Do you often find yourself reading a paragraph and not being able to comprehend? It happens to everyone, especially when we're talking about a complicated subject like Insurance. The Insurance industry is full of jargons, so it's easy to get lost in translation.
If you're new to Health insurance, learning these basic insurance terms is essential for understanding how policies work and what they cover.
Here is a compiled list of commonly used health insurance terms to help keep you up-to-date.
The premium is the amount that you pay every month / annually to be covered by your insurance. The higher the premium, the higher your coverage and thus, the less you will have to pay in medical bills throughout the year.
The insurer is a company that provides coverage for any losses sustained by the insured in case of any event in exchange for regular premium payment.
The sum insured is an amount for which you are eligible to receive maximum coverage under a health insurance policy. An insurer determines your eligibility for a specific sum insured based on various factors, including your age, income, and health conditions.
You can cover your spouse, children and parents as dependents in your health insurance policy. In some cases, you may also be able to cover a stepchild, grandchild, an adult child with a disability, a foster child or someone for whom you are the legal guardian.
A health insurance deductible is the proportion of the medical expenses that you have to pay out of your pocket before you can make an insurance claim.
For example, if you have a medical emergency and the medical bill is ₹2,500, but your deductible is ₹500, then you will pay ₹500 and your insurer will cover the remaining ₹2,000. The higher your deductible is, the lower your premiums.
The copay is a percentage of the claim amount that you are required to pay towards the cost of healthcare.
Let's understand with an example.
Suppose your health insurance claim amount for a doctor's consultation is ₹100. Your copayment for a doctor consultation is ₹20.
Then you pay ₹20 at the time of the doctor visit if you have paid deductible earlier, But If you haven't, then you pay ₹100 for the doctor visit.
The copay percentage can vary between 5-20% and depends on the insurance company and the health insurance policy that you are opting for.
Few health insurance plans come with mandatory co-payment, a few plans allow you to opt for the voluntary deductible, which reduces the premium amount.
A coinsurance is a percentage of what the insurance company will pay to cover health care costs after any deductibles or copays have been met.
The period during which certain benefits of the policy will not be available to the insured, when a new health insurance policy has started. The duration of the waiting period and its terms and conditions vary from company to company.
In most cases, you won't get any reimbursement or coverage from your health insurance policy during the waiting period.
You should buy the policy with a minimal waiting period. The lower is the waiting period, the sooner you will be able to avail the policy.
Super Top Up can be considered as a safety net which helps you in case your claim amount exceeds the threshold of your base policy.
Under a normal health insurance plan, the insurer pays the amount which an individual is insured for, but there could be cases when the expenses exceed this amount, which is where a top-up plan comes into play.
Cumulative Bonus is a feature that all insurance companies offer.
It is a rewarding benefit offered to those policyholders who have a claim free policy year. Although the type of cumulative bonus may differ, the granted benefits on every claim-free year remain the same.
Pre-existing diseases are injuries or illnesses that you may have prior to obtaining your insurance plan. The definition of a pre-existing condition can vary by plan, so it’s important to ask your insurer for the exact definition.
Cashless hospitalisation will enable you to concentrate on getting better treatment, and not worry about how much you have to pay towards the cost of your treatment as it will all be taken care of by your insurance provider.
Grace period is the extra few days when you can still pay the premium for your health insurance after the due date is over to ensure that the policy does not lapse. Typically it is additional 30 days from the due date of your premium payment.
Ideally, paying your premium on time is strongly recommended to avoid any lapse in cover. However, if you are really pressed for time and cannot renew your policy in time, opting for a grace period ensures that you have sufficient time to make payments without a gap in coverage.
Insurance can be confusing, but knowing some common terms can help you plan for a better insurance policy.
It is not always easy to decipher an insurance policy word by word. But, using this glossary as a reference, understanding the policy wording would be much easier than you imagined.
Disclaimer: The above information is for illustrative purpose only. Related policy wordings and relevant prospectuses must be read fully before opting for investment products.