Session 2 on Finances | Why Health Insurance, How to Select the Best One, and a Lot More That You Need to Know | Sagar Kakkala's World
The video here is demonstrated in Telugu. For non-Telugu speakers, please read the blog for a better understanding.
click here - to watch on Youtube
Note: The colored texts are links.
Note: I may mention some negative scenarios like death, recession, or health issues. Please do not be offended as these words are used only for better understanding.
Note: It is recommended to open the blog on a laptop for easy access to Google Sheets.
Why you need Health Insurance?
Most people take health insurance for granted as they get it from their companies. While company-provided insurance can offer better coverage, there are scenarios where you might be laid off or in a transition phase. During these times, you won't be able to claim insurance from your company.
Moreover, you need to take health insurance for your parents as early as possible because delaying it can increase the premium amount based on their age.
Additionally, there is an increase in medical inflation and lifestyle diseases. Taking insurance early allows you to claim a No Claim Bonus (NCB), which is discussed below in the features of health insurance. You can also benefit from tax deductions, which we have also covered in the same blog.
What story was i telling in video to support Health Insurance ?
Let's take the current scenario as an example. Suppose you were laid off from your job and are now preparing for other opportunities. During this period, you have no insurance coverage. One day, you go to see a movie and are hit by a car while crossing the street. The car flees the scene, and you are admitted to a nearby hospital. Without insurance, you may need to exhaust your emergency funds or investments to cover the medical expenses.
In the worst-case scenario, if you do not have sufficient funds or emergency savings, you might reach out to friends for help. Let's say your friend's name is Ravi. Unfortunately, Ravi recently lent money to another friend named Raghu, who has not paid him back. As a result, Ravi is facing financial difficulties and has decided not to lend money to anyone, even though your situation is genuine.
This story illustrates the importance of being prepared for the worst when you are at your best.
What are Types of Health Insurance?
You have two types of health insurance:
1. Mediclaim Policy: Covers only hospitalization fees, typically up to a certain limit like 5 lakhs.
2. Comprehensive Health Insurance: Includes various plans such as Individual Health Insurance, Family Floater Plan, Top-Up Plan, and Super Top-Up Plan.
- Family Floater Plan: This plan covers the entire family under a single sum insured. The premium is based on the age of the oldest family member included in the plan. You can opt for a restoration benefit or without it. For example, if a family has coverage of 30 lakhs and the son incurs hospital bills of 10 lakhs, with the restoration benefit, the coverage will reset to 30 lakhs. Without the restoration benefit, the remaining coverage would be 20 lakhs.
- Top-Up Plan: This plan covers expenses per bill. For instance, if the coverage is 30 lakhs with a deductible of 10 lakhs, the insurer will pay the amount exceeding the deductible. If your bill is 15 lakhs, the insurer will pay 5 lakhs.
- Super Top-Up Plan: This plan covers expenses per year. If the coverage is 30 lakhs with a deductible of 10 lakhs, and you have a bill of 5 lakhs in July and another bill of 15 lakhs in August, making the total bill for the year 20 lakhs, the insurer will pay 10 lakhs.
What are features of Health Insurance?
No Room Rent Limit: Let's say you took an insurance policy with a room rent limit. If you are admitted to a hospital where the room costs 1000 per day, there is a chance that your insurer will not cover the full amount due to the room rent limit. Therefore, it is advisable to always opt for a policy with no room rent limit to ensure that you are fully covered for your hospital stay.
No Co-Pay: Always opt for insurance with no co-pay. No co-pay premiums are less compared to general ones and can be especially beneficial for senior citizens, as premiums tend to be higher for them. If you choose insurance with co-pay, it means you will have to split the bill with the insurer.
Restoration Benefit: This is explained in the Family Floater plan.
Disease Wise Sub Limits: Always opt for insurance without disease-wise sub-limits. What does this mean? If you opt for disease-wise sub-limits, your insurance company will not pay the full amount for hospital bills related to certain diseases like TB, COVID-19, or others that have limits according to their policy.
Inflation cost: This is not mandatory. Your coverage increases by the same percentage as inflation. For example, if inflation increases by 5%, your coverage will also increase by 5%.
Maternity Cover: This is for pregnant women, and you can opt to avoid it since the medical bills would be close to the premium you had paid.
Domiciliary Claim: You can opt for general hospital consultation bills and medical bills.
Existing Disease Waiting Period: This means that if you have a condition like BP (hypertension), and your insurer's agent informs you that there is a one-year waiting period for existing diseases like BP, you need to continue paying your premiums during this period but cannot claim any hospital bills related to BP until after the one-year waiting period is over.
Day-Wise Treatment:This can be opted for by senior citizens if they have a disease that requires daily care.
Hospital Cash: This is just like regular insurance, except instead of the insurer depositing money into your bank account, they will give you cash directly into your hand.
