Illustration: Factors that matter while choosing health insurance

Published: February 11, 2016 at 8:25 am

Last Updated on

Here is an illustration of the most important factors  that we need to keep in mind while choosing health insurance.

Health insurance policies are riddled with window dressing. That is, the features advertised by insurers are often tertiary or downright unnecessary while considering the purchase of a policy. I have written a guide on How to Buy a Health Insurance Policy. In this post, I give an explicit illustration of the features that can be immediately rejected while comparing health plans so that only the important factors are left for easy selection.

This illustration has been made with

I considered a 5 Lakh floater cover for a couple with one child. I am not crazy about floater plans, but that is the only I could compare. I used my age and my wife’s age for the premium. Got a list of 15 insurers – some like United India were missing! So take those results with a pinch of salt. From the list, I took two of the most expensive and two of the cheapest policies for a detailed feature comparison.

I have added the ‘x’ mark on the leftmost column to indicate those features are not necessary while shopping for a health insurance policy.

Screenshot from (1)
Screenshot from (2)
Screenshot from (3)

All the features mentioned above are explained in detail here: Brief Explanation of Each Feature: Health Insurance

Day care treatment which does not require overnight hospitalization is becoming more and more prevalent. So it is a good feature if the cost is not too high.

Pre-existing disease waiting period is typically 4 years. If you want it reduced, you need to pay more.

New-born child: Most companies may cover only from 3 months on. This is okay typically, but if you expect the child to have health issues during pregnancy itself, this may be important. Not crucial though.

Room rent limit: If the room rents are high in your city, try to get a policy with no room rent limits or one in which this can removed for a fee. Else a 1% room rent and 2% ICU rent per day limit is quite fine. Policies with no limits will be pretty expensive.

Limit to certain diseases If there are exclusions, then you need to be careful and read the policy document.This is the main reason one should not buy group mediclaim policies from banks! If something is offered cheap, there is always a catch! More on bank-mediclaims in a spearate post. 

Co-pay : I have filtered out this option. That is, you do not agree to pay 10% or 20% of the costs. The insurer will cover the full cost of hospitalization (as allowed by the policy). Never buy any policy with co-pay option unless there is no other choice (esp for senior citizens)

Maternity benefits: Not necessary.

So from any shortlist, if the above features are favourable at a reasonable cost, go for the policy. – Notice that low-cost policies do have all essential features (except room rent and less than 4Y waiting period of pre-existing diseases)

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If are interested in brand names, go for private companies which have been around for at least 10 years. If you hate privates like me, choose a PSU insurer and live with the sub-limits.

Other features like pre- and post-hospitalization are typically the same across insurers.

Ignore ambulance cost coverage. Good to have, but not important.

Factors you can ignore

Health check-up: Do not use this facility! Pay for your own health check-ups! Why do you need to update the insurer about the current state of your health! IRDA only said no loading of premium based on claims. It is not clear if health-check ups come under those claims! What if the insurer uses the check-up results to increase your premium? I dont know for sure, and I do not intend to take a chance!

Sum-insured restoration: If you exhaust your sum insured limit, it can be restored for free with conditions or  for a fee. Not necessary in my view.

Ayurvedic/Siddha etc. Stay away! Will be expensive.

Critical illness and daily hospital cash: Not necessary. If daily cash is available at same premium, use it!

Recovery benefits (quoted from above link)

A new feature addition; some insurance companies offer lump sum cash benefits for prolonged Hospitalisation to mitigate, to some extent, the monetary hardship suffered by Insured since all expenses involved in any hospitalisation do not get reimbursed and more the Hospitalisation period; more is the hardship.

Not crucial. Not necessary.

Out-patient expenses. This is silly! Go to your own doctor. Ignore.

The above illustrations are just that – illustration only. While comparing policies, always include a PSU insurer at least for cost reference. you should be able to choose a policy within an hour if your budget is clear.

What do you think? Do you agree? Have I missed out anything?

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
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  1. Dear Sir,

    Is there any health insurance policy which offers also the domiciliary benefits for the the whole family? Please guide me on this.

    Thanks & regards,
    Sachin Kumar

    1. If the policy offers domiciliary treatment benefit, then it applies to the whole family. If you are keen on this benefit, pick up a family floater with domiciliary treatment benefit. Typically, such plans would have cap on expenses on domiciliary treatment.
      This coverage, I am sure, is not without hassles. The doctor will have to confirm that the patient cannot be shifted to hospital for some reason.
      This may be true in case of the elderly. For the elderly, in any case, it is prudent to opt for individual policies (and not family floater).
      So take a call accordingly. Not too important a feature.

  2. Sir,

    Why have you kept critical illness as not important?
    For an employed person, bare minimum insurance exist, covering hospitalization, consultation and medication.

    However critical illness is not covered by most MNC employers. I was of the opinion that just like life is a risk, critical illness is a risk. And continuous and regular treatment for organ or oncology may erode a lot of money with time. His family may get term cover in case of death. But expenses towards treatment will equate 30to50% of term cover.

    Please correct me.

  3. Hi Pattu, Are we obligated to declare medical history at the time of health insurance renewals (to your point on using health checkups)? I’ve a health insurance with Apollo Munich and these guys want the medical history to be declared during every renewal. Not sure if the same requirement applies to other insurers..

  4. Is there an easy way to evaluate whether I should buy a health insurance given that my current employer already provides insurance cover till retirement. I am trying to evaluate whether I should be purchasing a health insurance for post retirement coverage when the premiums are really high vis-a-vis investing in the market (MFs, stocks etc.) now and later cover health related expenses from this corpus.

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