30 Important Health Insurance Terms You Must Know

Nevertheless, while there has been an increased awareness about health and health insurance in India, especially after the COVID-19 pandemic, a large number of people still don't know how health insurance works and the different terminologies used in health insurance. Such unawareness can lead them to make uninformed decisions that restrict them from making the most of their health insurance plan. Hence, in today's article, we aim to enumerate the 30 important health insurance terms you must know.

Here are the 30 important health insurance terms you must know:

1. Policyholder/Assignee:

The Policyholder or Assignee is a person who purchases the policy and to whom the policy is assigned.

2. Issuer/Insurer:

The Issuer or Insurer is an insurance company involved in the policy contract, i.e. from whom the policyholder purchases the insurance policy.

3. IRDAI:

Health insurance policies are offered by the general and health insurance companies that are governed by the Insurance Regulatory and Development Authority of India (IRDAI). It is a statutory body that comes under the Ministry of Finance, Government of India.

4. Premium:

Premium is an amount you are obligated to pay to the health insurance company/insurer on a periodic basis, typically monthly or yearly, in order to keep the health insurance policy active and to ensure you receive the required coverage as and when needed. The three major deciding factors of health insurance premiums are the age of the insured, the sum insured, and health habits.

5. Claim:

A health insurance claim is a formal request submitted by a policyholder to the insurance company to access the benefits outlined in the policy when faced with a medical emergency. Insurers can follow two distinct types of claim settlement procedures:

a. Cashless Claim:

In the cashless claim settlement procedure, the insurance company handles the payment directly with the hospital. This process is entirely convenient for the policyholder, with a key benefit being that they are not required to make any payments out of their own pocket, except for a deductible if applicable. Furthermore, because the claim is settled directly, the policyholder is relieved of the responsibility of managing hospital bills and seeking reimbursement.

b. Reimbursement Claim:

In the Reimbursement Claim Settlement Process, the policyholder is required to personally cover all hospital expenses and any other medical costs upfront. This method is not as streamlined and trouble-free as the cashless claim settlement process. Policyholders must later request reimbursement by providing the original hospital bills. While this process can be challenging for the insured, it does grant them the flexibility to select their preferred hospital, even if it is not part of the insurer's network hospitals.

6. Sum Insured:

The Sum Insured is the designated policy coverage amount. The insurer provides compensation equal to the sum insured, which can range from Rs 2 lakhs to Rs 100 Crores.

7. Policy Benefit:

In the realm of health insurance, any service included within a health insurance plan as part of routine patient healthcare, such as a doctor's appointment, lab test, surgical procedure, and the like, is referred to as a "benefit."

8. Free Look Period:

The Free Look Period is a specified timeframe during which a policyholder has the option to cancel the policy without incurring any penalties. Insurance companies grant this option without imposing any charges, and this period can extend for up to 15 days.

9. Waiting Period:

Typically, most health insurance plans include a 30-day waiting period. This waiting period applies to hospitalisation related to specific illnesses and medical conditions. However, coverage for hospitalisation resulting from an accident is effective from the first day of your health insurance policy.

10. Survival Period:

Regarding critical illness coverage, the insured individual is eligible to claim benefits only if they have survived for a minimum of 30 days after receiving a diagnosis of the illness.

11. Pre-existing Diseases:

Pre-existing diseases or ailments refer to existing health issues that you or your family members have before purchasing a health insurance policy. Typically, health insurance companies do not provide coverage for pre-existing health conditions until a waiting period of 2-4 years has passed.

12. Hospitalisation:

Hospitalisation refers to a hospital stay lasting a minimum of 24 hours, and this requirement applies to both scheduled and unforeseen hospital admissions.

On the other hand, the phrase "daycare" pertains to medical procedures that necessitate hospitalisation for a duration of less than 24 hours.

Apart from these, domiciliary treatment includes any medical care received by the insured while at their residence under the supervision of a healthcare professional.

13. Deductibles:

A health insurance deductible is the sum that a policyholder is required to pay before their insurance provider starts covering their healthcare expenses. This deductible amount is clearly outlined in the policy document, and the insurance company will not reimburse any claims until the deductible has been met.

