A single medical emergency can wipe out years of savings and might even push you into debt if you don’t have a health insurance policy. But picking a solid, comprehensive health insurance policy these days is not a walk in the park. You need to make sure it offers extensive coverage and the company offering it is reliable. So how do you figure out if your health insurance policy and your insurer are up to par?
If you’re purchasing a policy for the first time, here are the 7 key factors to keep in mind when you’re comparing various health policies.
1. Incurred claim ratio
One of the ways you can check how effective your insurance company is in terms of claim payments is to see its Incurred Claim Ratio (ICR). This ratio tells you how much your insurance company has paid out in claims, as against the net premiums that it has collected during a financial year. For instance, if the company’s ICR is 85% and it has collected Rs 10 lakh as premium, it means that it spent Rs 8.5 lakh on claims payment. Experts suggest that the ideal ICR falls between 70% and 90%.
Check out the ICR of stand-alone health insurance companies for 2023-24, according to IRDAI.
Incurred Claim Ratios (ICR) of top 10 private general insurance companies with the highest gross direct premium for health + PA + travel insurance in 2023-24
Source: IRDAI Handbook of Indian Insurance Statistics, 2023-2024
2. Claim settlement ratio
Another key parameter you should look out for is the claim settlement ratio ( CSR), which represents the percentage of the total number of claims paid by an insurance company against the total number of claims filed with them in a particular period. For instance, if the claim settlement ratio of an insurance company is 92%, it means that out of every 100 claims received by the company during a particular period, it settled 92 claims on average, within the given timeline.
Check out the CSRs of stand-alone health insurance companies for 2023-24, all settled in under 90 days
Claim settlement ratios (CSR) of top 10 private general insurance companies in 2023-24 *% of claims paid in less than 3 months during 2023-24, Source: IRDAI Handbook of Indian Insurance Statistics, 2023-2024
3. Policy conditions like room rent limit, waiting period for pre-existing diseases
Every insurance policy has some terms and conditions that the policyholder should be well aware of to avoid any claim-related disputes in the future. These vary, based on the health plan you choose.
One of the key conditions to check for in the policy document is the room rent limit, which can significantly impact your expenses. A limit on room rent is usually specified in your policy document either as a percentage of the sum insured (SI) or as a fixed amount.
For instance, if you have a policy with a sum insured of Rs 10 lakh and it has a 1% room rent limit, the maximum room rent payable by the insurer would be Rs 10,000/day.
Also, it must be noted that the room rent does not only cover the room/bed charges per day while you are admitted, but it also forms the basis of ICU limits, nursing charges, and other facilities, which are calculated in proportion to your room rent charges.
So, if you choose a room that costs double your eligible limit, your insurer may cover only 50% of the room rent and 50% of other linked charges like doctor’s visiting fees, nursing charges etc.
For example, your policy has a room rent cap of Rs 5,000/day, but you opt for a private room that costs Rs 10,000/day, then:
Another factor to consider is the waiting period. This is the time after which your insurer will start covering certain diseases and medical conditions. Some of the most common waiting periods you should be aware of are related to certain pre-existing diseases (PED), specific ailments/procedures, critical illness, maternity benefit and the initial waiting period for all claims.
Many medical insurance plans cover PED only after a waiting period of 1 to 3 years. Almost all health insurance plans have an initial waiting period of 30 days, wherein the insurer will not cover claims related to anything except accidental cases. Experts suggest checking policy documents to know the exact waiting period and opting for a policy with a low waiting period for pre-existing diseases.
4. Is there a provision for co-payment or deductible?
Both co-payment and deductible clauses can significantly increase your out-of-pocket payouts. Co-pay is a fixed percentage of the claim amount that the policyholder needs to pay from their pocket at the time of claim settlement, while the insurer pays the remaining amount. For instance, assume your Rs 10 lakh policy cover comes with a co-payment clause of 20% of all surgery claims. Hence, if your cataract surgery costs Rs 2 lakh, then you will have to pay Rs 40,000 from your pocket and the remaining Rs 1,60,000 will be paid by your insurer.
Deductible is a fixed amount of medical expense that the policyholder has to pay out of their own pocket first in any given policy year, before the insurance company takes care of the rest.
Say you have a Rs 10 lakh policy that has a deductible of Rs 50,000. So, if you file a claim of Rs 1 lakh, then your insurer will pay only Rs 50,000 after you have paid Rs 50,000 from your pocket in any given policy year. In case of a claim of Rs 5 lakh, you will need to pay Rs 50,000 while the remaining Rs 4.5 lakh will be paid by the insurer.
