Avoid These 7 Common Mistakes in Health Insurance Purchase

Have you ever wondered why health insurance is considered one of the smartest financial decisions you can make? It’s not just about covering medical bills; it’s about protecting your finances and peace of mind. However, between recurring premium payments and understanding the complex terminology, it’s easier to get confused. However, with the right approach, it doesn’t have to be so daunting—you can confidently tackle this task.

So, what’s the right approach? Understand health insurance mistakes and avoid them when choosing a plan.

7 mistakes while buying health insurance and how to avoid them

Here are some common mistakes people make when purchasing health insurance:

1. Opting for the inappropriate cover amount

Choosing health insurance with the lowest premium (with lower coverage) might seem attractive initially. However, it could leave you vulnerable if you face a bigger medical challenge. On the other hand, an overly expensive plan might feel excessive for your current needs. 

Avoid getting the wrong cover by finding a plan that strikes a balance. 

Adequate coverage should include hospitalisation, pre- and post-hospitalisation care, critical illness, and health check-ups. Consider your family history of illnesses, age, current health, lifestyle, dependants and their health status, and inflation when choosing a plan.

A good rule of thumb is to choose a cover amount of at least 2-3 times your annual income.

2. Not considering deductibles and co-payment clauses

a. Deductible: A deductible in health insurance means a fixed amount you pay upfront before the insurance kicks in. Let’s say your policy has a deductible of ₹10,000. If your medical bill rounds to ₹50,000, you pay ₹10,000 first, and the insurer will cover the remaining ₹40,000.

You can use your deductible with a top-up to increase your overall coverage. In that case, the deductible means the threshold amount your total medical expenses should exceed before the top-up plan kicks in. Suppose you have primary health insurance with ₹5 lakh and a top-up plan of ₹3 lakh, with a deductible of ₹1 lakh. If your hospital bill is ₹6 lakh, the primary plan covers ₹5 lakh, and the top-up pays the remaining ₹1 lakh, since the deductible threshold is already met.

b. Co-payment clause: A co-pay is a percentage of every bill you share with the insurer. A higher copayment helps lower the premium. While this may seem appealing initially, you pay more (than you saved!) if you make frequent doctor visits. 

3. Ignoring room-rent limits and sub-limits

Room rent is the maximum amount payable for hospital room charges. Here’s the catch: Insurance companies apply “proportionate deductions” when they exceed the limit. Suppose the room-rent limit is ₹5,000 daily, but your hospital room costs ₹6,000 daily. Here, you will not only pay the difference of ₹1,000 daily but also 20% (1000/5000)*100%) of the overall medical bill from your pocket. 

Sub-limits are the maximum amount payable for specific treatments or expenses. If a policy has a sub-limit of ₹5,00,000 for cancer treatment, you cannot claim more than this amount.

Read the policy document carefully to know these limits. Also, if a private room or specific treatments are necessary, choose a plan with higher room-rent limits and sub-limits.

4. Not understanding the waiting period

Health insurance plans have waiting periods (around 1–4 years) before certain coverages, such as pre-existing conditions like diabetes, heart disease, or hypertension, and other treatments like pregnancy, become active. Filing a claim within this period may result in claim rejection.

If your policy has a longer waiting period, consider buying a separate critical illness plan for adequate coverage during an emergency.

5. Not disclosing all medical conditions

Honesty is the best policy (pun intended). Health insurance contracts rely on mutual good faith.

Hence, hiding medical conditions can lead to claim rejection down the line. Be upfront with your insurer about your medical history. While the premium might be a little higher, transparency will ensure smooth claim processing when you need it the most.

6. Not knowing your policy’s exclusions

Certain treatments, like dental procedures or cosmetic surgeries, are commonly excluded from health insurance plans. Not understanding these exclusions might result in unexpected out-of-pocket payments later.

Read the policy document carefully and understand what’s not covered. Consider adding riders for specific needs if necessary.

7. Not comparing insurers

Don’t just settle for the first plan your friend or broker recommends. Research and compare various insurers. A few key parameters to look for are:

• Claim settlement and incurred ratio
• Network hospitals
• Number of policies issued
• Number of claims serviced
• Average days for settlement
• Percentage of claims settled in less than 30 days
• Percentage of complaints received on overall claims

Key Takeaways

Knowledge is power, especially when it comes to your health and finances! Hence, by avoiding these mistakes in purchasing health insurance, you can choose a plan that protects you and your loved ones.

Understanding health insurance helps you buy the right policy, offering invaluable peace of mind and financial fortification during unforeseen medical exigencies. Additionally, with platforms such as PhonePe, managing your health insurance policy becomes even easier!