Health Insurance

What Is Health Insurance?

Health insurance is a way to pay for health care.1 It protects you from paying the full costs of medical services when you’re injured or sick. Just like car insurance or home insurance, you choose a plan and agree to pay a certain rate, or premium, each month. In return, your health insurer agrees to pay a portion of your covered medical costs. Payments by your health insurance are typically based on discounts they negotiate with doctors and hospitals

Types of Health Insurance

Health insurance, also called, medical insurance or simply mediclaim, covers the cost of an individual’s medical and surgical expenses. The individual pays a fixed sum (premium), every year for the health cover.

There are broadly three types of health insurance in India:

1. Hospitalization Plans
Hospitalization plans reimburse the hospitalization and medical costs of the insured subject to the sum insured. For this reason, the plans are also known as indemnity plans.

The sum assured can be fixed –
i- For a member of the family in case of individual health policies or
ii- For a family as a whole in case of a family health insurance policy

For instance, consider a three-member family with an individual cover of Rs 1 lakh each. Each member can claim reimbursement for a maximum of Rs 1 lakh as all three policies are independent.

If the family applies for a family health plan cover of Rs 3 lakhs, then any family member can claim medical benefit for more than Rs 1 lakh so long as it is within the overall sum assured of Rs 3 lakhs.

2. Hospital Daily Cash Benefit Plans
The daily cash benefit plan is a defined benefit policy. As evident from the name,the policy pays out a defined sum of money for every day of hospitalization regardless of actual costs. For instance, the hospitalization costs for a day may be Rs 2,000/day and the defined daily limit of the policy could be Rs 1,500/day, in which case the insured receives the latter. On the other hand, if the hospitalization cost is Rs 1,000/day, he still receives Rs 1,500/day.

3. Critical Illness Plans
These are benefit-based health insurance plans which pay a lumpsum amount on diagnosis of predefined critical illnesses and medical procedures. The illnesses are specified at the outset. By nature, critical illnesses are high severity and low frequency and cost of treatment is higher compared to regular medical problems like heart attack, stroke, among others.