What Is A Health Insurance & Its Advantages

 

A health insurance policy is a type of insurance which covers for the medical expenses incurred by the insured. It insures you against medical expenses incurred during the treatment of illnesses and guarantees a financial stability in case you fall sick and require medical attention. Without a proper health insurance, an unexpected medical condition can leave you and your family financially weakened.

The advancement in medical treatments and technology has increased the average life expectancy. However, this improvement in technology comes at a higher cost in terms for treatment expenses. Add to that the new illnesses coming into picture, health insurance is now an integral part of how you plan your finances.

Health insurance is your safeguard against unforeseen illnesses or accidents where high expenses like hospitalization, tests and operations are required.   A health insurance helps you out by providing cover for medical care or may compensate you for the amount spent as medical expenses.

ADVANTAGES OF HEALTH INSURANCE

There are a number of reasons that make it important for an individual to have health insurance.

1. You get healthcare facilities at an affordable rate.
2. You do not need to delay any immediate medical expenses.
3. You have access to an extensive network of hospitals and treatment centers provided by the insurance company where cashless facility is available.
4. Any medical conditions that you have at present also get included within the policy.
5. Peace of mind if any unforeseen illness or accident occurs.

Considering the rising cost of medical equipment and treatments, not having health insurance cover can result in you spending a high amount of medical expenses which can disrupt your finances.

WORKING OF HEALTH INSURANCE

Just like any other insurance type, a health insurance works on a pooling mechanism. When you buy a health coverage policy, you actually join a group of individuals who sign up for health insurance coverage. Health insurance coverage is based on the pooling manner so as to combine a group’s premium resources to cover for the whole group. Thus the premiums you pay help in covering the whole group rather than just an individual.

The insurance company analyses overall risks involved with healthcare along with your likeliness to be affected by a risk and the cost of coverage you might require to develop a finance structure and determine your premium costs.

The premiums collected from every individual of the group is pooled and used to pay for health coverage claims made by others. Thus your healthcare expenses are spread out and coverage assured by the insurer. The healthy customers help pay for the medical care required by the ill individuals, knowing that the same will be provided in case they need help.

COMPONENTS INVOLVED IN A HEALTH INSURANCE

There are a number of components involved with your health insurance coverage policy which needs to be understood and read before obtaining one.

1. Premiums:  The periodic payments you make to keep your health insurance policy active is defined as premium. The premium payments you make towards your health insurance policy pays for the coverage. These premiums collectively are used by the insurer to provide cover to the claimant.
2. Deductible: A certain amount that you have to pay out of your pockets is referred to as deductible. An insured is supposed to pay deductibles in the different types of insurances. The range of deductible depends upon how much you would like to pay out. The higher the deductible the lower your premium cost would be.
3. Co-insurance: A percentage of the expense incurred on medical care is to be paid by you and the rest is guaranteed by the insurer. Generally in a co-insurance arrangement, an 80/20 split is made between the insurer and the insured to pay for the expenses.
4. Co-payment: Also referred to as co-pay is the amount you must pay out of your pocket before the health insurer pays for the coverage.

HEALTH INSURANCE COVERAGE: WHAT’S COVERED & WHAT’S NOT

A number of health insurance policies are available which covers loss or expenses incurred due to medical care. The insurance plans cover your expenses in case you need to be hospitalized. Your insurance cover pays for the hospital rooms, ICU charges and other treatment charges.

Health insurance also covers medical expenses, which may not require 24 hours hospitalization but a simple visit to a medical center.

Your insurance policy provides coverage against critical illness such as heart attack, organ transplants, stroke, kidney failure etc.

However there are certain exclusions which might not be covered within your health insurance policy.  Medical condition or expenses incurred by indulgence in any act of war, terror, criminal activity, attempted suicide, participation in defense activities, mental disorders, abuse of drugs and alcohol, expenses arising from HIV or AIDs related diseases, infertility treatment, laser treatment etc are amongst some of the various exclusions which are not covered under health insurance policy.

While having a health insurance policy is important, it is equally important that you extensively analyze the available health insurance products before buying. The analysis and comparison should be based on:

• The amount of medical facilities and illnesses that a policy covers.
• Its hospital network where cashless facilities are available.
• Quality and swiftness of claims resolution. This is one of the most important factors one should consider.
• The amount of premium you pay towards a policy should be value for money in regard to keeping you properly insured without putting a strain on your finances.

Buying your health insurance after proper research ensures that the health expenses are covered as per your own requirement and allows you to have peace of mind if any unforeseen illness occurs.
Now that we have understood the importance of health insurance, let’s read more on why everyone one should have a life insurance.

You may also like to read which type of insurance you should buy while financial planning.