8 mistakes to avoid while taking medical insurance Guideline to select best medical insurance

Every year, many people in India end up selling their assets like gold, properties or end up breaking their FD just because they don’t have medical insurance. In fact, some people even end up borrowing money from friends and relatives.

As per research, only 36% of people in India are covered under health insurance. Shockingly, out of total medical expenditure, 64% money is spent out of pocket by the person. 

The healthcare cost in India is rising at a very fast rate. A few days of hospitalization can cost lakhs. It just takes 1 accident to wipe out the entire lifetime of savings! 1 heart attack can break you physically, mentally as well as financially! 

 Not only this, the majority of people who take medical insurance end up making many mistakes that result in a big financial blow. Honestly speaking, I don’t blame them. The simple reason is because of complex terms and conditions in the medical insurance document that is alien to a layman. 

So in this article, we will discuss one of the most important aspects of money management i.e. medical insurance. We will identify the most common mistakes people make with medical insurance and how to avoid them to select the best medical plan for you and your family. 

Key takes away from this article

  • Buy medical insurance. If you are reading this article and haven’t taken medical insurance for you and your family then prioritize this medical plan right away and start searching for a good medical plan. 
  • Those who are either planning to take a medical plan or even for those who have already taken the medical plan. Because the majority of people end up making many mistakes with medical plans which normally nobody talks about.
Let's understand the 8 mistakes to avoid while taking medical insurance:
#1 mistake is many people end up taking medical insurance with room rent capping. For example, there can be a limit on room rent up to Rs 5,000 per night. Now if you take a room of Rs 10,000 then you will have to shell out additional Rs 5000/night out of your pocket. Not only this, the biggest catch is that you need to shell out money for everything including the surgery. Because in this case, you ended up taking a room of Rs 10,000 but your room cap is Rs 5,000 i.e. 50%. So they will only approve the claim of 50% on the total bill. Yes, on the total bill. So if your surgery cost is Rs 1 lakh then you will have to shell out 50k from your own pocket. Big catch! Hence, while taking insurance, make sure there is no room rent capping.
#2 mistake is people end up opting for a copayment option. Think this way - You take a medical plan of Rs 5 lakh and the annual premium is Rs 10k. Now they give you an option to take the copayment of 20% and you will get an additional 25% discount. So you do the math and calculate that you with copayment you will save Rs 2,500 every year and you take the copayment option. Let’s say there is a surgery and the total bill is Rs 5 lakh. Guess what! You will have to pay 20% of 5 lakh i.e., Rs 1 lakh out of your own pocket because you opted for copayment just to save Rs 2,500 on premium. So, make sure you don’t make this mistake of taking the copayment option.
#3 mistake is people end up opting for no claim bonus instead of increase in sum assured: When you take a medical insurance, you will get an option to get some bonus each year in case you do not make any claim each year. For example, let’s say you get a bonus of Rs 2k on your annual premium of 10k. Now this sounds like a good deal, what if you after 3 years you end up in a surgery that requires 7.5 lakh? Healthcare cost is rising rapidly. Today, 5 lakh might look enough but it won’t be enough after 5 years. So you have an option to increase your sum assured from 5 lakh to 6 lakh then 7 lakh and likewise in case of no claim. Normally the sum assured can be doubled in case of no claim. For example, if you have taken a medical insurance of 5 lakh then it can double up to 10 lakh in case of no claim. But people end up taking no claim bonus instead of increase in sum assured. So make sure you do not get lured by sum assured and opt for increase in sum assured.
#4 mistake is ignoring the waiting period clause. When you take a medical plan, there is a clause on pre-existing disease. For example, if you have diabetes then you won’t be covered with diabetes for a fixed duration. Or if you have a heart issue then you won’t be covered on medical expenses for heart problem for let’s say 3 years. If anything happens during that period, you have to bear the cost. In this case, you need to ensure the medical insurance has minimum waiting period.
#5 mistake is ignoring the sublimit on diseases. Let’s say you take a medical plan of Rs 10 lakh and end up with a surgery related to heart issue and the total bill is Rs 5 lakh. Now you would think that you don’t need to pay anything as you have medical insurance of Rs 10 lakh. But you might end up paying out of your pocket. Medical insurance has a sublimit on various disease. So, if you have taken medical insurance of Rs 10 lakh but if there is sublimit of Rs 2.5 lakh on heart related issue then you will end up paying Rs 2.5 lakh out of your own pocket. So, make sure you check the sublimit on disease.
#6 mistake is not opting for restoration benefits. So, think this way - You opted for a medical plan of 5 lakh. And you ended up with a medical issue and the overall cost is 4.5 lakh. Now you would be left with only Rs 50k limit. What if there is again some problem that required 2 lakhs? You would end up paying 1.5 lakh from your own pocket. So always opt for restoration benefits to avoid such problems.
#7 mistake is not covering pre and post hospitalization charges. It is not just the surgery cost or hospital treatment that requires money, you also need to spend a lot of money on various diagnosis test like MRI, CT scan and many more. These charges are part of pre and post-hospitalization. Normally people ignore them. But they can also cost you a lot. Hence, make sure that your medical insurance cover pre and post hospitalization charges.
#8 mistake is not opting for a cashless facility and not checking the hospital network that is covered in the policy. So, majority of medical insurance have this option of cashless facility where you don’t need to pay anything upfront. Everything is managed cashless. Make sure your policy covers cashless facility. Also, make sure that the best hospitals in your city are covered in the hospital network of the insurance policy.
Many people simply take a medical plan based on a low annual premium and ignore all these important points. These are the most important factors that you need to keep in mind before taking medical insurance. If you are single then take individual medical insurance. But if you have a family with a wife and kids, you can opt for family floater medical insurance where your entire family would be covered in a single medical plan.

I hope this article will be an eye opener for those who have not taken a medical plan and help you to avoid all mistakes with a medical plan. If you liked this article, do share it with your friends and relatives so that they can also avoid all these mistakes.

PS: If you want to learn every aspect of fundamental analysis of stock and other important concepts of personal finance, you can explore my video course on "Everything about money management".
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