The Two Basic Types of Health Insurance and How to Go About Buying Them

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People of India have drawn towards health and wellness more in the past few years than ever before. Indians have started having healthy diets, have started exercising regularly, and making lifestyle changes for better health. But despite all these efforts made towards being healthy, achieving holistic health is an uphill climb for us. Working out and eating healthy might have increased by leaps and bounds, but most Indians still do not know types of health insurance and they do not have health insurance coverage to their names.

Health insurance Penetration in India is Low

A majority of the population still rely on income, savings or borrowings to fund their treatment. Such unpreparedness many times leads to a financial crisis. A critical illness or a big accident may account for bulk medical spending because of the private healthcare system and many out of pocket expenses.

One research reveals that the baseline cancer treatment cost is higher than the annual household income of over 80% of households in India. Again, deaths due to cancer are four to six times higher in India than America. In such a health ecosystem, having proper insurance is essential to gain a greater sense of control on one’s physical and financial health.

Buying Health Insurance Tailored to Lifestyle Requirements Helps

The primary reason for the lack of health insurance penetration in India is misinformation. Even health-conscious individuals do not have enough information on what they should be looking for to choose the right insurer.

To avoid medical expenses related to financial worries, we must know about the two basic types of health insurance:

  • Indemnity-based health insurance
  • Benefit-based health insurance

Family health insurance, individual health insurance, health insurance for senior citizens, etc., are indemnity-based health insurance types. Critical illness insurance, accident insurance, etc., are benefit-based plans.

It is essential to consider a policy as per lifestyle and age. As we grow old, lifestyle diseases like diabetes, hypertension, heart disease, stroke, and cancer could creep in. Factors like age, premium, coverage, no-claim benefits, co-payment clause, hospitalisation benefits, preventive health check-ups, etc. should decide our policy.

Indemnity Plan Vs Defined Benefit Plan

Diseases are unpredictable. Buying any of the general health insurance plans in India might not provide us with the requisite safety net. Purchasing a health insurance policy depends on hospitalisation duration, the seriousness of the medical emergency, etc. A health insurance plan in India should cover hospitalisation expenses as well as disease-related expenses. The best way here is to customise your health insurance policy with the benefits of both indemnity plan and defined benefit plan.

An indemnity plan is a type of health insurance plan that reimburses actual expenses incurred during hospitalisation. There is a pre-defined limit up to which reimbursement is made based on the sum insured. Any unutilised amount left after a claim is made can be used for the medical needs of the future during a given year.

 The pros of indemnity based plans

  1. An indemnity plan makes private hospitalisation cheaper

Health insurance experts advise in favour of indemnity plans for a variety of reasons. Healthcare cost is high in India, and private hospitalisation can clean up one’s lifetime savings. The longer is the hospitalisation, the higher is the medical bill. An indemnity plan can ease the financial burden to a great extent.

  1. An indemnity plan offers flexibility

The plan offers flexibility in the choice of hospital, healthcare service provider, doctor, etc. Insurance companies offering indemnity plans have a network of hospitals and doctors so that policyholders can choose a primary care doctor of their choice. The insurer even refers to specialists. Again, cashless indemnity health insurance plans in India allow cashless hospitalisation.

  1. An indemnity plan offers a wide range of hospitalisation pay-out options

An indemnity plan covers the hospitalisation cost for different ailments. Such plans cover the actual expense incurred during hospitalisation up to the sum insured. A policyholder can get the best treatment as per the payout his/her policy offers.

  1. An indemnity plan offers a choice between family floater and individual plans

Indemnity plans are further divided into individual plans and family floater plans. Individual plans are bought in the name of a single individual. The premium is based on the sum insured and the individual’s age. Many health insurance companies offer discounts if more than one members of a family are insured together. Family floater plans allow the coverage of more than one member under the same plan. The premium is based on the age of the eldest member included in the plan. A right policy should be chosen depending on critical illness history and family medical history.

  1. Indemnity plans have low premiums

The low premium rates of indemnity plans are the reason they are popular among the masses. Policyholders mostly avail a percentage of the total cost incurred. This reduces the risk for the insurer and makes a plan available at lower premiums.

A defined benefit plan is the extra boost of insurance you need

While indemnity-based health insurance plans in India ease the burden during a medical emergency, your coverage should be more than that. For complete health insurance coverage, health insurance companies offer defined benefit plans.

Defined benefit plan is a type of health insurance plan that provides financial safety against critical illnesses. The entire sum insured amount gets paid to the policyholder when a predefined disease sets in. A benefit plan doesn’t include hospitalisation charges but offers a lump sum payment.

The pre-defined payment is not dependent on the expenses incurred during the treatment. The policyholder can use the lump sum amount as per his/her convenience. In fact, the benefit of Hospital Daily Cash offered in indemnity plans is based on the ‘defined benefit’ model, and the payout is based on the number of days a policyholder is hospitalised.

The bottom line

 When looking for all-round health insurance, it is essential to supplement your indemnity plan with a defined benefit plan. With such 360-degree insurance, you can stay financially protected despite any medical emergency.

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