Insurance

How to choose the best health insurance policy?

13 January 2025

Imagine thirty years ago, Thalaiva and Prakash Sir were chatting about their biggest fear.

Health insurance is a financial safety net that covers medical expenses like hospitalisation, treatments, and medications, protecting your savings and ensuring access to quality healthcare when needed.

How health insurance works?

The working of a health insurance can be divided into two main parts:

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Policy Purchase

Premium

You pay a fixed amount (monthly, quarterly, or annually) to the insurance company for your health insurance policy.

Sum insured

This is the amount chosen by you, which you get to cover your medical expenses, as defined in the policy.

The policy outlines the sum insured, coverage details, exclusions, and terms.

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Coverage and Claims

Once insured, the policy covers your medical expenses as per the conditions mentioned in the agreement. When a medical event occurs, you can make claims to ease the financial burden in two different ways.

Cashless claims: In network hospitals, the insurer directly settles the bill with the hospital upon submission of required documents.

Reimbursement claims: In non-network hospitals, you pay upfront and later submit bills and records to the insurer for repayment.

But, is it that simple?

While Health insurance industry in India processes more than 90% of claims successfully, policyholders may still experience other issues, such as:

Deductions in claim amounts,
Delays in claim settlement, and
Cancellation of insurance policy

These issues often arise from policyholders not understanding the policy terms, processing delays, incomplete documentation, or communication gap between insurers and policyholders.

Checklist to buy the best health Insurance!

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1. No Co-pay surprises

Co-payment clauses require you to pay a fixed percentage (e.g., 10–30%) of every hospital bill.

What can go wrong?

Ravi, a 35-year-old, bought a health insurance policy with a 20% co-pay clause and cheaper premium.

A year later, he was hospitalised for a surgery that cost ₹5 lakhs.

Here’s how his bill worked out:

‍Total hospital bill: ₹5,00,000
Insurer’s share (80%): ₹4,00,000‍
Ravi’s share (20%): ₹1,00,000

Ravi had to pay ₹1 lakh from his pocket despite having insurance because of the Co-pay clause.

What to look for?

A policy without a co-payment clause, where the insurer covers 100% of the claim amount (up to the sum insured).

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2. Freedom to choose your room

Some policies limit the daily room rent you can claim to 1% of your total coverage (₹5000 for ₹5,00,000 coverage).

What can go wrong?

Anita’s policy has a room rent limit of ₹5,000/day.

But, she chose a room for ₹10,000/day, believing she’d only need to pay the ₹5,000 difference in room rent. However, that’s not how health insurance works.

Hospital bill breakdown:

Room charges: ₹10,000‍
Doctor fees, nursing, and other services: ₹40,000

Total bill: ₹50,000

Insurance calculation: Since her room rent limit is ₹5,000/day (50% of her actual room rent), the insurer reimburses only 50% of all costs, including non-room expenses.

Total reimbursement: 50% of ₹50,000 = ₹25,000
Anita pays ₹25,000 (50% of the bill) despite having insurance because of the room rent limit.

What to look for?

A policy with no or high room rent limits (e.g., ₹10,000/day or above).

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3. No sub-limits

Sub-limits restrict how much you can claim for specific illnesses, regardless of your total sum insured.

What can go wrong?

‍Rahul’s policy

Total sum insured: ₹10,00,000‍
Sub-limit for heart surgery: ₹2,00,000

Rahul undergoes heart bypass surgery, and his total hospital bill comes to ₹5,00,000. He assumes his ₹10,00,000 policy will cover the costs. However, the sub-limit for heart surgery caps his claim at ₹2,00,000.

Rahul has to pay additional ₹3,00,000 out of his pocket despite having health Insurance because of the Sub-limit.

What to look for?

Policies without sub-limits on specific illnesses like cancer, heart disease, or cataracts.

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4. Pre- and post-hospitalisation covered

These cover medical expenses incurred before and after hospitalisation, like diagnostic tests, follow-ups, and medications.

What can go wrong?

Priya’s policy covers hospital bills but excludes pre-and post-hospitalization expenses.

‍Priya’s bill:

‍Pre-hospitalisation (tests, consultations): ₹25,000
Hospitalisation (surgery): ₹1,00,000‍
Post-hospitalisation (medicines, follow-ups): ₹20,000

‍Total bill: ₹1,45,000

‍Insurance claim: ₹1,00,000 (since only applicable on hospitalisation expenses)

Priya has to pay ₹45,000 from her pocket despite having health Insurance because her policy doesn’t cover pre- & post-hospitalisation expenses.

What to look for?

Coverage for pre-hospitalisation (diagnostics, consultations) and post-hospitalisation (medication, follow-ups) expenses, at least for 30 day pre and 90 days post.

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5. Short waiting periods

A waiting period is the time you must wait before your policy starts to cover pre-existing diseases you already have at the time of buying insurance like diabetes or hypertension.

What can go wrong?

‍Raj had diabetes and bought insurance with a 3-year waiting period for pre-existing conditions. Within a year, he incurred ₹50,000 in diabetes-related treatment costs. He had to pay the entire ₹50,000 out of pocket despite having health insurance because of the Waiting Period.

What to look for?

A smaller waiting period for pre-existing conditions like diabetes, hypertension, or thyroid disorders.

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6. Daycare treatments included

Daycare procedures are treatments like chemotherapy or cataract surgery that don’t require 24-hour hospitalization.

What can go wrong?

Rahul policy does not cover daycare treatments as he thought any big expense would involve more than 1 day, but, Rahul gets diagnosed with cancer and undergoes chemotherapy as a daycare procedure costing ₹75,000. Rahul has to pay ₹75,000 for every round of chemotherapy out of his pocket, despite having health insurance because of daycare treatments!

What to look for?

Coverage for daycare procedures like chemotherapy, cataract surgery, or dialysis that don’t require 24-hour hospitalisation.

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7. Restoration of sum insured‍

Restoration benefits refill your sum insured after it’s exhausted.

What can go wrong?

Amit’s Insurance has ₹5,00,000 Coverage, but no restoration benefit. Amit uses ₹5,00,000 for surgery. In the same year Amit is hospitalized again, incurring another bill of ₹2,50,000, but the sum insured is already exhausted. Amit Pays ₹2,50,000 despite having health insurance because of no restoration benefits.

What to look for?

A policy with automatic restoration of the sum insured after its exhausted, ideally unlimited or at least once per policy year.

Conclusion

To find the right health insurance, start by comparing policies online and thoroughly reading the fine print to understand these limits and benefits.

Look for policies that align with your health needs, and don’t hesitate to ask insurers for customisations like higher room rent limits or daycare coverage.

If you’re still unsure, consult a trusted insurance advisor and don’t buy a policy until you’re sure because you don’t go buying health insurance everyday or even every year!