Medical expenses come unannounced, thereby leaving us minimal time to manage funds. A Mediclaim policy becomes a saviour and helps you tide over a hospitalization bill, entirely or in part. The insurance policy is essentially a contract between an insurer and the policyholder. The insurer agrees to cover costs up to the sum assured subject to the agreed policy terms and conditions. Let us understand in detail what is a Mediclaim policy, its features and benefits.

Mediclaim, a type of health insurance, reimburses the policyholder of eligible expenses incurred to treat a medical condition.

What is a Mediclaim policy?

A Mediclaim policy is insurance against the medical expenses incurred on hospitalization or treatment of a medical situation. The Mediclaim policy usually covers for:

• Hospitalization expenses
• Treatment costs of critical illnesses
• Medical costs incurred a specified number of days before and after the hospitalization
• Day-care treatments (e.g. cataract operation, chemotherapy, etc.)

Add-on benefits (aka riders) cover medical costs incurred for maternity, pre-existing diseases, accidents, etc. Do read further to know more about essential insurance riders.

The Mediclaim policy, like most other insurance policies, is for a defined period, usually one year and is renewable.

Six major types of Mediclaim policy

There are different Mediclaim policies, and your needs should guide you to make the right choice:

• Individual policy – offers coverage for only the policyholder
• Family Floater policy – covers the policyholder and is extended to the policyholder’s family, including spouse, children and parents
• Senior Citizens policy – aims to provide coverage for senior citizens
• Critical illness policy – designed to cater to expenses incurred on treatment of specific critical illness. These policies would usually cover life-endangering and severe diseases like cancer, kidney ailments etc.
• Group Mediclaim policy – an employer can purchase a group Mediclaim policy to cover medical expenses of its employees and their family members
• Overseas Mediclaim policy – allows the insured to claim any hospitalization expenses incurred outside India

What is the difference between Health Insurance and Mediclaim?

Quite often, we use the words Health Insurance and Mediclaim interchangeably. While health insurance represents a broader term, Mediclaim is a type of health insurance.

Let us understand how different is Mediclaim vs Health Insurance:

Definition	Mediclaim	Health Insurance
Scope	It covers only hospitalization related expenses	Provides a comprehensive coverage for medical costs beyond just hospital expenses
Coverage	Hospital expenses due to accident, surgery, illness, etc.	It also covers ancillary costs like ambulance expenses, pre & post hospitalization expenses, diagnostic test costs, OPD expenses etc.
Add-ons	Usually, no add-ons available	Add-ons are available for specific medical conditions like diabetes, hypertension etc.
Claims	Insured claims until the sum assured is exhausted	Insured get money up to the sum assured. However, in plans like critical illness cover, lump-sum amounts get paid to the insured upon being diagnosed with the illness
Hospitalization	Actual hospitalization required to claim Mediclaim	Day-care treatments, regular check-ups, pre-natal expenses, etc. gets covered beyond hospitalization
Flexibility	Not considered flexible	Flexible as customization is possible
Cost	Less costly	Coverage is extensive and is therefore costlier
Renewal	Renewal at similar terms/costs at the end of the insurance term	Renewable, with a benefit of no claim bonus after a claim-free year available
Tax Benefits	Available under section 80D of the Income Tax Act of India	Available under section 80D of the Income Tax Act of India

Key benefits of the Health Insurance policy

The most important benefit is that it protects you against unexpected medical costs and provides ease of mind. If that is not enough, here are some more features:

• Option of cashless hospitalization. Here, the insurance company pays the medical bill, and the insured does not have to pay cash at the time of discharge from the hospital
• Reimburses expenses borne by the policyholder during the medical treatment
• Flexible insurance options to cover self, family, extended family
• Timeless benefits – the insurance cover continues as long as you continue to pay the insurance premium
• Covers pre and post hospitalization expenses for a specified numbers of days
• The insurance premium is deductible from taxable income under section 80C of the Income Tax Act of India. The deduction is subject to a maximum of Rs 25,000 per annum for the premium paid for self (Rs 30,000 in case you are a senior citizen). An additional deduction from income is available up to Rs 30,000 per annum for the premium paid for parents who are senior citizens
• It is easy to purchase an insurance policy. Both online (purchase from insurer’s website, third party websites) and offline mode (purchase through an agent or by visiting branch of the insurer) are highly effective

