in Finance, Insurance

Reading Your Health Insurance Document

Basic Concepts You Should be Familiar With

Health insurance is one of the most important investments you can make in life. Paying a small premium, year after year, goes a long way when you most need it. Health insurance saves you from spending lakhs of rupees when you need to cash in the policy. Although many people own a health insurance policy, they are not well-aware of the terms mentioned in it. Let’s familiarize ourselves with the basic concepts in a health policy, and understand what they mean.

Cashless facility: You are allowed to get admitted in any of the network hospitals listed in the policy without having to pay any advance. This is known as cashless facility.

Claim: A claim is a request filed by the policy holder to the insurance provider to pay for the services obtained from a health-care professional.

Co-payment: The policy holder must bear a certain percentage of claim amounts out of his pocket when he files a claim. This amount is known as co-payment.

Cumulative bonus: The insurance provider increases the sum insured by a certain percentile (typically 5%) for every claim-free year. This is known as cumulative bonus or no-claims bonus. The cumulative bonus is provided only if the policy is renewed continuously.

Deductible: The policyholder must bear a loss in case his hospitalization and other related expenses exceed the sum assured. This is regarded as a deductible. If your premium is low, chances are your deductible could be high.

Exclusions: Exclusions refer to the circumstances or terms for which the policy holder is not given certain benefits.

Insurance Certificate: This refers to the descriptions of the benefits and coverage offered to the policy holder which form the contract between the health insurance company and the policy holder. This document provides details of the sum assured, what is covered and what isn’t.

Insurer: Insurer refers to the insurance company assuming responsibility for coverage. They are the ones issuing the insurance policies. You pay your premiums to the insurer.

Premium: This refers to the monthly/annual amount you pay in exchange of insurance coverage.

Policy: A policy is the legal document which serves as the contract between the insurance company and the policy holder. A policy enlists all the terms and conditions of insurance.

Pre-existing condition: If a policy holder has an existing medical condition, before he obtains a policy, it is excluded from coverage. This is known as a pre-existing condition.

Reimbursement: In case your chosen hospital is not listed in the policy document, you can get treatment and then file for reimbursement.

Sum Insured: The payout amount that the insurer is liable to pay to the policy holder if a claim is made. E.g. if the sum insured as per the policy is ₹5 lakh and the policy holder makes a claim of ₹3 lakh in a given year, then the policy holder remains covered for the remainder of the insured amount i.e. ₹2 Lakh for the rest of the year.

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