policies do not cover day-care procedures.
25. Pre
and post-hospitalization expenses
There
may be times when customers may have to undergo medical tests to determine
their medical status or situation, prior to hospitalisation. These tests are
considered as pre-hospitalisation expenses.
Once
treatment has been availed, there may be tests that need to be conducted to
determine the effectiveness of the treatment. These tests may be considered
post-hospitalisation expenses. These expenses include medication, recovery
expenses etc.
26. Domiciliary
care
There
may be situations where patients may not be in a condition to be shifted to a
hospital or when the hospital cannot accommodate the patient. In such cases the
necessary treatment is provided at their homes or another suitable location.
This is known as domiciliary care.
27. Emergency
care
As
the name suggests, emergency care refers to treatment that needs to be
performed for symptoms or injuries that present themselves suddenly and may
lead to death or permanent disablement.
28. Medical
expenses
Expenses
that are incurred in the soliciting of treatment for medical conditions may be
considered medical expenses. Many insurers will cover these expenses subject to
certain conditions.
29. Network
& non-network provider
Health
insurance companies generally enter into agreements with multiple hospitals or
health care providers. These establishments are known as network providers. Any
establishment not tied-up with a particular insurance company is considered a
non-network provider.
30. Pre-existing
disease
A
pre-existing disease is defined as an ailment that policyholders have prior to
buying a policy. This information needs to be provided to the insurer. It may
be discovered via medical screening tests conducted by the issuing company and
lead to disqualification for coverage.
31. Unproven/experimental treatment
In
case you opt for unrecognised treatments or are in the developmental stages,
they are considered unproven or experimental treatments. Most insurers exclude
such treatment.
32. Maternity expenses
This
includes the costs of delivery, legal termination and pre and post-natal care.
Maternity expenses are not covered under most health
insurance policies in India and are often covered only on completion of a
waiting period varying between 2 - 4 years.
33. Ambulance Charges
In
some cases, getting to the hospital and back home from the hospital may require
an ambulance. Most insurers will cover this expense too in the policy. These
charges are often capped or subject to sub-limits.
34. Daily allowance
Many
insurers may offer a particular sum of money on a daily basis which is meant to
cover various expenses you or your loved ones may incur while you are
hospitalised. This sum is known as daily allowance or cash allowance and may
differ across insurers.
35. Riders
Riders
are add-on covers that can be bought in addition to existing health insurance
policies in order to enhance the cover provided by a standard policy. They can
be availed of by paying additional premium. E.g. critical illness covers or
personal accident covers. Some riders are built-in features of standard
policies that require no additional premium payments.
These
basic terms, while not an exhaustive list, will help you understand your health insurance policy better.
Author Bio-
Sanjit Agarwal, a Financial Adviser by profession,
holds a rich experience of around six years in Personal Finance industry. He
loves to write and share reviews, updates, tips, case studies and more on
Investments, Tax, Savings, Insurance and more.
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