Few beneficial riders –

There is an option to choose amongst a few beneficial riders. These riders might make the insurance policy expensive, but still, are worth considering:

• Cover any pre-existing diseases
• Maternity cover
• Critical illness cover wherein the insurance company pays a certain sum if the insured is diagnosed with specified acute illnesses, while the policy continues
• In the accidental disability rider, the insurance company pays the insured a certain sum if the policyholder is disabled. The amount paid will depend on the severity of the disability
• Often the policies put a cap on room rent. However, a room rent rider can help you choose a room of your choice without any additional burden on your pocket

Despite several compelling advantages, people ignore buying an insurance policy and therefore expose themselves & their families to a considerable financial risk.

What does a Mediclaim policy cover?

Medical expenses on the below get covered under the Mediclaim policy.

• Hospitalization expenses – the medical costs incurred during the hospitalization
• Room charges
• Doctor’s charges and consultation visit costs of medical professionals
• Pre-Post hospitalization expenses – usually, medical expenses incurred 30 days prior and 60 days post hospitalization gets covered under the Mediclaim policy. However, there can be specific clauses clarifying on these expenses and must be read carefully in the policy document
• Day-care costs for treatments that do not require patients to get hospitalized for 24 hours or more are also covered

What a Mediclaim policy does not cover?

It is crucial to know what a Mediclaim policy covers. But, it is much essential to understand what does not get covered. The policy document/prospectus would clarify the exclusions in detail, but below are some of the general exclusions:

• Pre-existing diseases
• Policy may exclude certain expenses in the first year of coverage and also impose a waiting period
• A few other standard exclusions are:
  • Cost of spectacles
  • Contact lenses
  • Hearing aids
  • Dental surgery
  • Intentional self-injury
  • Congenital external defects
  • Use of intoxicating drugs/alcohol
  • AIDS
  • Expenses for diagnosis
  • X-ray or laboratory charges not consistent with the disease that required hospitalization
  • Pregnancy-related treatment or childbirth, including cesarean
  • Naturopathy treatments

Worth mentioning that some of the general exclusions may get covered through the add-ons when you opt for a comprehensive policy.

What factors affect the Mediclaim premium?

Each insurance company uses an algorithm to calculate the insurance premium. Therefore for the same set of inputs, the premium amount may vary, though not significantly. The factors that determine insurance premiums are:

• Age of the policyholder
• Age and number of beneficiaries to be covered
• History of pre-existing diseases
• Base location/residence
• Total sum insured
• Riders, if any
• Whether fresh policy or a top-up policy

How much Mediclaim should I have?

Determining the correct insurance policy amount can be an intriguing exercise. It’s the single most crucial question that you need to address, and it is not simple. Several factors affect the process of determining the sum assured, such as:

• Current fitness level
• Family health history
• Number of dependents and beneficiaries
• Age of primary policyholder
• Lifestyle
• City of residence (generally, cost of treatment in metros/urban areas is high, and hence the need for a higher sum assured)
• Affordability

Advances in the medical sciences have improved life expectancy, but those advancements come with a price tag. There are more than just a few reasons why one must have adequate health insurance.

Firstly, changing lifestyles are making us more vulnerable. Secondly, increasing urbanization is adding to the stress levels. Thirdly, the cost of medical treatments is rocketing. And finally, mental disorders due to external factors have led to a higher medical burden on families. People live longer but not necessarily live healthily.

