What is health insurance?
Selecting health insurance is one of the most crucial financial decisions you will make. For this, you must have a comprehensive understanding of this concept. In this module, we will explore the health insurance definition, how it works and its types.
Concept of Health Insurance
A health insurance policy is an agreement between the insurance company and the policyholder in which the former is liable to pay for the latter's hospitalization and treatment expenses in lieu of regular premium payment during the policy term. In simple words, health insurance is an insurance product that covers the medical and surgical expenses of an insured individual.
With a health insurance policy in place, the policyholder can seek the benefits of either cashless treatment or reimbursement of the amount spent on treatment, if and when required. However, the insurer is liable to pay off the medical bills subject to the condition that the total billing amount does not exceed the amount of the sum assured and premiums are paid on time.
How does Health Insurance work?
Let’s understand how health insurance works with an example.
Ravi Kumar, aged 34, is a married man with two children. In addition, his aged parents are also living with him. The entire family runs on Ravi’s income. This means that Ravi is not only responsible for their financial security but has to also take care of their hospitalization and treatment expenses irrespective of whether the medical treatment is planned or sudden. This makes it even more important for Ravi to know the health insurance meaning. Suppose Ravi’s wife has been suddenly hospitalized and needs to be treated for some medical disorder. The total hospital bill amounts to ₹3,69,000. Ravi who already had bought a health insurance plan with a sum assured totalling ₹4,00,000 and had opted for the cashless treatment option, will simply submit the health insurance card at the insurance desk of the hospital. The insurance company is now liable to pay off the medical bills, thus, relieving Ravi from the liability of having to pay such a huge medical bill from his accumulated savings.
Different Types of Health Insurance
Different people have different health needs, so there are various types of health insurance plans to choose from:
Personal Health Insurance: This covers you, your spouse, children, and parents. It pays for hospital stays, treatments, and more. Each person on the plan has their own coverage amount.
Family Floater Health Insurance: This covers your whole family under one plan. The total coverage is shared among family members, making it cost-effective. It's great for small families.
Senior Citizens Health Insurance: This plan is made for older folks and considers their specific health needs. It may cover things like home treatments and mental health care. Since seniors often have more health issues, these plans might cost more.
Critical Illness Insurance: This policy covers major illnesses like cancer or heart problems. You can add it to your regular plan or buy it separately. If you're diagnosed with a covered illness, you receive a lump sum payment.
Group Health Insurance: This is for a bunch of people, like employees or residents of a building. It's usually cheaper but may only cover basic health needs. Employers often offer this as a perk.