The policyholder is responsible for covering the deductible each year when they renew their health insurance policy. The time it takes to reach the deductible amount can vary, depending on the specific deductible amount and how frequently medical services are needed. It is important to note that the deductible amount is paid directly to the healthcare provider, not the insurer.

14. Co-pay/Co-payment:

Co-pay or co-payment in health insurance represents a fixed portion of a claim amount that the policyholder must pay from their own pocket. This co-pay can be either a set amount or a percentage of the claim, determined by the insurance company. This amount can vary for different types of medical services. Unlike the deductible, the policyholder must pay the co-pay amount whether or not they have met the deductible.

For instance, if your policy includes a co-pay of Rs 1,000 for a consultation with a specialist, you will be responsible for paying Rs 1,000 for the specialist's visit, regardless of whether your deductible has been reached or not.

15. Co-insurance:

Co-insurance in health insurance refers to a fixed percentage of the claim amount the policyholder must pay for medical treatments when a medical emergency occurs. Some insurance companies may require policyholders, particularly senior citizens or those with pre-existing health conditions, to opt for co-insurance. This practice is aimed at discouraging policyholders from filing excessive or unnecessary claims. The policyholder is only required to pay their share of co-insurance after meeting the deductible.

For example, if your co-insurance rate is 10%, and your medical treatment costs Rs 2,00,000 with a deductible of Rs 20,000, you will first pay the Rs 20,000 deductible. Then, out of the remaining Rs 1,80,000, you will be responsible for paying 10% of your co-insurance, which amounts to Rs 18,000. The insurance company will directly cover the remaining Rs 1,62,000 with the healthcare provider.

16. Claim Settlement Ratio:

A Claim Settlement Ratio is a measure expressed as a percentage, indicating the proportion of claims that an insurance company has successfully processed and approved compared to the total number of claims received during a specific time frame. For example, in the event of the policyholder's death in a life insurance policy, the nominated beneficiary or family member submits a claim. Subsequently, the insurance company initiates the claim procedure and assesses whether to accept or reject the claim based on their terms and conditions. A higher claim settlement ratio suggests a greater likelihood of having your claim approved. Conversely, a low claim settlement ratio may indicate that the insurance company adheres to stricter criteria when evaluating claim requests.

17. Out-of-pocket Expense:

Out-of-pocket Expenses in health insurance refer to the portion of your medical expenses that you are responsible for covering, which may include deductibles, co-payments, and/or co-insurance.

18. No Claim Bonus:

Health Insurance claims come into play during the years when you require hospitalisation for medical reasons. In years when you enjoy good health, insurance companies reward you with a no-claim bonus as an incentive. This bonus has the effect of increasing your sum insured when you renew your policy. The no-claim bonus can vary, typically ranging between 10% to 50% for each claim-free year. Therefore, it's prudent to look for a policy that offers the most substantial no-claim bonus.

19. Riders/Add-ons:

Add-ons and riders are extra benefits not included in your base insurance plan. Insurance companies offer these supplementary features for a slightly higher premium. These add-ons and riders are optional and can be selected based on the policyholder's needs. Some of the popular riders and add-ons include personal accident coverage, critical illness coverage, room rent waiver, maternity coverage, top-up coverage, and daily hospital cash.

20. Portability:

According to IRDAI, health insurance portability refers to the right granted to individual health insurance policyholders, including all members covered under Family Floater Health Insurance Policies, to transfer their policy to another insurance company.

This portability feature enables you, as the policyholder, to shift your existing health insurance policy to a new insurer without losing out on the discounts or rewards offered by your current policy.

Portability applies to all indemnity-based individual health insurance policies, Family Floater Health Insurance Policies, and Group Health Insurance Plans. Importantly, neither IRDAI nor insurers levy any fees for offering the health insurance portability feature.

21. Inclusions:

Each health insurance company has a list of inclusions, which are specific situations and illnesses covered under the policy. Therefore, if you are seeking coverage for a particular condition, you should check if it is included in the list of inclusions.

22. Exclusions:

Exclusions, on the other hand, are the situations and illnesses not covered by the policy.

23. Policy Lapse:

Failing to make the premium payment by the policy's due date results in a lapse of health insurance policy and, subsequently, a loss of insurance coverage. In this scenario, your health insurance provider will cease to offer medical coverage, and you won't be eligible to file claims for medical expenses.