A health insurance plan that has deductible also offers a lower premium if you opt for the deductible option. Higher the deductible, lower is the premium. In case you and your family are health conscious and have a good lifestyle, then you can go for a plan with a deductible as it will help you save a good amount on premium. Your part in deductible remains fixed. So you know the maximum amount you will have to pay in case of a hospitalisation in any given policy year.
Co-payment on the other hand also helps you bring down the premium as you agree to pay a certain percentage of the claim amount each time a claim is made. So the bigger the claim, the bigger will be your contribution. It is better to avoid plans with a co-payment clause.
5. Number network hospitals for cashless hospitalization
If the hospital is in the insurer’s network, the patient can avail of a cashless facility. This means that, as per a predecided arrangement, the insurer will directly settle the bill with the hospital at the time of the patient’s discharge, without the policyholder having to pay anything upfront. This is different from the reimbursement route, where the policyholder first pays the hospital bill from their own pocket and then applies for reimbursement with the insurer.
It is important to check the list of network hospitals on your insurer’s website, and check for what network hospitals are present in your vicinity to ensure that you can receive timely and quality healthcare in the ones you trust without financial worries.
6. What all is excluded from coverage in the policy?
Every health insurance plan has a specific section that details the exclusions of the policy or specific medical conditions, treatments, or circumstances that the insurance company will not cover. Some of the common exclusions include pre-existing diseases, OPD treatments, obesity-related procedures, cosmetic surgery, infertility, adventure sport injuries, maternity, and dental care and so on. It is important to go through your policy document and look for the exclusions or what’s not covered, as exclusions vary across insurers. Comparing plans can help you choose the right coverage and avoid financial stress.
7. How good is pre and post-hospitalisation coverage
Pre-hospitalisation expenses are medical expenses such as diagnostic tests like blood tests, X-rays, CT scans, ECGs, MRIs, and other investigations needed to diagnose a condition before and during your hospitalisation. Many health insurance plans cover these for up to 30 or 60 days.
Post-hospitalisation expenses are medical expenses that include medicines, follow-up consultations, diagnostic tests, physiotherapy, and other treatments required for recovery after being discharged from a hospital. Many health insurance plans cover these for up to 60 or 180 days.
Experts recommend checking for a longer coverage period for pre- and post-hospitalisation expenses before buying any policy to reduce financial burden, so that even your follow-up care is covered.
If you’re purchasing a policy for the first time, here are the 7 key factors to keep in mind when you’re comparing various health policies.
1. Incurred claim ratio
One of the ways you can check how effective your insurance company is in terms of claim payments is to see its Incurred Claim Ratio (ICR). This ratio tells you how much your insurance company has paid out in claims, as against the net premiums that it has collected during a financial year. For instance, if the company’s ICR is 85% and it has collected Rs 10 lakh as premium, it means that it spent Rs 8.5 lakh on claims payment. Experts suggest that the ideal ICR falls between 70% and 90%.
Check out the ICR of stand-alone health insurance companies for 2023-24, according to IRDAI.
Incurred Claim Ratios (ICR) of top 10 private general insurance companies with the highest gross direct premium for health + PA + travel insurance in 2023-24
Source: IRDAI Handbook of Indian Insurance Statistics, 2023-2024
2. Claim settlement ratio
Another key parameter you should look out for is the claim settlement ratio ( CSR), which represents the percentage of the total number of claims paid by an insurance company against the total number of claims filed with them in a particular period. For instance, if the claim settlement ratio of an insurance company is 92%, it means that out of every 100 claims received by the company during a particular period, it settled 92 claims on average, within the given timeline.
Check out the CSRs of stand-alone health insurance companies for 2023-24, all settled in under 90 days
Claim settlement ratios (CSR) of top 10 private general insurance companies in 2023-24 *% of claims paid in less than 3 months during 2023-24, Source: IRDAI Handbook of Indian Insurance Statistics, 2023-2024
3. Policy conditions like room rent limit, waiting period for pre-existing diseases
Every insurance policy has some terms and conditions that the policyholder should be well aware of to avoid any claim-related disputes in the future. These vary, based on the health plan you choose.
One of the key conditions to check for in the policy document is the room rent limit, which can significantly impact your expenses. A limit on room rent is usually specified in your policy document either as a percentage of the sum insured (SI) or as a fixed amount.
For instance, if you have a policy with a sum insured of Rs 10 lakh and it has a 1% room rent limit, the maximum room rent payable by the insurer would be Rs 10,000/day.
Also, it must be noted that the room rent does not only cover the room/bed charges per day while you are admitted, but it also forms the basis of ICU limits, nursing charges, and other facilities, which are calculated in proportion to your room rent charges.
