Health Insurance

What is Health Insurance?

Health insurance, alternatively referred to as, medical insurance or simply mediclaim, is a type of insurance coverage that covers the cost of an individual's medical and surgical expenses. The individual, also known as the insured, pays a fixed sum (premium), every year for the health cover. In case of a medical problem that necessitates surgery/hospitalization, the insured is reimbursed by the health insurance company either directly in cash or indirectly through payment to the hospital / clinic.

Taking health insurance is one of those things an individual cannot ignore given the rising costs of treating health problems. Inflation in medicare or medical treatment is a lot higher than general inflation or inflation in other categories like food and clothing. While inflation in most categories is in single digits, inflation in medicare is often higher.

The term ‘Health Insurance’ relates to a type of insurance that essentially covers your medical expenses. A health insurance policy like other policies is a contract between an insurer and an individual / group in which the insurer agrees to provide specified health insurance cover at a particular “premium” subject to terms and conditions specified in the policy.

 

Types of Health Insurance

There are mainly three types of Health Insurance covers:

  • Individual Mediclaim : The simplest form of health insurance is the Individual Mediclaim policy. It covers the hospitalization expenses for an individual for up to the sum assured limit. The insurance premium is dependent on the sum assured value. Example : If you have 3 family members you can get an individual cover of Rs 2 lacs each . In this case each of you are covered for 2 lacs , if 3 members face a need for hospitalization , all 3 of them can get expenses recovered upto Rs 2 lacs . All the 3 policies are independent .
  • Family Floater policy : Family Floater Policies are enhanced version of the mediclaim policy. The sum assured value floats among the family members. i.e  each opted family member comes under the policy, and it covers expenses for the entire family up to the sum assured limit. The premium for family floater plans is typically less than that for separate insurance cover for each family member. Example : In this case if suppose there are 3 family members , you can take a Family floater policy for Rs 6 lacs in total . Now anyone can claim upto 6 lacs in expenses , but then the cover will go down by that much amount for that year . So if one of the family member is hospitalized and the expenses are 4.5 lacs . It will be paid and then the cover will be reduced to 1.5 lacs for that particular year . Next year again it will start from fresh 6 lacs. Family floater makes sense for a family because that way each one in family gets a big cover and probability of more than 1 getting hospitalized in same year is too low untill and unless whole family is traveling together most of the times in a year .
  • Unit Linked Health Plans : Taking the ULIP route, health insurance companies too have introduced Unit Linked Health Plans. Such plans combine health insurance with investment and pay back an amount at the end of the insurance term. The returns of course are dependent on market performance. These plans are very new and still in development phase . This is only recommended for people  who can handle market linked products like ULIP and ULPP .