Determining the amount

You can start with a Mediclaim of Rs 2-3 Lakhs in the early stage of your earning life. That is probably in the age bracket of 25-30 years. Gradually, you and your parents’ age (assuming they are dependents) and your family expands (spouse and children get added). At this juncture, you should increase the insurance cover.

There is no scientific method to derive the required sum assured. However, theoretically, it can be calculated as lower of the two – (a) 50% of primarily member’s annual salary or (b) total treatment cost of one acute disease (heart bypass surgery or similar) at a hospital of your choice.

Most experts suggest minimum health insurance of Rs 5 Lakhs. The sum assured should then be modified based on your requirements and affordability. A family floater policy is a good option, along with some of the essential riders discussed in this article. Also Read about: How much term insurance do I need?

Know these before buying a Mediclaim policy

Here are some critical do’s and don’t before concluding the purchase of health insurance.

The Do’s

• Always keep in mind that there are restrictions on the coverage the insurance provides
• Understand the pre-existing diseases excluded and waiting time for certain conditions before they are covered
• Know restrictions on coverage of certain expenses during hospitalization
• Be aware of the clause of co-payment, if applicable
• Make a note of any pre-conditions for renewal
• Ensure that you have disclosed all the pre-existing health problems – any critical ailments or conditions like high/low blood pressure or diabetes
• Comply with the medical procedures and documentation requirements listed by the insurer
• Meticulously renew your policy to make sure you are covered when required

The Don’ts

• Do not conceal any facts during the purchase process
• Never delay renewal

Top seven factors to consider before buying a Mediclaim policy

Considering purchasing a Mediclaim policy? Here are some essential factors to consider while evaluating and comparing policies. These are a good starting point; however, you may have more considerations based on your specific needs and requirements.

01.  Type of Mediclaim policy

Choose the right policy between the individual or family floater. Usually, senior citizens policy and critical illness policies are additional policies.

As the name suggests, only the expenses incurred on the policyholder get covered in the individual policy. In the family floater, all the specified family members are covered up to the sum assured.

One important point to note in the family floater policy is that if the primary member reaches the maximum age of renewability or dies, the whole insurance policy is closed. The surviving members cannot renew the policy and have to buy a new one.

02.  Exclusions

There would always be some exclusions from the Mediclaim policy, and it’s important to note the same. Exclusions work in two ways, either the disease is not covered, or certain expenses are not covered. Incurring medical costs on hospitalization and treatment of excluded conditions must be borne entirely by self.

03.  Network hospitals

A cashless facility is an essential feature of a Mediclaim policy. However, the cashless facility is only available if you conduct the treatment at a network hospital. Every insurer has a list of network hospitals, and you must check out the list.

04.  Maximum age of renewal

Medical expenses tend to rise as you and your family members age. Although the policy is for a one-year timeframe, it is essential to note any caveats around the policy’s maximum renewal age. After all, you do not want to be left without a policy when required or at an age when buying a new one would be difficult.

05.  Sum assured

Deciding the sum assured is an outcome of putting thoughts together around several factors. These include age, health, number and age of family members, affordability, income level, lifestyle, etc.

06.  Waiting period

Many Mediclaim policies specify a timeframe during which the insured cannot claim any medical expenses, usually just after purchasing the policy. This is called the waiting period.

Also, the insurance companies may have a waiting period before the insured can claim an amount on any pre-existing diseases.

07.  Riders

The insurance company may offer some valuable riders along with the policy. Therefore, it is crucial to evaluate the riders and purchase if relevant to your situation.

Most frequently asked questions

What is Health Insurance?

Health insurance is a type of insurance that covers your hospitalization and other medical expenses as per the terms and conditions of the policy statement.

What are the different forms of Health Insurance?

The most common type of health insurance is the one that covers expenses incurred on hospitalization. Several new features are available these days that offer a wide range of covers, based on the insured’s need. The health insurer usually provides either direct payment to the hospital (cashless facility) or reimburses the expenses associated with illness/injury, or pays out a fixed benefit. The insurance policy determines the type and amount of payment.

