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How does a health insurance policy work

Orders issued by the Jammu and Kashmir government said notices were issued to the doctors to resume duties but they did not respond to the notices or turn up (Getty Images/iStockphoto) (HT_PRINT)Premium
Orders issued by the Jammu and Kashmir government said notices were issued to the doctors to resume duties but they did not respond to the notices or turn up (Getty Images/iStockphoto) (HT_PRINT)

  • In modern times, health insurance is an absolute necessity. It covers the cost of medical care as well as other related expenses. Understanding how health insurance works is crucial before purchasing this policy. We lay it out in detail for you.

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There is a lot of uncertainty around the health of a person because of the fragility of the human body. Hospital bills and medical care are expensive and can cost a large amount. This is when health insurances come into play. A health insurance not only prepares one for a rainy day, but also provides health security cover.

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

This is how health insurance mechanism works in India:

Choosing a plan- An individual can choose a health insurance plan according to his/her needs based on facilities provided, expenses covered, etc. from an insurance company of one’s choice. In case of pre-existing ailments, different companies have different policies for cover. 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?

Calculation of premium- After selecting an insurance plan, the premium is calculated for the buyer. It is calculated on the basis of age, income, health problems/ diseases if any. A comprehensive full body check-up is administered by the insurance company.

Only after this, a premium payable every year is set by the company and the maximum amount that the insurance covers known as “sum assured" is authorised.

How does the claim work - In case any medical expenses come up due to hospitalisation, the claim can be sought in two ways. The first alternative is cashless. In this method, if the insured goes to a hospital in the insurance company’s network list, all the expenses will be dealt with directly by the company.

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

READ MORE: Looking to buy health insurance? 5 riders that you must be aware of

What happens in case no claim is ever made by the insured- In case the need for medical coverage does not ever arise, then the individual, during that year, pays a premium for nothing in return. Some companies, however, provide a “no-claim bonus" under which the company refunds a certain percent of the premium for every year no claim is sought. At the same time, some companies tend to increase the sum assured of an individual as a reward for not making any claim.

Health Insurance is quite a beneficial financial product for everyone. Health insurance plans have numerous additional benefits such as tax deduction, free health checkups among many others. One should very carefully choose an insurance cover considering his/her personal needs.

 

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