Advantages and Disadvantages of Health Care Insurance
Healthcare insurance in general has its advantages and disadvantages which are to be weighed before purchasing a right health insurance policy. The rising cost of health care in the country has pushed many people towards purchasing health insurance as per their requirements. The COVID-19 pandemic has also brought much awareness among the general public in terms of the importance of health insurance due to the heavy costs involved with the treatment for corona virus.
Health insurance is the only way of protecting yourself from spending heavily on the medical bills and ensures that you walk out of the hospital with a healthy pocket. Can you name few people who can help you with Lakhs of rupees during any point of time? What if you are admitted in a hospital in the midnight? Where will you run for money at the odd times? All these problems can be addressed with a single health insurance policy which can be taken based on your requirements. There are many general insurance companies as well as Standalone health insurance companies offering health insurance products in the market. Even IRDA has suggested and asked the insurance companies to roll out a standard health insurance product to benefit the policyholders at the time of Porting the policy from one insurance company to the other.
Let us understand the advantages and disadvantages of Healthcare insurance before purchasing one:-
Advantages of Healthcare insurance:
Cashless Treatment & Reimbursement:
One of the biggest advantages of the health care insurance is its ability to provide the cashless facility in the network hospitals. Customer can directly go to the hospital and get admitted after showing the health insurance card provided by the insurance company. The insurance companies have a tie-up with the hospitals to provide cashless treatment to their customers and later claim from the insurance companies. This cashless system has proved to be beneficial to many people who cannot afford to spend Lakhs of rupees for treatment.
Another option provided by the insurance companies is to go for reimbursement. That is the customer has to pay the medical bills and later claim from the insurance company by submitting all the required documents. This is the least preferred method opted by the customers and another point to be noted is that the Cashless hospitalization is available only in those hospitals where the insurance company is having a tie-up.
Ease of admission in Hospitals:
Hospitals normally admit a patient after paying a token amount and start the treatment. The rest of the amount is to be paid before discharge without which the treatment would be halted and the discharge process would be affected. This kind of situation is not faced in case of admission in the hospital with a valid health insurance policy.
You can get admitted in the hospital by showing the health insurance card given to you by the insurance company. This card acts as the token amount for admission in the hospital. This ease of admission in the hospital at any point of time is possible only with the health insurance policy.
Income tax exemption:
Indian government has been encouraging people to purchase health insurance and is also providing tax benefits for purchasing the health insurance. Below are the income tax exemption amounts under the Section 80D of Income tax act.
- Family age below 60 years: The deduction for the medical insurance premium paid for family ( Self, Spouse and Dependent Children) is up to Rs.25, 000/- and the Health care insurance premium paid for Dependent Parents below the age of 60 years is Rs.25, 000/-. The total deductions that can be claimed for the family with the age band below 60 years is Rs.50, 000/-.
- Parents aged above 60 years: In case either of the parents being aged above 60 years, the deductions for the health insurance premium is up to Rs.50, 000/- for the premiums paid towards Parent’s Health insurance. The deduction for the medical insurance premium paid for the Family (Self, Spouse and Dependent Children) is up to Rs.25, 000/-. Hence, the total deduction in this case is Rs.75, 000/-.
- Self/Spouse & Parents aged above 60 years: When one family member is above 60 years of age, one can claim up to Rs.50, 000/- under the Income tax. Additionally for parents over 60 years of age, medical insurance paid is exempted up to Rs.50, 000/- under the Income tax act. The total deduction for family member aged above 60 years and parents aged above 60 years is Rs,1, 00, 000/-.
The biggest benefit of Health insurance is that it prevents the sudden erosion of your savings and assets. You might be investing amount for your child study or marriage and the same amount might be eaten in case of your hospitalization if you don’t have a proper health insurance cover. Health insurance with Cashless or Reimbursement option protects your financial health and prevents you from liquidating your assets to pay the hospital bills in case of hospitalization.
Having a health insurance policy can provide a good sleep to you thinking that the hospitalization expenses will be taken by the insurance company and all your savings and assets will be safe. The premium paid for a health insurance policy depends on the sum insured required and the age of the family members. The premium paid per year would not be more than 5% of your annual income but prevents you from spending your annual income in case of hospitalization.
Disadvantages of Healthcare insurance:
Health insurance policy is like any other insurance policy when it comes to the terms and conditions. A normal health insurance policy contains three types of waiting periods:-
- Initial/30-day Waiting Period: This waiting period is applicable to all the new policy holders who have to wait for at least 30 days before claiming for any hospitalization. Hospitalization due to an accident is exempted from this waiting period.
- Specific disease waiting period: There are certain diseases mentioned in the policy copy such as Knee cap replacement, Hernia, Cataract treatments where the waiting period is at least 1year. You have to wait for one or two years before claiming for the diseases or illness mentioned in the policy copy.
- Pre-existing disease waiting period: Pre existing illness or disease is a condition or ailment that already exists 48 months prior to the time of purchasing the health insurance policy.
Health insurance policy has these three types of waiting periods which are applicable to all the customers after taking the policy. The main disadvantage of health insurance is the waiting period mentioned in the policy copy. There might be instances where the customer has taken the health insurance policy but might not be able to use it owing to the waiting periods mentioned in the policy copy.
Premium increases with Age:
Health insurance premiums are based on the age of the customers and the sum insured selected. The premium increases with increase in age and would be on the higher side for people aged above 60 years of age. This is due to the increased risk of hospitalization at the old age. Higher the risk of hospitalization, higher would be the health insurance premium.
There are separate health insurance products designed specifically for senior citizens. Insurance companies have also launched health insurance products covering the specified diseases and charging premium for the same. Although there are health insurance products specifically for senior citizens most of them have a Co-pay clause.
The co-pay clause specifies that a certain percentage of the claim amount has to be borne by the customer. The co-pay can range up to 50% of the claim amount. Having co-pay in the health insurance policy is also a burden to the customer who may not afford the co-pay claim amount.
Health insurance policy comes with standard exclusions as well as specific exclusions. The standard exclusions are same for all the health insurance policies which are specified by the IRDA, while the Specific exclusions are not standard across the insurance companies. Each insurance company can insert specific exclusions in the policy copy to and the same has to be verified by the customer before making the purchase.
Standard Exclusions such as Cosmetic treatment, Diagnostic costs, and Medical expenses to treat Suicide attempts etc are not covered under any health insurance policy unless specifically mentioned in the coverage.
Specific exclusion such as 9 months waiting period for Pregnancy related hospitalization is also mentioned in the policy copy and varies from one insurance company to the other.
The disadvantages of healthcare insurance are negligible when compared to the advantages offered by the health care insurance policies. The disadvantages can be overcome by proper understanding of the terms and conditions mentioned in the policy copy.
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