10 Common Health Insurance Exclusions And How You Can Financially Prepare Yourself For Them

While most buyers pay attention to what is included under the policy, i.e., inclusions, they often neglect what is not covered under the policy, i.e., exclusions. This is mainly because the health insurance companies and insurance agents promote their plans by showing what is covered under the plan. However, paying attention to the exclusions is equally important when buying a health insurance policy. Not doing so can result in nasty surprises in the future that will make you regret your decision.

This article enumerates 10 common health insurance exclusions and how you can financially prepare yourself for them.

Here are the 10 common health insurance exclusions:

Since health insurance exclusions vary from insurer to insurer, it makes sense to check the policy document before buying the policy. Here are the 10 common health insurance exclusions that are typically part of most health insurance policies:

1. Pre-existing medical conditions:

Pre-existing diseases/illnesses are existing health conditions that you and/or your family members have before purchasing the health insurance policy. Health insurance companies generally do not provide coverage for pre-existing health conditions without a minimum waiting period of 2-4 years.

2. Waiting period for specific diseases:

Generally, most health insurance policies come with an initial waiting period of 30 days. So, in order to claim for any medical emergency, you must complete this initial waiting period. However, hospitalisation arising due to an accident is covered by your health insurance right from the policy start. Apart from the initial and pre-existing illnesses waiting period, health insurance plans come with a waiting period for specific critical diseases/illnesses, such as cancer, stroke, tumour, hernia, cardiac ailments, etc. The waiting period for specific diseases is typically 2 to 4 years.

3. Cosmetic treatments:

Nowadays, many individuals opt for cosmetic surgeries that enhance certain body parts. Some examples of cosmetic surgeries include abdomen reduction, lip job, liposuction, and hair transplant. However, such surgeries are often not covered under health insurance. If cosmetic surgery is a medical requirement after a major accident, then some health insurers may cover it under the health insurance plan.

4. Dental, hearing, and vision treatments:

Since most dental, hearing, and vision treatments do not require inpatient hospitalisation, they are generally not covered under health insurance. However, if the treatment requires the minimum hospitalisation, the health insurer will have to cover it under the plan.

5. Pregnancy and childbirth:

Maternity insurance extends its coverage to normal as well as C-section deliveries, termination of pregnancy due to pregnancy complications, pre and post-natal expenses, and newborn cover. While most basic health insurance plans do not cover pregnancy and childbirth-related expenses, some companies may provide this cover with a waiting period of 2 to 4 years. If your health insurance policy does not cover pregnancy and childbirth, you can buy a maternity add-on to cover these expenses under insurance.

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6. Alternative treatments:

While most health insurance companies have started providing coverage against treatments done under alternative treatments, i.e., AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homeopathy), some health insurers still put them under exclusions.

7. Self-inflicted injuries:

Hospitalisation or medical expenses arising out of injuries that are caused due to any kind of deliberate self-harm or suicide attempt are strictly not covered under health insurance.

8. Mental health conditions:

The fast-paced lifestyle and peer pressure have significantly increased mental health conditions like depression and anxiety that need to be medically treated at the right time. Unfortunately, most basic health insurance policies still do not provide coverage for mental health conditions.

9. STDs:

Sexually Transmitted Diseases (STDs) like AIDS are not covered under health insurance plans.

10. Permanent exclusions:

Certain health conditions and situations are permanently excluded from health insurance. These exclusions are called policy exemptions. Congenital diseases and damages due to war or nuclear weapons are examples of permanent exclusions.

How do you financially prepare yourself for medical emergencies that are excluded from health insurance?

While these illnesses/situations are not covered or need the waiting period to pass to be included under the health insurance coverage, you cannot simply ignore such illnesses as they can arise without notice. If you are not prepared, such medical expenses can drain your pocket by making you liquidate your investments or opt for loans.

Therefore, it is best to pay a little extra premium to buy suitable add-ons and riders that can convert your basic health insurance into a customised health insurance plan. However, it is not possible to convert all the exclusions into inclusions.

Hence, it is advisable to build an adequate contingency fund based on your requirements. A contingency fund, also known as an emergency fund, is a saving that you set aside for any kind of financial emergency, such as the loss of a job, medical emergency, loss of an earning member of the family, etc.

While there is no single formula to calculate how much you should keep as a contingency fund, ideally, it is best to maintain at least 6 to 24 months of monthly expenses for emergencies. Take note that your contingency fund must include all your unavoidable expenses like utility bills, loan EMIs, healthcare expenses, rent, insurance premiums, children's educational expenses, etc.

Considering your health insurance coverage and all the family members' medical history, you can +/- 5% to 10% to the fund.

Remember that the aim of this fund is not to yield more returns but be financially prepared for any kind of emergency. So, you should be able to liquidate these funds within 24 to 48 hours whenever the need arises.

Since liquidity should be your priority for your medical fund or contingency fund, keeping a separate savings bank account for emergencies makes sense. But if you wish to yield some returns, then bank fixed deposit, recurring deposit, etc., are more traditional ways you can choose to invest.

However, when investing in bank fixed deposits, avoid making a high-amount long-term fixed deposit. Instead, you can book multiple FDs of smaller amounts with an investment horizon of 1 year and put them on auto-renewal. This way, you will be able to withdraw just the right amount required in case of a medical emergency, and the auto-renewal feature will ensure your funds do not lie idol in the savings account.

You may also consider Flexi fixed deposits and a sweep-in facility that allows flexibility to the fixed deposit. If you operate internet banking, it makes sense to book a fixed deposit online as during an emergency; you will be able to liquidate the same within a few seconds. However, in case of a premature withdrawal, the bank may charge a penalty on the interest rate as per their terms and conditions.

If you are looking for some conventional options, you can consider liquid funds or money market funds to park a portion of your contingency fund. These funds are ideal for a short-term investment horizon of less than 90 days, allowing your redemptions to get credited to your bank account within 1 to 10 days without any exit loan or penalty.

To conclude:

Health insurance is a financial backup for any kind of medical emergency. However, health insurance policies can have certain limitations. Hence, it is necessary to read all the terms and conditions carefully before buying the policy. It is a good idea to analyse the health needs of your family and buy suitable add-ons and riders to make the best of your health insurance policy. But certain conditions are completely excluded from health insurance, so you must prepare yourself financially to meet such unexpected expenses by building an adequate contingency fund.

Warm Regards,
Ketki Jadhav
Content Writer