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Buying health insurance without knowing these important health insurance terms can indirectly cost you more!
In modern times, humans are exposed to climate change, harmful microbes, pollution, etc. Moreover, in 2020, COVID-19 made us realise how important it is to plan for uncertainty.
Sounds ironic, right? However, health insurance makes it possible by safeguarding from uncertain medical emergencies financially. Healthcare expenses are rising due to inflation. So, insurance is mandatory for financial backup. However, while purchasing, investors should read health insurance terms and conditions properly. Investors may not understand some technical terms, but it can affect them while claiming insurance.

To avoid such issues, know these important terms of health insurance before buying health insurance.
Pre-policy health checks
The insurance policy prescribes some medical check tests to be done before buying an insurance policy. Insurance companies check the results of these tests. The main purpose of these checks is to understand the overall health condition of the policyholder.
Some companies may not even ask for the check, but in such a case, hiding or not disclosing any pre-medical conditions makes the insurance policy null and void. Commonly, pre-policy health checkups are the following:
Critical illness
Various fatal and life-threatening diseases are classified as critical. Insurance companies prepare this list of critical illnesses. However, conditions for some diseases are elaborated by the Insurance Regulatory and Development of India (IRDAI) like cancer of specified severity, kidney failure requiring regular dialysis, stroke resulting in permanent situations, etc. in the list of critical illnesses.

This list of particular companies should be checked before buying insurance, as it affects the type of policy, premium, coverage, exceptions, etc.
Exclusions
Some medical treatments, diseases, procedures, etc, are mentioned in the health insurance policy, which the insurer is not liable to pay. These are known exclusions to the policy. Usually, these are directly or indirectly under the insured person’s control and thus can be avoided. Some exclusions are as follows:
- Cosmetic treatment
- Infertility treatment
- Self-inflicted injuries.
- Pre-existing disease (Any medical condition diagnosed 48 months before the effective start date of the policy is a pre-existing disease- as per the IRDAI.)
- Sexually transmitted disease (STD)
Cashless health insurance
This type of health insurance does not require the insured to incur medical expenses. As per this policy, all the medical expenses are paid by the insurance company directly to the hospital. Cashless health insurance protects the policyholder from any burden of uncertain medical expenses. It applies only to the treatment in-network hospitals.
Network hospitals
Every insurance company has its list of hospitals where it extends its service. Usually, this happens in cashless health insurance. It is crucial to check this list to prevent a rush in urgent medical conditions.
Getting treatment in the hospitals not on this list (Non-network hospitals) becomes a burden for the policyholder. In such a case, the insured will pay the expenses before leaving the hospital. These expenses will be later re-imbursed by the insurance companies.
Add-ons/Riders
These are optional and additional coverage facilities over the regular conditions of the insurance policy. Usually, this increases the premium to a certain level but also provides additional risk coverage. These coverage options are also known as ‘Riders’ in insurance terminology. It differs for every insurance policy, company, etc, type. Following are some types of riders:
- Inflation cover
- Home care treatment expenses
- Ancillary medical commodities
- Waiver of premium
- Critical illness rider
Loading
Loading is the extra cost paid to cover the risk, higher than anticipation. It is due to the higher risk associated with a person. While compensating for higher risk, the company has some conditions for which it will not provide coverage. For example:
A person is willing to buy regular health insurance. However, he works in a chemical company and is prone to lung infection. In such a case, the regular health insurance policy would be availed by him at a higher premium, as the risk is higher than usual.
Waiting period
Policyholders should check the policy waiting period mentioned before buying it. It is the period from the start of the policy to the date that the insured is restricted from using the insurance benefit. An insured cannot claim policy benefits in this period. This period is different for every insurance company. There are various types of waiting periods, specific to certain critical diseases, accidental hospitalisation, maternity periods, and initial waiting periods.
Cumulative Bonus
Cumulative bonus is an important benefit of health insurance. It is also known as a no-claim bonus. It is offered by the insurance companies to the insured when there is no claim made throughout the specified time. Bonus is offered in different ways, such as waiver of some premiums, rider benefit, increase in insurance coverage, etc.
It benefits both in the following ways:
- Policyholder – The bonus earned for not making any claim is valuable.
- Insurance company – The insurance holder does not make small claims for this bonus. It saves the company from making a loss.
Co-payment clause
It is also known as the ‘Co-pay clause’ in insurance terminology. According to it, the insurer prescribes a certain percentage % of expenses which are paid by the insurance holder. It is crucial to check this clause and purchase the policy only if this value is feasible for the policyholder. It applies to both – cashless and reimbursement schemes. The policyholder’s share of expenses should be paid before claiming from the insurance company. Understand co-payment with these examples:
- Ms.Rekha has a policy with a co-pay condition of 30%. Claim = ₹1,00,000/-
- The policy is for ₹60,000/-. Co-payment would be = ₹30,000/-, and the claim would pay ₹80,000/-. Thus, the remaining ₹10,000 would be paid by Ms.Rekha out of pocket.
- The policy insures for ₹1,00,000/-. Co-payment would be = ₹30,000/-, and the claim would pay ₹90,000/-.
- The policy insures for ₹1,20,000/-. Co-payment would be = ₹30,000/-, and the claim would pay ₹90,000/-.

Conclusion
We encounter many cases in newspapers about insurers not getting their claims or getting cheated. However, the responsibility for this also lies on the insurance holder for not checking the insurance terms correctly. Thus, understanding health insurance terms and concepts is crucial while buying any health insurance policy.
DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.
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