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What is Health Insurance?
Health insurance definition is the coverage an insurance company provides for a regular premium you pay. The insurance plan covers medical services such as consultation, hospitalisation, surgeries, nursing, ambulance, etc. It also bears the prescription medicine, pre and post-hospitalisation expenses etc. Medical emergencies can drain your savings without proper planning.
Health insurance lets you know that you can manage treatment costs without financial stress. With medical expenses soaring high, medical insurance is a valuable addition to your financial planning that ensures your financial as well as overall well-being.
What is Health Insurance? Meaning & Benefits
Table of Content
This article is a complete guide to what is health insurance, the types of insurance plans, and tips for choosing the right insurance plan.
Types of Health Insurance
Further to what is health insurance, you should also know the types of health insurance plans available for an informed decision. They are:
Individual Health Insurance
Individual health insurance plans cover the medical expenses of a single person. You can have an individual policy for every member of the family separately. It provides extensive coverage and can be customised to align with the specific needs and the individual’s medical condition.
The premium for these plans depends on the gender, age, medical history, etc., of the policyholder. Also, the lifetime renewability feature of the plan facilitates coverage for an extended period without worrying about frequent renewals.
Family Floater Health Insurance
This plan improves the outlook on the meaning of health insurance and its importance. The family floater policies provide coverage for the entire family. You can plan your family's healthcare with a single plan. The insured sum gets distributed among all the family members. The premium is much lower compared to individual healthcare plans.
Older members are more prone to health issues that incur heavy treatment expenses that may use up the entire coverage. This health plan suits a household with younger individuals wherein the sum assured is available to all the members as they are less prone to health issues.
Senior Citizens Health Insurance
Issues that are of less concern in younger days may seem serious as you age. Treatment for age-related issues can be expensive and financially stressful without a MediClaim policy. This plan is for individuals over 60 years old. It covers various pre-existing conditions and provides more coverage for specific age-related health conditions. Treatment costs for injuries due to unforeseen accidents can drain retirement savings.
The injury coverage in a health insurance plan protects your savings. Senior citizens who understand what is health insurance and its benefits will certainly plan for their health needs with a senior citizen health insurance plan.
Critical Illness Insurance
If you understand the health insurance meaning and appreciate the various benefits, you also need to know critical illness insurance to derive the most out of the illness coverage. Critical illness insurance provides coverage for terminal illnesses like cancer, stroke, heart disease, kidney failure, etc.
The coverage is also available as an add-on@ to basic plans which proves more economical. This plan provides a lump sum amount when the policyholder is diagnosed with any critical illness listed in the plan. You can use the amount to pay for surgical expenses, medicines, hospitalisation bills, and any other related expenses.
Group Health Insurance
Group health insurance covers a group of people. Companies and organisations invest in group plans to provide health coverage for their employees or members. The employees can choose to cover their family members under the same plan.
This policy covers a range of medical needs and also extends maternity benefits and covers daycare treatments. The advantage of this plan is the instant coverage for pre-existing illnesses.
Top-up Health Insurance
You will be more open to selecting a healthcare plan when you understand the health insurance meaning and the benefits of top-up health insurance. Top-up health insurance provides coverage over and above an existing mediclaim policy or a group insurance plan.
You can utilise the additional coverage for hospitalization and other related expenses after the sum assured under the regular health insurance plan is exhausted.
Maternity Health Insurance
An insight into maternity health insurance provides a broader perspective on the meaning of health insurance. This medical policy covers to-be mothers and pregnant women. It covers delivery expenses for both normal and C-section delivery. The medical reimbursement under this plan includes pre and post-natal care expenses, newborn baby expenses, prescription medicines, hospitalisation, tests, etc.
Benefits of Health Insurance
Awareness about the health insurance policy benefits and the definition of health insurance will motivate you to invest in a health insurance plan. They are:
Helps Deal with Rising Medical Costs
A health insurance plan is as important as a life insurance policy as it deals with rising medical costs and enables treatment without any financial stress. You will acknowledge this fact if you are aware of the health insurance definition.