Not making the premium payment before the policy's due date results in a loss of insurance coverage. Consequently, your health insurance company will discontinue medical coverage, rendering you ineligible to seek reimbursement for medical costs.

24. Network Hospital:

Your insurer may have partnerships with specific hospitals to facilitate cashless claims. This means that when you seek treatment at a hospital affiliated with your health insurance company, the insurer directly settles the hospital expenses with that facility.

25. Pre-hospitalisation And Post-hospitalisation Expenses:

Pre-hospitalisation expenses refer to costs that arise before your hospitalisation, whereas post-hospitalisation expenses pertain to expenses incurred after you've been hospitalised. Typically, health insurance policies provide coverage for a minimum of 30 days for pre-hospitalisation expenses and 60 days for post-hospitalisation expenses. However, some insurance companies offer extended coverage for both pre-hospitalisation and post-hospitalisation expenses beyond these standard durations. Therefore, it's advisable to choose a health insurance plan that offers maximum coverage for both pre-hospitalisation and post-hospitalisation periods.

26. Top-up Plan:

As you reach new milestones in life, you may find that your current sum insured is insufficient. Instead of purchasing a separate health insurance policy with a higher sum insured, you have the option to acquire a top-up cover or a top-up health insurance plan that can increase the sum insured in your existing policy. This provides a cost-effective way to enhance your coverage.

27. Critical Illness Cover:

Every health insurance policy comes with a list of exclusions, which includes situations and illnesses that are not covered by the policy. In most policies, critical illnesses such as cancer and kidney failure are excluded from the basic health plan. However, the cost of treating these conditions can be substantial. To address this, critical illness insurance offers coverage for all critical illnesses at a lower premium. Some insurers even allow you to purchase critical illness coverage as an add-on to your basic plan. Before making a decision, it is crucial to review the list of critical illnesses covered by the insurer, as this can vary from one insurer to another.

28. Family Floater Plan:

Family Floater Health Insurance is designed to provide coverage for an entire family under a single policy, streamlining the process and reducing the premium burden. This type of policy allows for one premium payment to extend coverage to multiple family members, making it versatile enough to be used by one individual or several members within a policy year. Typically, family floater plans are well-suited for smaller families comprising two adults and a maximum of three children.

29. Daily Hospital Cash Allowance:

If you opt for a daily hospital cash rider and end up being hospitalised due to illness or injury for a specific number of days, you will receive an additional fixed daily income. This ensures that you have a source of income to cover non-medical expenses like food, transportation, accommodation, and more while you focus on your recovery. This rider is particularly valuable for individuals who lack a contingency fund to address such expenses.

30. Outpatient Department (OPD):

Outpatient Department treatment (OPD) refers to medical visits to clinics or healthcare centres where hospitalisation isn't required. The OPD (Outpatient Department) benefit rider in health insurance assists in covering medical expenses incurred during outpatient treatment, which are typically not included in a standard health insurance plan. This rider provides a fixed amount of coverage for expenses like consultation fees, diagnostic tests, pharmacy bills, and other costs related to outpatient care. You can use this rider to manage expenses for routine health check-ups, dental treatments, minor illnesses, and more, which can accumulate over time. An OPD benefit rider ensures you have sufficient coverage for all your medical expenses.

31. Third-Party Administration (TPA):

Third-party administrators (TPAs) function as intermediaries connecting insurance companies with policyholders. Their primary responsibility revolves around the management of insurance claims on behalf of policyholders. In this capacity, TPAs collaborate with hospitals and insurers to facilitate the processing of essential documents, letters, and bills for the evaluation of claims. It's important to note that TPAs do not make decisions regarding accepting or rejecting claims.

Furthermore, TPAs are responsible for issuing ID cards to policyholders, which are necessary when seeking hospitalisation. In addition to this, they offer services such as operating customer helplines, pre-authorising claims, and providing lists of network hospitals, among other functions.

To conclude:

Knowing the important terms related to health insurance will help you better understand your health insurance policy and aid in making an informed decision when buying or renewing the policy. It is advisable to thoroughly read the policy document, including the benefits, inclusions, exclusions, and terms & conditions, in order to avoid future disappointment.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.