Health insurance is a financial protection against any medical related expenses a policyholder may have to incur during the tenure of the health insurance policy. Technically a health insurance policy is a contract between the health insurer and the policyholder seeking health insurance. As per the contract, the health insurer will pay out expenses related to medical needs of a policyholder, while the policyholder pays a premium amount each year towards the policy. The payment for expenses pertaining to any pre existing diseases a policyholder may have before opting for a health insurance policy are subject to the terms and conditions of the underlying contact or health insurance policy.
Apart from providing medical coverage, health insurance also offers a tax deduction benefit to the policyholder. The premium pad for health insurance is labile for tax deduction under Section 80D of the Income Tax Act, 1961.
Types of Health Insurance
With increasing healthcare costs and varying needs of different individuals with respect to their healthcare needs, there are various types of health insurance plans on offer today. Health insurance in India can be broadly classified into two distinct categories namely indemnity based health insurance and fixed benefit based health insurance.
Indemnity based health insurance: Indemnity based health insurance plans, also commonly known as reimbursement plans are based on the concept of indemnity or reimbursement. The motive of such plans is to ensure that the policyholder is financially in the same position prior to incurring of any medical related expenses. Indemnity based health insurance plans therefore reimburse medical expenses including the money spent on diagnosis as well as pre and post hospitalization.
The premium of any such plans is based on the total sum assured. Treatment towards accident or illnesses up to a certain limit as per the assured sum is covered under the policy.
Defined benefit health insurance:
Defined or fixed benefit health insurance plans are on the other hand offer a pre fixed coverage or a benefit payout irrespective of the actual expense incurred. Critical illness plans as well as hospital cash and surgical benefit plans are examples of a typical fixed benefit health insurance plans.
Individual health insurance plans:
Individual health insurance plans are prime example of a mediclaim or indemnity based health insurance. Individual plans offer compensation for expenses that have been borne by the policyholder up to the sum assured limit. So if a policyholder as an individual mediclaim policy with a cover of Rs. 1 Lakhs and spends Rs. 80,000 on medical expenses, the policy will reimburse the spent amount of Rs. 80,000 as per the policy terms and conditions.
Family floater insurance plan:
A family floater plan is also a type of indemnity health insurance plan. The only difference between a family floater plan and an individual health insurance plan is that under a family floater plan the sum assured is available for all insured members of the family. For example if a family of four opts for a family floater plan with a cover of Rs. 10 Lakhs, any member can claim an amount up to Rs. 10 Lakhs in one year. Only the remaining amount is available to other members of the plan for the year.
Critical illness plan:
Critical illness plan is a prime example of a fixed benefit plan wherein the benefits and payouts are fixed and available only if the policyholder is diagnosed with a pre specified illness. Usually under critical illness plan the insurer pays out a lump sum amount irrespective of the treatments and hospitalization costs.
Senior citizen plan:
Since the advances in medical care have meant advancement in average age, insurers are offering insurance plans tailor made for the elderly. These senior citizen health insurance plans are usually meant for individual between 65 to 80 years and covers a large majority of common pre existing diseases. Some senior citizen health insurance plans also offer a lifelong renewal making them apt for the elderly.
Maternity Heath insurance is usually offered as an add-on or additional rider along with the main health insurance policy. Maternity insurance covers expenses made for hospitalization of the expectant mother including delivery costs for both normal and caesarean. Being an add-on rider, the benefits of a maternity health insurance covers are made available with an added premium charge.
Top up plans:
These plans help you to increase your cover with very less premium. Top up plans provide coverage like any health insurance, but come with a basic deductible. For example, if you have a top-up plan of Rs.8 lakhs with a deductible limit of, say, Rs.2 lakhs, it means that the first Rs.2 lakhs of the hospitalization bill will have to be borne by you, and the balance by the insurer. Top ups can be for both individual and floater plans, and is a good way to get an additional cover when you are having other insurance plans like an employer’s insurance.
Personal accident plan:
Personal accident health insurance plans offer coverage against any unexpected accidents that may cause severe injury or permanent disability. It offers a lumpsum pay out in case of accidental death or permanent total disability, apart from reimbursements / cashless payment benefit in case of injury.
Surgical benefit plans:
It is a standalone policy, which provides coverage for the actual expenses if in case the insured had to undergo any surgical procedures. It covers all expenses related to surgery, along with along with other benefits such as day care procedure benefit etc.
Group or employee insurance plan:
Group health insurance plans are offered to a group of individuals usually employees in an organization to offer a financial cushion against any health related eventuality.