“We live in an unpredictable world these days. Thus, there are many legitimate reasons to prepare yourself for those unannounced curveballs.” – DBS Singapore.
In broader and more straightforward terms, Insurance means indemnifying the losses or the possibility of loss.
Insurance is an umbrella to uncertainties that an individual may face in the course of his life. Therefore, Insurance can be classified under various heads like life insurance, fire insurance, stock insurance against any damage, insurance of the stock’s profit, etc.
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As broad as the scope of Insurance is, there are some very general and crucial insurances that need investment, such as health insurance.
Now, it would be unfair if I begin without referring to the fundamentals.
What is Health Insurance?
There are always at least two parties in a contract of indemnity.
- Insurer: The person who receives a premium for bearing the risk.
- Insured: The person who transfers the risk.
We talked about how risk is indemnified. The insurer bears the risk of a premium paid by the insured. The insured can split the payment into installments or pay in lump sum.
Under health insurance contracts, the insurer pays for all the health expenses that the insured party incurs when they are under a contract. Before entering into an agreement, the insured has to disclose every little intricacy regarding their health.
Non-disclosures of furnished reports make the insurance contracts null and void. The terms of the contract are altered according to the needs of the concerned party at the time of entering into an agreement.
Health Insurance plans navigate the policyholders to designated healthcare providers. In this way, maximum coverage is provided.
The insured party should not deviate from that designated care center. Otherwise, the insurance company may refuse the payment outright. One has to obtain the services from within the network defined by the insurance company.
You need to acquire prior authorization for every service received outside the scope of the contract. Else, this gives the insurance company an advantage to escape the contract.
Usually, the agreement document contains all these conditions. Hence, I advise you to read and review it thoroughly.
Going down the alley, let us look at the advantages and disadvantages of obtaining health insurance.
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Advantages of Health Insurance
Given the rise in costs of medical care due to fragility and intricacy concerned with the field, along with regular advancements, health expenses will keep inflating.
An acute illness has the power to drain your life-long savings. A medical emergency persuades families to borrow money, which leaves the victim vulnerable and insecure.
Such a situation certainly puts a dent in your financial health. A health insurance policy covers such expenses for you. Later in this article, we will discover how.
Availability of Options
With advancement and modernization, health insurance has offered a wide range of plans like Family floater plan, Critical illness plan, Unit Linked Health Insurance, Group health insurance.
The availability of such a wide variety of options ensures that you select the most suitable and affordable policy.
Another way Health Insurance benefits the policyholder is by deducting their income tax. Health Insurance Premiums are deductible from the total income, which reduces the burden of Income Tax.
Under Section 80D of the Income Tax Act, 1961, various laws have been provided regarding the same. Hence, Health insurance does not put an unnecessary burden on your finances. Instead, it reduces the load and provides peace of mind.
Traditionally, it was mandatory for the policyholder to clear all the hospital dues and then claim the required amount from the insurer.
But nowadays, things work through a direct network. One does not need to pay cash at the hospital. The insurance company directly covers all expenses.
The extensive list of hospitals around the country allows the insured much-needed access to urgent healthcare requirements.
If you are admitted to a non-network hospital under any circumstances, the reimbursement claim shall come into force.
Disadvantages of Health Insurance
As your age and complications regarding your health increase, the premium also increases. Your age and wellness of health are significant factors in determining your premium.
It becomes considerably difficult to find health insurance after the age of 60. The critical uncertainty associated with the person inflates the amount charged.
This is why one must purchase and invest in health insurance at younger ages.
Existing Health Problems
Health insurances generally come with a waiting period of 2-3 years for existing diseases. It implies that the policyholder shall cover the expenses arising from that particular illness for a specified period.
Even after purchasing health insurance, the company imposes a waiting time to monitor your health under the prevalence of that specific disease.
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Under this clause, a policyholder must share the bills with the insurer to a predetermined percentage. Though such a clause lowers the premium, the total coverage amount is less.
You must go through every document before investing in a health insurance policy.
How does Health Insurance Work?
Denials and Rejections
Considering general contracts, health insurers have the authority to reject the claim on the following basis:
- If you purchase a drug but a comparable medication with the same characteristics was available at a lower cost.
- You obtain certain services without any authorization or intimation to the Insurance Company.
- If you avail of non-network services without approval, it may attract higher premium payment or denial outright.
Deviation from a Managed Care Plan, under which a primary care physician is provided to monitor the patient’s health.
Some other terms of Insurance Contracts
- Co-Pays: A particular fee that plan subscribers must share.
- Deductibles: An amount that must be met before health insurance shall cover the claim.
- Co-Insurance: A predetermined percentage of the cost that the insured must pay after deductibles but before reaching their maximum out-of-pocket expenditure is known as co-insurance.
An insurance policy with higher out-of-pocket expenses shall have relatively smaller premiums. It is thus highly vital to read all the documents carefully and with detail. Don’t sign the documents without squandering and reading them.
- The insurance company conducts a comprehensive medical test to ascertain your health condition. It decides the claim based on your report. Further, co-insurance and deductibles are agreed mutually.
- If you approach a network hospital for treatment, the third-party administrator shall reimburse your bill directly. This occurs under a cashless policy. If the policy you opted for does not favor cashless treatment, you need to pay the expenses, and later the insurance company shall reimburse you for the same based on the bills.
You need to file an application to obtain the claim. A process of verification is also carried out. Sometimes, the claim includes certain items that are not in the policy’s scope, partially or entirely.
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The ones that the insurance company pays for proportionately are known as deductibles. The complete disallowances shall be borne by the policyholder.
What happens if I do not claim anything in a year?
In such a case, the insurance company shall provide you with an NCB. An NCB is a Non-Claim Bonus. It is offered to the insured party as a discount on the premium or an added benefit on the sum assured.
Why is Health Insurance Considered Necessary?
Importance of health insurance in Financial Planning:
Inflation and Medical Costs are knocking off everyone’s pocket. To save and invest regularly is a better option than waiting for an illness and then coming out empty-handed. Health Insurance policies even stated earlier take care of your medical conditions. Terms and Conditions apply.
Health insurance acts as a savior to cover your medical expenses. One must avail a plan when young. Furthermore, after retirement, many people do not have a fixed source of income. Having health insurance by their side relieves them of added stress.
Already stated above, the government provides tax benefits. Anything that must be encouraged amongst the masses is promoted with added advantage by the government. To promote health insurance, the federal authorities offer help in the form of tax deductions.
Conclusion: Is Health Insurance a Burden?
As the article indicates, a health insurance policy does not spell an unnecessary burden on your finances. Instead, it enables you to save more. In specific terms, an individual shall save on their taxes.
Furthermore, the rising costs of medical care are hard to combat for an ordinary man. Therefore, a health insurance policy must be considered.
Not only will it help you meet healthcare expenses, but it shall also ensure better exposure to medical facilities and treatments regularly.