Health insurance! Most of us have heard of it, but very few take it seriously. There are some who feel health insurance should be taken only when there is a need of hospitalization. Health insurance in fact, should be taken when you are young as you will not have to undergo any medical tests and the premiums will be much lower. So, what is health insurance and how does it work? Let us find out.
How does Health Insurance work?
Hospital costs are extremely high and range from a few lakhs to several lakhs depending on the type of treatment required. You might have to withdraw a major portion of your savings meant for your financial goals in order to pay for the hospital bills, not to mention the post hospitalisation costs.
In order to protect yourself from these unexpected emergencies, you need health insurance. For a nominal annual premium, you can get health insurance cover for your medical costs.
You need to ensure that you pay your health insurance premiums on time and keep the policy active to avail the benefits that it offers. The insurer will in turn pay your hospital expenses and post hospitalisation bills on time. You can have cashless health insurance or reimbursable insurance where you pay out of your own pocket and the insurance company reimburses your expenses.
Calculation of Health Insurance
There are several factors that are taken into consideration while calculating your health insurance premium. The amount of premium you pay is inversely related to your age. So, for the same policy coverage, a 25 year old will pay much less premium than a 45 year old. The reason being that you are statistically more likely to have health problems at 45 than at 25. Moreover, at 45 you will have to undergo a medical checkup to calculate the premium payable by you.
Health insurance premiums go up if you are a smoker or are taking any medications for some pre-existing illness. While filling out the insurance application form, you need to mention these details as there will be an additional loading to your premium as well as some exclusions for a certain period. If you go online and fill in the details, you can find out the health insurance payable by you using a health insurance premium calculator.
Insurance policies contain complex terms which are difficult for a lay man to understand and you might end up paying insurance in excess of your requirements. In order to simplify things and assist you in calculating the exact amount of insurance payable by you, you can use online health insurance premium calculators.
With these calculators, you will be able to calculate the insurance amount as per your age group, make comparisons with the rates of premium offered by different insurers, find out the cost of additional riders like critical insurance, and other information. After finding out the cost, you decide which health insurance policy suits you the best.
For calculation of premium, you need to fill in the following details:
- Personal details including the details of your family members.
- Cover needed by you.
- Whether you are a smoker or a non-smoker.
- Pre-existing illnesses if any.
- Your annual income.
- City name and pin code.
- Mobile number.
When you click on the ‘Proceed’ button, you will find the different quotes by the various insurance companies.
You need to remember that the health insurance premium is calculated on the basis of the oldest member of your family.
What Is the Breakup of the Health Insurance Premium Charged to You?
There are a lot of costs which are factored into the health insurance premium that you pay. Insurers have to adhere to certain guidelines with regard to health insurance policies. These are:
There are a lot of expenses which are incurred towards marketing costs. These would include the cost of designing a health insurance policy, commissions, brochure, advertisements, and other costs. Operating costs also come under this.
Insurers invest in public sector savings instruments in compliance with IRDA guidelines and avoid private sector investments due to the risk. The returns from these investments impact your premiums.
The eligibility criteria for different policies like an individual health insurance policy, family floater insurance, as well as group insurance, depend on the risks that are anticipated while underwriting them. This is to ensure that none of the policies pose an extreme risk that could result in heavy losses for the insurer. Risk analysis is done taking into account multiple factors which help in deciding whether an applicant should be denied or not.
Mortality rate is the cost that has to be borne by the insurance company when a customer needs to be hospitalised. This is a liability for the insurer and immediate funds need to be released for emergency hospitalisation. It is for this reason that your insurance premium goes up with age as there are greater chances of falling prey to life-style diseases. Also, premiums for senior citizens are the highest.
Location Specific Factors
There are numerous factors like political stability of that region, geographical position, state of industrialisation, trade activities, and lifestyle that are considered by insurers to calculate the modified community rating.
Even though a medical checkup may not be insisted upon, there are certain facts of an individual’s background that are examined. These include the applicant’s health, family medical history, as well as smoking and drinking habits of the applicant.
Tax Benefits of Health Insurance
Apart from protecting your investments, health insurance also provide tax benefits. Premium paid by you by cheque, demand draft, and online qualify for exemption under Section 80D of the Income Tax Act, 1961. Premium paid for your spouse, children, and dependent parents are also exempt up to a certain limit.
Benefit from Awareness about Health Insurance
It is very important that you understand how health insurance works. After choosing the right health insurer and specifics from the online portal, make sure that all the details filled out are correct. All important details about your health and any medical history should be disclosed, otherwise your claim is liable to be rejected.
It is also extremely important to remember that you should pay your medical insurance premium on time. If there is a default, your policy is liable to be cancelled. As you grow older, fresh applications are more difficult.
So, insure right now and live a stress free life!