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What are a few key things to take into account before buying health insurance?

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20 Sep, 2020 by rohan bhatia

What are a few key things to take into account before buying health insurance? Any must have add ons?

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Health Insurance

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20 Sep, 2020
Anuj Jindal

Hi Rohan,

This is a brilliant question. First a bit of context.

Whenever you ask this question to an insurance seller, the answer is loaded with their self-interest. Even insurance-comparison websites do a shoddy job on this count.

So keep yourself at the center of the entire process which thinking about insurance. Here's a 3 step process we recommend people to follow:

(1) Define your purpose of buying insurance. Think long term. Some people just buy for ultra-short term purpose of saving tax and compromise on picking up the right cover for themselves. Some people look at insurance with the view of buying the cheapest cover, but do not realize that the plan they're picking comes loaded with several restrictions which come to bite them when they have the need to use the product - i.e. hospitalization. Then there are some people who are brand or product focused, but don't realize that they may not match your own goals for buying insurance. For example, several people think either PSU insurers are better or Pvt insurers are better, but never spend time and energy to appreciate what products are being offered by all of these companies. Their assessment is not very objective.

So how to define 'Purpose'?

The goal of health insurance cover should be to provide financial relief commensurate or matching the need of the member to be covered. So for a younger member, need is different from a senior citizen. Senior Citizen don't want too many frills in the policy - they rather focus on buying a cost-effective cover with some strings attached because they can't afford high premiums of a full-stack policy. If the member to be covered is relatively healthy, then the immediate cover need is for accidents or acute illnesses such as cancers; but for members who are not in their pink of health, they need to look at higher coverage at the outset itself because they may need more claims in near future and are at the risk of getting diagnosed with a disease which will block their chances of buying a health cover.

(2) Pick inflation-efficient plans.

With the rising medical cost, the ability of a certain policy to pay for medical expenses goes down because the same sum insured buys lesser health services with time. Similarly, having a plan with, say, 2 lakh sub-limit on a treatment may be fine today. But this limit will not change with time. So 6-7 years from now, the treatment cost would have jumped and become double, but the policy would still yield 2 lakhs for treatment.

How to look out for inflation-efficient plans?

Plans with no room rent limit or plans where room category is defined should be preferred. Plans where accumulation of No-claim bonus grows upto 100% of more are better because they give you more coverage for same sum insured. Look out for plans where age-acceleration of premium is shower than competing products; you would be amazed to see that premiums rise 7 to 10 times over a 20-30 year period for same sum insured - Be watchful of that.

My recommendation also as an insurance claim expert is to avoid insurance plans that assign a Third Party Administrator (TPA) to service your claims. TPA service sucks. Never buy a policy which has TPA, whatever be the brand or howsoever lucrative is the product and its premium.

(3) Be brutally honest and involved. From my experience of having witnessed more than 500 claims getting rejected due to non-disclosure of previous medical ailments (or PEDs in industry parlance) at the time of buying policy, I can tell you that majority of insurance buyers are at the risk of their claim and policy rejection because of a very weak disclosure of information on PEDs at the time of buying policy.

I have written extensively about what are PEDs, how to identify and disclose them in this post-

But what is relevancy of honest and involved?

Because during the purchase process, you will be tempted to hide information, or you would be advised by agents to skip providing accurate and comprehensive details on your PEDs. Infact you will be threatened by these people that either your policy application will be rejected by insurance company or a long waiting period of 3-4 years will be applied to your PEDs. What they will not tell you is that insurance companies spend considerable amount of time, money and effort to detect non-disclosure IN EVERY CLAIM that you file. Yes, they do. Agents will make it sound very simple to you... that everything would be fine. But it never will be.

If an insurance company is rejecting your insurance application today due to PEDs, keep in mind that they will reject you claim and even your policy in future when the PEDs get uncovered in future claim (insurer will eat up all your premium also without returning any dime to you). So disclose everything. If one insurer rejects your application, try a different one. Underwriting or application processing guidelines of insurance companies vary, so one may reject you policy but another one will issue you the policy. Try try again!

Being involved means 2 things -

First, never leave it in the hands of the agents to fill up your policy application/proposal forms - whether online or offline. Because you would sign the document and they'll put 'NOs' everywhere even if you have told them a PED. Do you know that policy application rejection rates can be as high as 20% if proper disclosure is made! Agents want their commissions (which are as high as 20% of your every premium btw considering fixed commissions and rewards and free foreign trips), so they skip PED details in proposals to ensure applications go through and they make their commissions.

Second, if you're buying online, you may not get enough fields or space to mention all your PEDs. No problem, enter whatever space allows you to type. Prioritize the critical ones. Then once the underwriting team calls you for verification, send them the remaining list on email (to the official email id of insurer and not to the agent's email id) so that you have a written record of disclosure done prior to policy issuance. If you're doing this exercise offline, then you will have adequate space on proposal form to write down every bit of PED details. Now once the process ends and a policy issued to you, make sure the verify the the PEDs are mentioned on the policy certificate (PC). PC is a legal document or contract. If someone smartly skips mentioning PED on PC and you accept it, then legally insurer has no liability and can still say that PED was not disclosed (emails sent to insurer before policy issuance will therefore be your evidence to fight later). You must create the necessary ruckus and get the agent and insurer to make changes to the PC and add the PED to the PC or to their records through a process called as 'endorsement'.

I hope these points give you the requisite tools to figure out the right plan for you. Do the necessary diligence, don't be in a hurry.

If you need clarification on any of the above points or you have any follow-up questions, I'm happy to answer them.

Anuj Jindal



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