No Claim Bonus: If you have taken insurance in 2024 and have not claimed for any diseases during that year, your insurer will give you a discount on the premium in 2025. Generally, if the bills are small, it is advisable not to claim in order to not miss out on the No Claim Bonus (NCB) discount.
Ayush: This mostly applies to insurance related to Ayurveda, Homeopathy, Siddha Vaidyam, etc.
How to select Best Health Insurance according to your need?
If you are in Tier-1 cities, opt for coverage of 10 to 15 lakhs. For Tier-2 cities, opt for 5 to 10 lakhs in coverage, and for Tier-3 cities, opt for 3 to 5 lakhs.
Now, please open any health insurance aggregators below.
Once you have opened any insurance aggregator website, fill out the required details.
Now add filters based on your requirements.
The above filters are just an example of how to select them. Please apply filters based on your specific requirements once they are applied.
Now visit the IRDAI website and copy the latest file. IRDAI is like a regulatory board for insurance, similar to RBI for banks and SEBI for stocks.
Select the latest data and click on "Download."
Once downloaded, open the document and search for "incurred claims ratio" until you reach the table below, like this.
Now, open your Excel sheet with the 19 plans filled in. Search for each insurance company in this table, check the health rating of each particular company, and fill the data in Excel.
For example, HDFC ERGO has incurred claim ratio of 79.04.
Similarly, fill out information for all the remaining 19 plans.
Preferred incurred claims ratio values should be between 60 to 90.
What is incurred claim Ratio? In simple terms, the incurred claims ratio is calculated as the amount given to people divided by the amount collected from people. If the amount given to people exceeds the amount collected, the ratio goes above 100, which is not preferred because it indicates the insurer is paying out more than it is collecting, making it difficult to settle new claims. Conversely, if the amount collected is more than what is paid out, the ratio decreases, which is also not preferred because it suggests the insurer may not be settling claims adequately despite having sufficient funds. The optimal range for this ratio is typically between 60 to 90.
Now, in the same PDF document, scroll down to the claim settlement ratio. Most of the time, you will find it below this table.
Since I was not able to find the status of the claims document, I took data from a document from a year ago.
You will be able to find the claim settlement ratio for less than 3 months. Select ratios above 90.
What is claim settlement ratio? The number of people who claimed divided by the number of claims paid by the insurer. For example, if 2 persons claimed an amount and the insurer paid for both, the claim settlement ratio is 100%. Now, fill this data for all 19 plans again in Excel.
Now, among these 19 plans, remove insurers that do not meet the conditions like a claim settlement ratio above 90 and an incurred claim ratio between 60 to 90.
You will then be left with 5 or 6 options. If there is only one option remaining, then that's your go-to.
If you have more than one option remaining,
Open the website and study in detail about your insurer.
Once you open the website, scroll down until you reach this dialogue box.
Select your plan and click "Check Now"
You will be able to find what is good and what is bad here. Do the same for everything and opt for what is best.
Follow the same procedure for your parents' health insurance.
If you are confused in selecting insurance even after filtering options, you can reach out to experts in the industry via Beshak.
You might need to pay a little fee based on their experience and expertise.
Also, once you have filtered out the insurance you want, buy directly from the insurer and not from insurance aggregators like Policybazaar to reduce premium costs.
If you are planning to buy HDFC ERGO...
Can you Port Your existing Health Insurance?
Yes, you can port your insurance policy. If you have HDFC Ergo and you want to port to ICICI Lombard, you have to start the porting process 90 days before your renewal date.
You do not need to serve the existing disease waiting period again if you have already served it with your previous insurer.
Your new insurer must offer you the same coverage or more than your previous insurer.
However, porting is not recommended if you have developed an illness, as your new insurer will conduct a medical check-up and there is a high chance that your policy could be rejected.
How would you get Tax Benefits?
You can claim tax benefits on health insurance under section 80D. Let's assume your salary is 10 LPA, which puts you in the 30% tax bracket. You can claim up to ₹25,000 annually as a deduction.
For example:
- If you pay a premium of ₹2,000 per month, your annual payment is ₹24,000. So, your taxable income becomes ₹9,76,000, taxed at 20%.
- If you pay a premium of ₹2,500 per month, your annual payment is ₹30,000, but you can only claim up to ₹25,000 max. So, your taxable income would be ₹9,75,000.
If you take individual health insurance for yourself and your parents:
- If your and your parents' age is less than 60, you can claim up to ₹50,000 total.
- If your parents' age is more than 60, you can claim up to ₹50,000 for them and up to ₹25,000 for yourself, totaling ₹75,000.
- If both your and your parents' age is above 60, you can claim up to ₹50,000 each, totaling ₹1,00,000 deductible amount.
You can also find short notes that i use regarding insurance here - Short Notes of Insurance
This concludes blog about Health Insurance
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