The term health insurance is generally used to describe a form of insurance that pays for medical expenses.Buying health insurance wards off financial worries during contingencies. For all those who are healthy hospitalization may look like a remote possibility. Nonetheless, in these times of exorbitant healthcare costs, having a health insurance cover is absolutely essential. The market is flooded with options and each comes loaded with its own share of pre-conditions hidden in the fine print. Negotiating your way through the plethora of policies and buying one that fits your needs has indeed become a challenge.

A Brief History Of Health Insurance

Last year, LIC, for the first time in its history, ventured into the health space by offering a product called Health Plus (Reliance Life Insurance too came up with a similar offering). The rationale behind this foray for life insurance companies is the tremendous opportunity in the health sector as only 11 per cent of the Indian population has any form of health insurance. These offerings by LIC and Reliance are essentially unit-linked health insurance plans. Though the cost structure of both these policies is on the higher side, and they come with several restrictive clauses, their launch exemplifies the product innovation that is happening in the life insurance industry.

To have a health insurance cover is absolutely essential. The market is flooded with options and each comes loaded with its own share of pre-conditions hidden in the fine print. Negotiating your way through the plethora of policies and buying one that fits your needs has indeed become a challenge.

What it will Cover?

A basic health insurance plan covers you against expenses incurred during hospitalisation and also for pre- and post-hospitalisation expenses, typically for up to a month. Buy one such plan first. Most plans admit claims on fresh ailments only and not on pre-existing diseases - not until a no-claim period of three to four years has elapsed. Typically, these plans cover people up to 60 years. But it becomes difficult to buy a policy after 50. So buy a cover as soon as you can afford one.

Many employers today provide group medical cover, but depending entirely on this could be risky. Says Ritesh Kumar, head (retail, rural and reinsurance) at ICICI Lombard General Insurance: "Evaluate the employer's policy to ensure that the cover is adequate. Also, in case you shift job you need an individual cover." Remember, your employer's medical cover terminates the minute you quit your job. If your next employer offers medical cover, you could renew your previous policy. But if in the job switch a gap of seven to 15 days arises, the insurer at the new organisation will insist on issuing you a fresh policy. The disadvantage of a new policy is that any claim made on a disease on the previous policy will be treated as a pre-existing disease and will not be covered.

Extra Benefits For Critical Illness

If you are healthy then a basic health insurance plan suffices. But people with hereditary problems or poor health records require a critical illness policy as well. This plan pays a lump sum when the policyholder is diagnosed with one of the specified critical illnesses. Typically these include cancer, coronary artery bypass, heart attack, major organ transplant, paralysis and stroke. After the lump sum is paid the policy terminates. These policies are far cheaper than basic health insurance plans, but you can't depend on them alone.

Three types of critical illness plans are available:

• rider
• term
• regular

Riders come with a major disadvantage. According to Binay Agarwala, head (health business), ICICI PruLife, "As per IRDA regulation, the sum assured of the rider cannot be higher than that of the base policy. A critical illness plan is meant to cover diseases that require a lot of money. If they don't provide that much relief, their purpose gets defeated." Adds Rahul Aggarwal, chief executive officer, Optima Insurance Brokers: "In case of some insurers, if you invoke the rider the main policy also terminates. Term critical illness plans are best since their premium remains fixed throughout the policy tenure."

A major restriction of critical illness plans is that insurers wait for a month after diagnosis before paying the benefit. This defeats the need for immediate liquidity. Look at a critical illness cover only as a supplement to your basic plan.

Specific covers for senior citizens

Currently six insurers, namely Bajaj Allianz, Star Health Allied Insurance, National Insurance, New India Assurance, United India Insurance and Oriental insurance, have specific plans for the elderly. These plans cover people beginning from age 60 and up till 80.

Bajaj Allianz restricts the age at entry to 70 years, and Star to 69 years. Other than Oriental, which covers only accidents and critical illnesses, the other policies cover hospitalisation expenses like any normal health insurance policy. Some also do not require you to undergo a medical check up.

Most of these policies provide limited cover. They cover pre-existing diseases after a short waiting period. National Insurance covers pre-existing diseases after one no-claim year and New India Assurance after 18 months. After 18 months the latter does not cover pre-existing critical illness diseases, only diabetes and hypertension (for extra premium). United India covers pre-existing diseases after three claim-free years and Oriental after two. Star Health covers pre-existing diseases immediately but excludes those for which treatment or advice was recommended within a year before policy was bought.

The restrictions don't end there. Star entertains claims only if treatment is done at one of its network hospitals. Bajaj requires the insured to pay 20 per cent of claim amount if treatment is not done in one of the network hospitals. New India, Oriental, and United India too have co-payment clauses. New India requires the policyholder to bear 10 per cent of the claim amount; Oriental and United 20 per cent. National's, by far, is the best policy. It does not require you to co-pay and does not ask for medical tests either. But it offers you cover of up to Rs one lakh only.

Senior citizens who are healthy and can clear medical tests could also buy a normal mediclaim policy. Policies offered by Oriental or Star Health give you more cover and you can also shop around to choose the lowest-cost plan. Star offers cover even for the elderly in its normal Mediclaim policy although you need to undergo a medical test and any pre-existing disease is covered after four policy years. Star's Rs 1 lakh policy for a 60 year old comes for Rs 3,000 as against National's Rs 4,180.

More variants

Floater Plans. Floater plans are popular with families. Instead of covering each member separately, insurance companies issue one cover for the entire family. The advantage of these plans is their lower premium. Says Kumar: "Floater plans are recommended since they give higher coverage at a lower cost per person." However, the lower rates come at a cost. If one member of the family falls ill and invokes the policy, the cover on the rest of the members gets reduced by that amount.

Disease-specific plans. The latest variants to enter the health insurance sector, these plans target specific diseases, including pre-existing ones. At present, ICICI Prulife and Star offer these policies. While ICICI Pru covers cancer and diabetes, Star covers only diabetes. Cancer policies cover early stage cancer, which even a basic plan takes care of. So the only cushion cancer-specific policies provide is higher coverage of up to Rs 25 lakh and preventive health care. Says Agarwala: "Other health insurance plans generally give a cover of up to Rs 10 lakh and do not cover a person for early cancer. This policy also ensures regular screening that helps in early detection."

Diabetes Cover covers diabetics and also offers preventive care. If you belong to a family in which this disease runs but haven't contracted it yet, having a regular health insurance policy is sufficient.While the market is launching a large number of plans, stick to policies that offer comprehensive cover and carry few hidden clauses tucked away in their fine print.