health insurance terms

Understanding Health Insurance Terms and What They Mean

Riders, sub-limits, super top-up, deductible, domiciliary coverage, grace period, and more! Do these health insurance terms sound alien to you? Do you feel confused when you come across health insurance terminologies? Don’t worry. We will make it simple for you.

Health insurance terms have a reputation of being difficult to understand, confusing and scary, too. And it’s understandable, given its massive glossary of terminologies. So we’ve put together a few of the key terms and simplified it for your understanding.

Learn about:

  • Deductible
  • Room rent limit
  • Claims
  • Exclusions and inclusions
  • Top-up and super top-up
  • Other terms

Related blog: How Health insurance Works

Deductible

Deductible is an amount that policyholders have to pay out-of-pocket towards medical expenses. The insurance company pays the amount over and above the deductible.

How does it work? You may wonder.

If your plan’s deductible is Rs 15,000 and the claim is of Rs 40,000, your insurance company is responsible to pay only (Rs 40,000 – Rs 15,000 = Rs 25,000). The deductible of Rs 15,000 has to be paid by you from your pocket.

So what happens if your claim amount is less than the deductible? Your insurance company does not have any liabilities in that case and they would not pay anything. Normally deductibles are relevant where you take a cover over and above the health cover provided by you company. In that case you can declare the corporate cover as your deductible so that the insurer liability only kicks in when the base limit is exhausted.

Deductible pro tip: Go for a high deductible amount. There are two types of deductibles – mandatory and voluntary. Having a high deductible would mean that you would have to pay premium only for the amount over the deductible amount, which means you could avail a high sum insured at a lesser premium.

 

Room rent limit

Most comprehensive health insurance policies provide room rent coverage. However, this is only available up to a specified limit and is only applicable to a specified room type. This is called room rent limit. Many policyholders miss understanding the details related to room rent limit and think the insurance company would reimburse the entire amount paid towards room rent. But that’s not the case. 

E.g. Insurers normally cap daily room rent at 1% to 2% of the total sum insured. This means, if the sum insured is Rs 2 lakh, the insurance company would only pay Rs 2000 per day towards room rent. If the policyholder ends up choosing a room that costs Rs 4000 per day, the insurance company is not liable to pay the entire Rs 4000, but only Rs.2000.

Room rent pro tip: Always read room rent clauses carefully so that there are no last-minute surprises at the time of making claims or if the insurance company rejects the claim.

 

Claim

Claim is one of the most common health insurance terms. A claim is a request submitted by a health insurance policyholder to the insurance company for the reimbursement/payment of the medical expenses incurred by the insured. There are two types of claims:

1.    Cashless claim

Cashless claim is a facility where the insured does not have to pay money to the hospital. Instead, the insurance company directly pays to the hospital towards the expenses incurred for the hospitalization of the policyholder. It is essential that the policyholder informs the insurance company in advance about the hospitalization so that the paper work can proceed smoothly.

2.    Reimbursement claim

In reimbursement claims, the insurance company reimburses the medical treatment expenses to the policyholder upon submitting required documents, bills and hospitalization certificates. All documents have to be submitted in original and the processing of the reimbursement claim is completed by the TPA in 15-20 days.

 

Exclusions and inclusions

Exclusions: Health insurance plans do not pay for certain medical expenses. The medical treatments not covered in a health insurance plan are called exclusions.

Inclusions: The medical treatments that are covered in a health insurance plan are called inclusions. The health insurance company would pay towards these expenses. 

When you clearly know the inclusions and exclusions, you will be able to set clear expectations from your insurer. Some of the most basic inclusions in health insurance plans are hospitalization, pre-existing diseases, free health check-ups, day-care procedures, ambulance charges and more. 

Among the exclusions are HIV, STDs, cosmetic surgeries, dental and eye care treatments. Make sure you are aware of the inclusions and exclusions while choosing a health insurance plan. 

Let’s look at inclusions and exclusions further:

Inclusions Exclusions
In-patient hospitalization Pre-existing illnesses (Before waiting period)
Pre and post hospitalization Illnesses within three months of buying policy
Day care treatments Self-intended injuries
Ambulance costs Cosmetic and dental treatments
AYUSH treatments (alternative treatments) Unproven and experimental treatments
Free health check-ups War, nuclear contamination related ailment

 

Top-up and super top-up

Top-up: Top-up health plan is additional sum insured bought by an insurance policyholder on the existing policy. It is just like a regular health insurance plan, but it comes into the picture only once the regular deductible of the sum insured has been used. Top up plans kick in when a single claim amount exceeds the deductible of a plan.