Why is health insurance important?

With the advent of better medical technologies, medical expenses are also on a high. Based on the individual and family needs, one should subscribe to health insurance. In case of any medical emergency, the insured can expect financial relief from health insurance.

What is a cashless facility?

All the insurance companies have tie-up arrangements with hospitals across the country as a part of their network. The policyholder can undertake treatment in any network hospitals without paying the hospital bills if the health insurance policy offers a cashless facility. The Third Party Administrator (TPA) settles the medical invoices on behalf of the insurance company. The policyholder should pay only the unapproved part of expenses. These would be expenses beyond sub-limits (e.g. additional room rent over the maximum cap) or costs not covered under the policy (e.g. price of usable). A critical point to note here is, no cashless facility is available if you take treatment outside the network hospital. In that case, the only option is the reimbursement of costs.

Can I transfer my insurance policy?

Yes. The Insurance Regulatory and Development Authority (IRDA) issued a circular effective October 2011. The circular directs insurance companies to allow porting policy from one insurance company to another and from one insurance policy to another. Further, the portability ensures that the policyholder does not lose benefits of pre-existing conditions as per the earlier policy. For a better understanding, it is best to understand the portability features of the insurance company.

How many times can I claim in a year under the policy?

Any number of claims are possible in a year. Subject to a maximum benefit up to the sum assured under the policy.

What is a family floater policy?

A policy that covers all the members of the family is called a Family Floater policy. The policy specifies one single sum assured, which can be utilized by one/multiple family members. The maximum limit of the policy is limited to the sum assured. Family floater policies are the most prevalent plans. You may consider buying two within the family floater – the first policy covering your family, spouse and children—the second policy covering parents.

What happens in the case of multiple policies?

Suppose the insurer has purchased two or more policies. In that case, the contribution clause shall not apply if the policy offers either a fixed benefit or does not relate to the treatment costs.

Under a fixed benefit policy, the insurer must make claim payments independent of the amount received under any other similar insurance policy.

Policy where the purpose is to reimburse the cost of treatment, the policyholder can choose the insurer to settle the claim. Herein, the insurer shall be obliged to pay as per the terms of the insurance.

Can the health insurance policy renewal be denied?

In an ordinary course, the insurer must renew a health insurance policy. The insurer can decline the renewal on the ground of fraud, moral hazards or misrepresentation. An arbitrary denial is not an option. The insurer shall provide appropriate reasons for non-renewal.

Where can I get the list of non-life insurers?

You can find the list of non-life insurers registered with Insurance Regulatory and Development Authority of India at this Link.

Is domiciliary hospitalization covered under Mediclaim?

Yes, domiciliary hospitalization expenses are permissible under the Mediclaim policy. However, these are subject to certain conditions.

Under domiciliary hospitalization, the insurance company considers the insured’s treatment at the hospital even when at home. Expenses incurred towards the treatment are permissible under the policy, as per the terms specified. The medical treatment should be for more than three days. The patient’s condition should have been such that shifting to the hospital was impossible, or there was no accommodation available at the hospital.

Even after fulfilling the above conditions, the domiciliary hospitalization facility may not be available in some instances. Please read the policy document clearly for all the terms and conditions.

The author is a senior finance professional with over fifteen years of work experience in corporate finance and has an affinity for personal finance and investment management. Please leave your comment or share thoughts on this article via email at decodefinance.in@gmail.com. For more articles, please visit the website www.decodefinance.in.

Disclaimer:

The author has used his knowledge, experience, and understanding of the subject to write this article. Any views, opinions, and thoughts mentioned in the article belong solely to the author and not necessarily to the author’s employer (past or current), organization, committee, or other group or individual.

Under any circumstances, the author shall not be liable for any views or analysis expressed in this note. Further, the opinions expressed are not binding on any authority or Court. We advise readers to consult their financial advisor for assistance in their specific case.