Mistakes you should Avoid while Purchasing Health InsuranceBy Ryan
Health insurance, much like a comprehensive term insurance plan, is one of the most important coverages that you must have. However, not many opt to purchase a health insurance plan for self and family due to various factors. One of the most prominent reasons for avoiding this purchase is the availability of the employer’s health insurance that most employees consider to be sufficient.
It should be noted that buying an optimum health insurance policy is an integral part of financial planning, and should be done right to avoid costly repercussions. Here, we take a look at the most common misconceptions regarding health insurance and the mistakes to avoid during the purchase of one.
- Buying insufficient coverage - Buyers of health insurance usually shy away from purchasing comprehensive coverage in order to avoid paying higher premiums. Doing so only defeats the purpose of a policy, as the low cover would be exhausted quickly at the time of a medical emergency. The policyholder will then have to consider paying from his/her savings or liquidation of assets to cover the expenses incurred. Hence, it is crucial for the customer to understand his/her insurance needs and compare policies to arrive at the most suitable one.
- Concealing medical history - Some customers conceal their medical background in an attempt to avail lower insurance premiums and to avoid rejection of their application. This is a critical mistake during the purchase of a policy, as it can lead to rejection of a claim during a crucial phase of your life. It is advisable to be honest about your lifestyle and health history with the insurer, as such acts could show you in a bad light, and you may even be charged for fraudulence.
- Insurance for tax benefits - Buying health insurance has a bearing on your tax liability. Under Section 80D of the Income Tax Act, contributions towards premiums of health insurance are exempt from tax. Many customers of health insurance policies make the purchase for the purpose of reducing tax liability. This should be avoided at all costs, as it could lead to the purchase of an inappropriate policy or one that has insufficient coverage. In effect, you should look to buy a health insurance policy that provides you ample financial protection in a medical emergency, as opposed to one that only saves you tax.
- Ignoring zone-based pricing - Health insurance in Tier-I cities has been found to be more expensive than Tier-II and Tier-III cities. This is attributed to better quality of treatment, and subsequently, higher medical expenses in Tier-I cities. If you stay in a Tier-II city and have a restricted income, you can check with your insurer about zone-based pricing of health insurance, and purchase one that suits your needs and budget.
- Not considering co-pay - Health insurers introduced the co-pay clause in order to keep a check on the number of claims raised by customers. According to this clause, customers can choose to split the cost of medical treatment with the insurance company, and this amount could vary anywhere between 10%-20%, based on policy terms. The premium borne by the policyholder when he/she opts for co-pay is lesser than that for a policy where the insurer bears the total claim amount.
- Buying additional policy - Contrary to popular belief, purchasing additional health insurance policies to enhance your coverage is not a cost-effective method. You can opt to increase your existing health insurance policy coverage with top-up or super top-up plans instead.
- Not understanding the exclusions - It is crucial to read your policy wordings carefully and understand the exclusions, so that you are better equipped at the time of a claim.
Overlooking policy details - While most individuals make sure to know about the things covered in the policy, they do not pay heed to exclusions mentioned in a medical health insurance plan. Knowing the coverages of a policy is definitely vital, however, understanding the exclusions is equally important.
There can be chances that at the time of buying your health insurance policy you may have missed out to go through the complete fine print. Even in such a case you can avail the benefit of a free look period. Almost every health insurance policy has an option of free look period of 15 days. This means that, after buying the policy, you have a time of 15 days in your hand to go through each and every detail of your health insurance plan. If during this period you find any clause as problematic, you can cancel the plan and the company shall pay you back your money as per the terms and conditions.
- Relying on employer insurance - As mentioned earlier, it is not wise to rely completely on employer-sponsored group health insurance. The coverage that you get for such policies is limited. Additionally, you stand to lose the cover once you leave your job or enter into retirement.
Not looking beyond basic cover - One would often find experts recommending to choose a comprehensive health insurance plan over a basic coverage. However, individuals seem to be unwilling to give up the idea of basic coverage because they are keener on saving the extra few pennies. They fail to realize the benefits of having a personal accident rider and critical illness rider along with their basic health insurance plan. Such a combination of insurance coverage makes your health insurance cover complete. In addition, choose a policy which offers added benefits like ambulance charges, domiciliary hospitalization, and cashless hospitalization.
- Buying insurance when you are older - Younger people are generally healthy; but that does not justify the act of not purchasing a health insurance policy. It is advisable to buy health insurance when you are young. Most insurers provide better coverage and attractive premiums for younger customers. Moreover, you will also benefit from not having too many ailments classified as pre-existing.
In addition to the aforementioned points, it is important to focus on buying a policy with long-term benefits. You should also look to renew your health insurance on time and avoid letting it lapse, as you may lose out on accrued bonuses.
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