Health Insurance

Health insurance (also known as medical insurance or mediclaim) is needed for the following reasons:  

Key Points:
  • Life is very uncertain A person may not stay healthy and fit throughout their life and so it is prudent to have health cover at every stage of life.
  • The cost of healthcare has risen significantly in the last few years. If a major illness like heart failure, cancer or diabetes is diagnosed and the funds for treatment cannot be immediately arranged then it may lead to loss of life. If the family resorts to costly personal loans for treatment and the life of the person cannot be saved then the family could incur huge debts. Having health insurance cover can help to overcome this problem
  • The age of a person at the time of taking the health cover is relevant; the higher the age, the higher the premium will be. As these are annually renewable policies the cost will increase as the person gets older, regardless of the age of the policyholder when the policy commences. It also depends on the claims experience.

Types of Health Plan:-

A) Individual Health Insurance Plan
As the name specifies this plan covers a single individual and caters for their health requirements.
Example : Ajay and Tina are a married couple. Prior to their marriage Ajay had taken out an individual health insurance policy from Company ABC for a cover of Rs. 1,00,000 which caters for his health requirements.Tina also has taken a separate individual health insurance policy from Company ABC for a cover of Rs. 1,00,000 which caters for her health requirements.
B) Family Floater Health Insurance Plan:-
A family floater plan is different from an individual health plan. In this type of plan family members can be covered. An individual can cover themself, their spouse, children and parents. The insurance company may specify the number of people that can be covered. In this type of plan the insurance cover is shared among the family members covered in no fixed proportions.
Example : Subham and Meenu are a married couple and they buy a family floater health insurance plan with a cover of Rs. 5,00,000. This cover of Rs. 5,00,000 can be shared by Subham and Meenu in no fixed proportion. Regardless of whether either or both are hospitalised, the maximum payout would always be Rs. 5,00,000.

Features and benefits of health plans

Health insurance plans come with various features and benefits. Some of these include:
1. Pricing: The premium for a health insurance plan depends on the individual’s age, fitness, habits and family medical history. If all other factors remain constant, premiums increase with the age of the policyholder. So it is always better to take out a health plan as early as possible as the premium paid at younger ages is not very significant but will increase as the policyholder gets older.ForExample:-Karan has bought a health insurance policy for a cover of Rs. 3,00,000 by paying an annual premium of Rs. 7,000. Karan suffers a major heart attack and has to undergo an operation. The hospital bill amounts to Rs. 2,50,000 which is taken care of by the health insurance company. So in this case the premium of Rs. 7,000 is hardly anything compared to the benefit that Karan has had by buying the policy.
2. Cashless Facility: Some health plans offer a cashless facility. In these plans the person covered under the plan is given a photo identity card. The insured needs to inform their health insurance company at the time of their admission to a network hospital. This is the group of hospitals that have contracted with a health insurance company to provide healthcare services. On approval the insured does not pay the hospital deposit amount or the treatment expenses, rather the invoices are settled directly by the insurance company as per the terms and conditions specified in the policy.

3. Medical examinations: Most health insurance companies require the proposer to undergo a medical examination before the policy can be issued and, depending on the age of the proposer, a number of tests may be carried out. Based on the doctor’s report, the health insurance company decides whether to accept the proposal and at what price.
4. Pre-existing illnesses: Most health insurance policies cover pre-existing illnesses after a specified time period; commonly referred to as a ‘waiting period’. Some insurance companies may exclude some pre-existing illnesses altogether and this information is specified in the policy terms and conditions; for example a pre-existing illness like diabetes may be covered after, say, three or four years. The terms and conditions relating to treatment of existing illnesses may vary from company to company.
5. No-claim bonus: If there is no claim in a year then, at the time of renewal, the insurance company may offer a no-claim bonus, i.e. the insurance company will give a discount in the premium due next year.
6. Permanent exclusions: Health insurance plans have some permanent exclusions which are specified in the policy, e.g. misuse of drugs or not following medical advice.
7. Immediate care: Treatment is available immediately and at a time convenient to the policyholder. There will be no waiting for a future appointment whilst the policyholder is suffering from a treatable medical condition.
8. No need for lump sums from savings or loans: The policyholder does not have to worry about how to manage when the need for medical payments arise because these will be paid by the insurance company as a result of the premiums already paid.

Tax implications for Health Insurance

As per the prevailing tax laws, the premium paid up to a specified limit for health insurance plans qualifies for deduction from taxable income under the relevant section of the Income Tax Act. If the individual is a senior citizen (60 years or above) then the deduction allowed is higher than other individuals. An individual can pay the premium for themself , their spouse, children and parents and make use of the tax benefits applicable.
Exemption under Section 80D:
Own Health= Up to Rs.25000 of premium paid Health policy for parents=Additional Rs.25000 of premium paid for Non-senior Citizens (below 60 years) and if parents are Senior Citizens(60 & above) than Rs. 30000

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