Health Insurance 101

A prolonged illness and a sudden accident alike can greatly impact your financial stability. Choose the right insurance plan to protect you and your family against unplanned disasters

HeaIth Insurance 101

With the soaring cost of healthcare in India, investing in health insurance has never been a better decision. According to a study of Indian industries by India Mirror, 30 billion USD was spent on healthcare in India in 2014. Out of this, only 10% was covered by insurance, which undoubtedly is because health insurance penetration in India is less than 5%.

Since there are numerous health insurance plans in India, choosing the right one for you and your family can be quite problematic.

In order to simplify this decision for you, we have described below the 3 main types of health insurance plans and their benefits. Read, evaluate and choose!

1. Indemnity-Based Health Cover (Mediclaim)

Such policies reimburse expenses incurred on hospitalization (up to a certain extent of the specified sum assured). You can renew these plans annually and can cover yourself and your entire family under a single policy. The premium payable on these policies increases as you get older. Mediclaim policies have certain restrictions and reimburse only a percentage of the total cost. These plans are offered by general insurance companies.

2.Fixed Benefit Health Insurance Plans

These products offer a fixed pre-defined benefit in the event that certain specified illnesses, surgeries or hospitalization occur. Such plans are generally offered as standalone critical illness covers, hospital cash policies or personal accident covers and can also be bought in addition to the Mediclaim policy.

In case the insured is diagnosed with any of the critical illnesses covered by the policy, an amount equal to the sum assured (irrespective of the actual amount spent by the insured) is paid to the insured. This lump sum amount can be used to fund rehabilitation, recuperation, lifestyle adjustment, etc., all of which are issues thrown up when major diseases strike.

3.Unit Linked Health Plans (Money Back Health Insurance Plans)

These products, commonly called ULIPs, combine health coverage with investments and are one of the most advanced health insurance plans in India. ULIPs offer a variety of fund options which come with varying equity exposures. The advantage of such plans is that not only is your health covered during the term of the policy, your investment also yields returns depending on the fund%u2019s performance. In addition, the invested funds can be used to cover health-related expenses that are otherwise not covered by the policy. Once the term has ended, you receive the fund value as a maturity benefit.

As we%u2019ve explained above, there are a number of types of situations and individuals that each type of health insurance plan suits, and as the insured party, it is your duty to yourself and your family to make the decision effectively and efficiently.


Various companies offer health insurance plans in India, and their products offer different kinds of benefits. In order to zero-in on the right one for you and your family, first identify your exact requirements. Your choice of product (benefit) should depend on your medical condition, your lifestyle, future healthcare needs, family medical history (hereditary disorders), your cash flows, and hospital preferences, location (medical costs in metros is higher), etc.

Once you have listed down your requirements, start evaluating the products. Compare and contrast the benefits they offer. Here are some of the common benefits you should look for when buying your family health insurance:

1. Cashless Hospitalization Benefit

Many insurers offer cashless hospitalization at networked hospitals. It is thus advisable to check if the best hospitals in your locality are a part of your insurer%u2019s network, to ensure that you can avail cashless treatment.

2. Hospital Cash Benefit

Some insurers offer a hospital cash benefit that pays a fixed sum of money every day in case of hospitalization of the insured, irrespective of the actual amount spent. This benefit is generally paid for a maximum of 60 days in a year.

3. Intensive Care Unit Benefit

This feature offers the insured a fixed amount of money every day in case he is admitted in the ICU. The amount payable is generally double the daily hospitalization benefit.

4. Surgical Cash Benefit

This feature covers an extensive list of surgeries. Fixed benefit products pay a specified lump sum amount in case the insured needs to undergo certain surgical procedures. While one can claim for more than one surgery in a year, but the total pay-out cannot exceed the sum assured.

Certain mediclaim plans also pay for postoperative care for a specified number of days.

5. Tax Benefits

The health insurance premium are tax exempt under Sec 80D of the Income Tax Act. Based on the provisions of the Budget 2015, deductions up to Rs. 25,000 and Rs. 30,000 (for senior citizens) are available. In case there are no claims in a given year, you can receive a no-claim bonus in the form of additional cover, which is added to your existing cover.

A combination of the above-mentioned products and riders can ensure that you and your family enjoy comprehensive health coverage. It is important to go through the terms and conditions carefully when choosing from one of the many health insurance plans in India, identify the network hospitals, understand the exclusions, and claim limits/ sub-limits that might be in-force


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