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News & Views

Tuesday, Jul 10, 2012

Health insurance terms simplified

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Due to the rising medical costs, more and more people are becoming aware about the importance of health insurance policy for themselves and their family. But most of the people while buying Mediclaim do not understand the terms mentioned in the policy document and because of this lack of awareness they end up with the wrong policy or they feel cheated at the time of claim settlement.

In this article we will try to educate you on what the terms mentioned in the policy documents really mean.

Before we start describing the terms mentioned in the policy documents, let’s first understand what a health insurance policy aka Mediclaim is?

Mediclaim is a Health insurance policy which reimburses your hospitalization bills in case of hospitalization due to accident or any illness. Mediclaim policies are generally issued for a period of 1 year and are yearly renewable contract but now some of the private companies have started issuing policies for a period of 2 years as well.

Now let’s discuss some terms in the policy document:

1. Pre-Hospitalization Expenses:

Pre-Hospitalization Expenses are those expenses which are incurred prior to the hospitalization; these expenses are covered under the Mediclaim policy. Pre-Hospitalization expenses are usually covered for a period of 30 days.

2. Post-Hospitalization Expenses:

Post-Hospitalization Expenses are those expenses which are incurred after the discharge from the hospital; these expenses are also covered under the Mediclaim policy. Post-Hospitalization expenses are usually covered for a period of 60 days.

3. Domiciliary Treatment:

Domiciliary Treatment as the name suggests is the treatment taken at home. Mediclaim companies generally do not cover treatment taken at home but in case condition of the patient is such that he cannot be moved to the hospital or there are no beds available in any of the hospitals, then the treatment taken at home are also covered by the Mediclaim policy.

4. No Claim Bonus:

No Claim Bonus in Mediclaim policies means that an additional cover of 5% of Sum Assured is added in the subsequent renewal of the policy in case there is no claim in the current policy year. This increase in sum assured of 5% every year is restricted to a maximum of 50% of the initial Sum Assured. If there is a claim in the policy then this additional cover is decreased by 10% on the next renewal.

5. Pre-Existing Diseases:

Pre-Existing Diseases are those diseases which have already been diagnosed with, at the time of taking the policy. Insurance companies do not cover such diseases from the time of taking up the policy; these diseases are generally covered after a waiting period of 3-4 years varying from policy to policy.

6. Waiting Period:

Waiting period is the duration during which insurance company will not cover hospitalization expenses except in certain cases such as accident. This waiting period is generally 30 days from the start date of the policy.

7. Co-pay:

Co-pay is the percentage share which you would have to pay yourself and the Mediclaim Company will not be liable to pay for it. For e.g. If a person is diagnosed with certain disease at the time of taking up the policy or the age of the person is above 60 years then Mediclaim company might include a co-pay clause of 20%. It means that if the hospitalization expenses are Rs. 10,000 then 80% of Rs. 10,000 i.e. Rs. 8,000 will be borne by Mediclaim Company and 20% of Rs. 10,000 i.e. Rs. 2,000 will be borne by the insured.

8. Third Party Administrator (TPA):

Third party administrator is an intermediary between insured and the insurance company. In case of a claim insured submits all the documents related to the claim to TPA and TPA after verifying all the documents on behalf of the insurance companyprocesses the insurance claims.

9. Network Hospital:

Network hospital means the hospitals or nursing home which have tie up with TPA’s for providing cashless facility to policyholders.

10. Cashless Facility:

Cashless facility means that TPA will directly settle the eligible claim with the Network hospital. In such a scenario insured does not have pay the hospital bills after the discharge from the hospital, but this facility is only available in Network hospitals.

For more information on health insurance policies, read the 8 things you must know about Health Insurance . And remember, insurance is a part of holistic financial planning. If you have any queries on insurance and financial planning do speak with your financial planning firm .

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