Health Insurance — Is it an expense?

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Medical inflation is at an all-time high and that means the cost of treatment and surgery for most ailments has skyrocketed through the roof. Without a good health insurance policy, an illness in your family can significantly eat into your savings. On top of that, the people that most need insurance in your family are your parents or other elderly persons, because they are most likely to contract diseases in their old age. To plan for any medical emergency concerning your parents, you must buy them a good health insurance policy. Here’s how you can decide on getting the best health plans for your parents.

Buy sooner than later 

It is now common knowledge that health insurance premiums are at their lowest the younger the policyholder is. As a person grows older, most insurance providers will demand higher premiums and increase restrictions and exclusions of covered diseases. Therefore, in order to make the most of a health insurance policy, get it when your parents are still relatively young and disease-free.

Consider multiple options and choose basis your need

The very high number of insurance products available on the market can make it hard for someone to choose just one. But it is vital to carefully select health insurance that suits your parents best. Maximum coverage with minimum exclusions is the golden rule when it comes to choosing a policy. Also, your family history of medical ailments will give you a good idea of what diseases your parents are likely to contract in the future, so you can ensure that your insurance covers those. It maybe a good idea to consult your financial advisor before taking a decision.

As a rule of thumb, insurance experts advise that health insurance cover for the elderly (aged above 45 years) should be anything starting from Rs 15 lakh to Rs 30 lakh.

Understand pre-existing diseases

Health insurance for parents comes with different terms for pre-existing diseases. Some plans may entirely exclude pre-existing illnesses while others may impose a waiting period for claiming costs related to such ailments. It is important to check the waiting period for common pre-existing conditions and ensure that the period is not more than 2-4 years. You really do not want to be in a position where you invested in a good health plan and at the time of claim found out that your expenses won’t be reimbursed because of a long waiting period.

Look out for the co-pay amount

The co-payment amount in any health insurance is the percentage of your medical expenses that you have to pay out your own pocket. Look for a plan for your parents that has a low copayment amount, which is anywhere between 10% to 20%. Higher than that and you will find yourself paying a big chunk of the cost of treatment yourself. However, in my opinion, a co-pay option is something which must not be considered given the incremental cost of insurance cover not opting a co-pay being very low.

Good claim settlement ratio 

The claim settlement ratio of an insurance provider is the proportion of settled claims to the total number of claims. This simply means that the insurer must have a good record of approving claims. You must choose an insurer that has a claim settlement ratio of at least 90%. This information can be found in the insurers brochure or website.

Single or floater plan?

An individual health insurance plan provides coverage for one individual, while a family floater plan provides cumulative coverage that can be used by any member of the family. For example, if you have purchased a family floater plan with sum insured of Rs. 10 lakh, then that amount can be utilized in a year by either a single member of your family, or multiple members, but the total limit of 10 lakh will be the same. This means that if one member utilises the entire amount, other members cannot use the policy anymore for that year.

Such a policy can be risky for your parents because old age ailments can come unannounced. If your floater policy is already exhausted and your parents need treatment, you could be stuck in a dire situation. So it is always better to get a separate policy for your parents in order to ensure that their coverage remains available throughout the year. Also these days insurance companies are coming up with innovative options to choose from under which all members of a family are covered under one policy with individual sub limits. It makes tracking of the policies easier and each family member enjoys their own sub limits.

Conclusion

These are the things that you must keep in mind whenever you’re buying a health policy for your parents. Ask all the questions and read all the documents carefully to understand every aspect of the policy. In the end, your parents’ healthcare should be extensively covered and you must not keep any gaps in their coverage.

(The writer is a Chartered Accountant and qualified professional advising on wealth management to individuals, millennials and emerging HNIs. He can be reached at adukia.rishabh@gmail.com. Views expressed are personal)