E.g. a person has a base cover of Rs 5 lakh and a top-up plan of Rs 4 lakh. If the person incurs hospitalization expenses of Rs 7 lakh, Rs 5 lakh would be paid from the base cover and Rs 2 lakh from the top up. 

Benefits of top-up health insurance

  • Provide additional coverage
  • Provide higher coverage at lower premium
  • Supplement existing health plan
  • They normally do away with healthcare risks

Super top up: Similar to top-up plans, super top-up plans provide extra coverage for multiple claims during a policy period when the hospitalization bills exceed the deductible. 

In super top-up health plans, the threshold limit is applied to the total expenses incurred during a policy period. E.g. if a policyholder is hospitalized twice during a policy period, then the super top up is a useful tool for the insured. Super top-up policy lapses only when the entire sum insured has been utilized, not upon one claim. 

Benefits of super top-up health insurance

  • Cost effective in the long run
  • Coverage for wide range of ailments
  • Beneficial for those who have frequent healthcare expenses as they can avail cumulative coverage

When do top-up and super top-up come to use?

Top-up health plans have a feature called ‘deductible’. It is a pre-decided limit. When the cost of a single hospitalization crosses the deductible limit, the top-up plan kicks in. Top-up plans can be utilized only for single hospitalization cases and when the cost exceeds the deductible. 

However, super top-up plans provide coverage over the threshold limit for multiple claims in the same policy period. All the hospitalizations during a year are put together to calculate the deductible limit.

Top up plans are more beneficial to those who do not have any serious chronic ailments and have a base health plan and require additional coverage. Super top-up plans are beneficial to those who suffer from chronic illnesses and need hospitalization a few times in a year.

 

Other health insurance terms and jargons

Day care expenses: Certain types of medical treatments require few hours and can be completed without the need for hospitalization. These are called day care procedures. The expenses towards these treatments are called day care expenses. 

Grace period: Grace period is the time that is given to the policyholder to pay the premium after the due date and it normally extends up to 4 days.

Policy term: Policy term is the period for which a health insurance policy is valid, subject to timely payment of premiums. 

IRDAI: The Insurance Regulatory and Development Authority of India. It is a statutory body formed under Act of Parliament that regulates and promotes insurance in India.

Riders: Riders are additional benefits provided to policyholders, over and above the regular healthcare cover.

Contribution clause: A contribution clause comes into the picture when the insured has more than one health insurance plan. It is a clause that mentions details about payment of claims: whether the claim will be paid equally, proportionately or by one insurance plan only. These will depend on the specific clauses in your health insurance contract.

Group / corporate health insurance: Group health insurance provides coverage to a group of people under a single policy. Group health insurance is usually provided by employers to a group of employees. Here, the employer/company pays the premium but the sum insured benefits are provided to the policyholder/the employees. In this case, the tax benefit is not available to the employee but to the employer.

Coverage: Coverage is the amount of risk or liability that is covered in an insurance policy for the insured by the insurer. It is also called underwritten limit.

Grace period: Grace period is the extra days or extra time after the premium payment due date given to policyholders to pay premium. Grace period is given to ensure that the policy does not lapse. 

Policy tenure: The duration of a health insurance policy is called policy tenure. It is the period for which the policy is valid. 

No-claim bonus: No-claim bonus is the amount added to the sum insured for every claim-free year. In other words, it’s a reward to the policyholder for not making any claim. 

Restoration benefit: Restoration benefit is a benefit by way of which, the insurance company restores the sum insured once it gets fully exhausted through claims made by the policyholder. 

Underinsured: When a person has Inadequate or insufficient insurance coverage then that person is underinsured. Premium: The amount paid by a policyholder to the insurance company against the insurance policy is called premium.

 

FAQs: Health Insurance Terms

What does the insurance term out-of-pocket expense mean?

When policyholders pay for medical bills and other tests from their own pocket or personal sources, it is called out-of-pocket expenses.

What does underwriting mean?

It is the process through which an insurance company accepts and signs liability towards an insurance applicant. Underwriting means taking on the risk.

What is pre-policy medical check-up?

Most health insurance providers make health check-ups mandatory before they sell a policy. Pre-policy medical check up is the medical examination that health insurance seekers have to go through before the insurance company underwrites the policy. Insurers request pre-policy health check-ups to reduce the risk of the insurance companies and to gather health information of the policyholder. However, for smaller cover and in the case of persons with existing policy covers with other insurers, insurance companies are willing to underwrite without a health check.

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