How does a health insurance policy work


There is a lot of uncertainty surrounding a person’s health due to the fragility of the human body. Hospital bills and medical care are expensive and can be very expensive. This is where health insurance comes in. Health insurance not only prepares for a rainy day, but also provides health security coverage.

A Health Insurance is a contract between an insurer (health insurance company) and an individual in which the insurer undertakes to cover the cost of medical expenses that may arise in the future in return for the premiums paid by the benefactor.

Here is how the health insurance scheme works in India:

Choosing a plan – An individual can choose a health insurance plan according to their needs based on the facilities provided, expenses covered, etc. with an insurance company of their choice. In case of pre-existing conditions, different companies have different coverage policies. Thus, it is very important to choose the right plan for oneself keeping in mind all the relevant factors.

READ MORE: How to reduce the health insurance premium?

Premium calculation – After selecting an insurance plan, the premium is calculated for the buyer. It is calculated according to age, income, possible health problems/diseases. A full body checkup is administered by the insurance company.

It is only after this that a premium payable each year is set by the company and the maximum amount covered by the so-called “sum insured” insurance is authorised.

How the claim works – In case of medical expenses due to hospitalization, the claim can be filed in two ways. The first alternative is cashless. In this method, if the insured goes to a hospital in the list of the insurance company’s network, all costs will be borne directly by the company.

The second option is the refund process. In this process, the invoices are initially paid by the insured himself and the expenses are then reimbursed to him by the company after submitting the invoices and receipts to the company.

READ MORE: Are you looking to take out health insurance? 5 runners you need to know

What if no claim is ever made by the insured – In the event that the need for medical coverage never arises, then the individual, during that year, pays a premium for nothing in return. However, some companies offer a “no-claims bonus” whereby the company refunds a certain percentage of the premium for each year that no claims are made. At the same time, some companies tend to increase an individual’s sum insured as a reward for not making any claims.

Health insurance is a fairly advantageous financial product for everyone. Health insurance plans have many additional benefits such as tax deduction, free health checkups among many others. You have to choose insurance coverage very carefully, taking into account your personal needs.

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