Health insurance is the basic foundation of a sound financial plan. A health insurance policy can help you cover the costs of medical surgeries, expenses, and other procedures. With a comprehensive health policy in place, your overall planning can largely stay unaffected as unexpected medical bills can be covered or reimbursed by health policies. With the rising medical inflation, the cost of surgeries and procedures in India is rising. Hence, health coverage is a necessary step you should be taking toward your finances. Moreover, buying a policy isn’t sufficient if you do not give the time to understand it. Knowing the common health insurance terminology can help you get the most out of it. Here are some crucial terms you should be aware of, which are largely standardised across the industry.
Health Insurance Terminologies
PED: Pre-existing disease or PED is a declaration required to be given to the insurer before buying the policy. Insurers only cover hospitalisation costs after a waiting period if it is related to a pre-existing medical condition. This period is generally 2-4 years.
Co-pay & Sub-limits: A co-payment is a % of the bill that the policyholder is required to pay. This clause is common in cheaper policies and senior citizen plans. For instance, in a policy with a 15% co-pay, the policyholder will be required to pay for 15% of the total expense while the rest will be covered by the insurer. Sub-limit is another form of cap on the coverage amount but on specific diseases. The clause specifies the maximum an insurer is willing to pay if you go for the listed surgeries or procedures.
Room Rent Limit: This is a cap put on the type of hospital room you can choose. Hospital rooms have a daily rent. This clause restricts the policyholder from going for more plush rooms. Going with a room that exceeds the cap can reduce the amount your insurer will cover. Further, services rendered in the room, like diagnostic, surgeon fees, consultant fees, etc., will not be covered fully.
NCB: No Claim Bonus is a perk given by the insurer for a claim-free year. You can think of it as an incentive by the insurer for your good health in the past year. Usually, the basic sum insured increases by a fixed % for every claim-free year and is limited up to a certain amount. For instance, 25% for every claim-free year with a cap of 100% (of the basic sum insured). Finally, the bonus may also be reduced at the same rate at which it has accrued in case of claims.
Restoration Benefit: This benefit can restore your sum insured back to the initial amount if you have claimed some benefit. For instance, if your sum insured is 10 lakhs and you claim for a medical treatment costing 8.5 lakhs, the sum insured now reduces to 1.5 lakhs. But this will be restored to the original sum insured if you have a restoration benefit in your policy. It can help you pay your costs if you are hospitalised once more in the same year. There may be restrictions on using the restored benefit. Some policies may not let you use the benefit for the same illness once again.
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– Nischay Avichal
