Health is the prime concern of every person. With the increasing medical expenses and inflation rate, healthcare costs have also increased.
These health maintenance costs are enhancing the importance of health insurance in our life. Health insurance has now become a very essential part of our financial planning.
But before you buy a health insurance plan, you should try to understand what actually it is.
Well, Insurance is a contract or arrangement by which the insurance company (insurer) will compensate your survivors in the event of your (insured) death for a specified premium payable by you. Anything that does not relate to or fit in this definition is not insurance.
The first question that comes to your mind while buying a health insurance is that what should be the amount of health insurance coverage?
There is no fixed formula for calculating it. Factors like your age, income, genetic diseases can help you in making a decision.
After you have arrived at the amount of health insurance cover, the question that arises is this sum enough for your insurance?
Since there is no fixed formula to compute the amount of health insurance coverage, you are never sure about the answer. This is because life insurance are being concerned about how much premium you can pay rather than check whether you are adequately insured.
The insurance companies measure their success by the amount of money they have taken from the customers and not by the amount of insurance they have delivered or the number of customers they have served.
The major question is that as an individual you should keep in mind to avoid getting fooled while buying a Health Insurance.
Areas where you can get fooled
- Limiting features: The insurance company may not always explain you the restricting features of the policy. Apart from benefits, health plan also has some limiting clauses like deductibles, waiting period, cap limits, etc. If you are not aware of the effect of these clauses on your plan, you might get fooled.
- List of exclusions: Every health insurance plan has a list of exclusions which the insurer does not mention at times fearing that you may not buy the policy at all. You should read the list of exclusions so that you may not have to bear the expenses at the time of making a claim.
- No Claim Bonus and on-time renewals: When you do not make any claim in a year, your insurer gives you an increase in the sum insured which is being called No Claim Bonus (NCB). If you are not aware of the benefit of on-time renewals or NCB, you can get fooled.
- Claim process: At the time of buying the health insurance, you should understand the claim settlement process. The insurance companies promise help when you buy a policy, but may not provide the same level of help when you file a claim. So you should have the entire information about the claim settlement procedure to avoid any kind of difficulties.
Buy an Insurance Plan, not an Investment Product
The most important thing to understand is that you are buying an insurance plan and not an investment product. Insurance companies have encouraged an investing culture in their business.
People do not like buying insurance as they feel that they do not get anything from it in the end. Taking advantage of this mentality, insurance providers sell investment products that look like insurance plans.
It is up to you to learn how to buy real insurance and not get fooled.
The Bottom Line
You should focus on buying an insurance cover which is equal to 10 years of your income.
If you do this, you are buying an actual insurance plan and not an investment product because in any other kind of insurance product, getting 10 years income worth of insurance coverage will cost you your entire income.
So go ahead, follow the discussed tips, and avoid getting fooled!