So, if you choose a room that costs double your eligible limit, your insurer may cover only 50% of the room rent and 50% of other linked charges like doctor’s visiting fees, nursing charges etc.
For example, your policy has a room rent cap of Rs 5,000/day, but you opt for a private room that costs Rs 10,000/day, then:
- Total hospital bill: Rs 4,00,000
- Since the room rent is double the eligible limit, the insurer applies a proportionate deduction (50%).
- Amount covered by insurer: Rs 2,00,000
- Out-of-pocket expense for you: Rs 2,00,000
Another factor to consider is the waiting period. This is the time after which your insurer will start covering certain diseases and medical conditions. Some of the most common waiting periods you should be aware of are related to certain pre-existing diseases (PED), specific ailments/procedures, critical illness, maternity benefit and the initial waiting period for all claims.
Many medical insurance plans cover PED only after a waiting period of 1 to 3 years. Almost all health insurance plans have an initial waiting period of 30 days, wherein the insurer will not cover claims related to anything except accidental cases. Experts suggest checking policy documents to know the exact waiting period and opting for a policy with a low waiting period for pre-existing diseases.
4. Is there a provision for co-payment or deductible?
Both co-payment and deductible clauses can significantly increase your out-of-pocket payouts. Co-pay is a fixed percentage of the claim amount that the policyholder needs to pay from their pocket at the time of claim settlement, while the insurer pays the remaining amount. For instance, assume your Rs 10 lakh policy cover comes with a co-payment clause of 20% of all surgery claims. Hence, if your cataract surgery costs Rs 2 lakh, then you will have to pay Rs 40,000 from your pocket and the remaining Rs 1,60,000 will be paid by your insurer.
Deductible is a fixed amount of medical expense that the policyholder has to pay out of their own pocket first in any given policy year, before the insurance company takes care of the rest.
Say you have a Rs 10 lakh policy that has a deductible of Rs 50,000. So, if you file a claim of Rs 1 lakh, then your insurer will pay only Rs 50,000 after you have paid Rs 50,000 from your pocket in any given policy year. In case of a claim of Rs 5 lakh, you will need to pay Rs 50,000 while the remaining Rs 4.5 lakh will be paid by the insurer.
A health insurance plan that has deductible also offers a lower premium if you opt for the deductible option. Higher the deductible, lower is the premium. In case you and your family are health conscious and have a good lifestyle, then you can go for a plan with a deductible as it will help you save a good amount on premium. Your part in deductible remains fixed. So you know the maximum amount you will have to pay in case of a hospitalisation in any given policy year.
Co-payment on the other hand also helps you bring down the premium as you agree to pay a certain percentage of the claim amount each time a claim is made. So the bigger the claim, the bigger will be your contribution. It is better to avoid plans with a co-payment clause.
5. Number network hospitals for cashless hospitalization
If the hospital is in the insurer’s network, the patient can avail of a cashless facility. This means that, as per a predecided arrangement, the insurer will directly settle the bill with the hospital at the time of the patient’s discharge, without the policyholder having to pay anything upfront. This is different from the reimbursement route, where the policyholder first pays the hospital bill from their own pocket and then applies for reimbursement with the insurer.
It is important to check the list of network hospitals on your insurer’s website, and check for what network hospitals are present in your vicinity to ensure that you can receive timely and quality healthcare in the ones you trust without financial worries.
6. What all is excluded from coverage in the policy?
Every health insurance plan has a specific section that details the exclusions of the policy or specific medical conditions, treatments, or circumstances that the insurance company will not cover. Some of the common exclusions include pre-existing diseases, OPD treatments, obesity-related procedures, cosmetic surgery, infertility, adventure sport injuries, maternity, and dental care and so on. It is important to go through your policy document and look for the exclusions or what’s not covered, as exclusions vary across insurers. Comparing plans can help you choose the right coverage and avoid financial stress.
7. How good is pre and post-hospitalisation coverage
Pre-hospitalisation expenses are medical expenses such as diagnostic tests like blood tests, X-rays, CT scans, ECGs, MRIs, and other investigations needed to diagnose a condition before and during your hospitalisation. Many health insurance plans cover these for up to 30 or 60 days.
Post-hospitalisation expenses are medical expenses that include medicines, follow-up consultations, diagnostic tests, physiotherapy, and other treatments required for recovery after being discharged from a hospital. Many health insurance plans cover these for up to 60 or 180 days.
Experts recommend checking for a longer coverage period for pre- and post-hospitalisation expenses before buying any policy to reduce financial burden, so that even your follow-up care is covered.
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