Critical Illness Cover
Critical illnesses like kidney failure, heart disease, stroke, cancer, etc., can be fatal without timely treatment. The critical illness cover manages the expenses, and you can focus on your treatment and recovery.
Easy Cashless Claims
Cashless claims allow you to focus on the treatment without having to indulge in arranging for finance. The hospital coordinates with the insurance provider, and the bills are settled directly. All you need to do is to submit the claim form and provide the required documents for the claim.
Added Protection
With add-on benefits like accidental disability or death benefits, critical illness coverage, etc., to the base plan, you get additional protection with extended coverage for the treatment of these conditions.
Tax Savings
The policyholders and their families can avail of tax deduction benefits up to Rs. 25000/- under Section 80D of the IT Act 19611. The benefit is up to Rs. 50000/- if the insured or the family members are above 60 years old.
Cashless Treatments
You can get treated at network hospitals mentioned in your health insurance plan without any initial payment. The insurance company will settle the bills directly with the hospital.
How Does Health Insurance Work?
It is essential to know how health insurance works besides understanding what is medical insurance.
The insurance company fixes the premium for the health care plan based on age, gender, type of plan, medical history, existing health condition, etc. The policy is activated with the payment of insurance premiums. To keep the plan active, you should ensure that you do not miss out on premium payments,
Thereafter, the insurer will take care of medical expenses such as hospitalisation, prescription medicines, consultation, nursing services, etc. You can choose to get reimbursement for medical expenses or cashless treatment at network hospitals. It is not adequate to know what is health insurance and its benefits to selecting a plan. It is vital to understand the limitations and the exclusions to select in the right plan.
Need for Health Insurance
You contemplated buying a term insurance plan after knowing what is term insurance. Similarly, when you understand what is health insurance and the need to have one, you will be convinced to buy a healthcare plan that suits your requirements. You can be fit like a fiddle but still encounter unexpected health issues at some point in time. You will be in a financial dilemma if you have not planned for the unexpected expenditure.
A health insurance plan provides financial protection during such circumstances. It takes care of the treatment costs such as hospitalisation, surgeries, etc. You can afford treatment without worrying about finances for better outcomes. You need health insurance to overcome the financial hurdles and get timely treatment.
Why Should I Buy a Health Insurance Policy?
Health insurance alongside life insurance is necessary for dual protection. Life insurance provides financial security for your family when you are gone from your life, whereas a health insurance plan provides for treatment costs to keep you alive. The other reasons to select a healthcare plan are:
Financial Security
It serves as a financial safety net when you encounter a medical emergency. It manages the treatment costs and spares you from the financial burden.
Access to Good Healthcare
Treatment at reputed hospitals and access to better benefits can diminish your savings if you do not have health insurance. Health insurance takes care of the rising medical costs and enables access to good healthcare.
Cashless Treatment
Without upfront payments, a cashless treatment facility initiates treatment immediately. Elaborate admission procedures and paperwork can delay the treatment. With health insurance, the insurers coordinate directly with the hospital and expedite the process.
Tax Benefits
You can reduce tax liability with a health insurance plan. A deduction of up to Rs. 25000/- (Rs. 50000/- if the insurer of any family member is above 60 years) is allowed under Section 80D1.
How to Choose a Health Insurance Plan?
The tips for choosing the best health insurance plan are as important as knowing what is medical insurance. They are:
Check the Sum Insured
Assessing your healthcare needs is essential before you decide on the sum insured. You should consider your pre-existing illness, your family medical history, the rising cost, etc. In the absence of the right sum assured, the purpose of health insurance will not be served. The sum assured should also be able to beat inflation to be able to meet the expenses in the future.
Scout the Network Hospitals
You should look for network hospitals included in the plan. Choose a plan with network hospitals close to your residence to be able to reach out immediately in case of emergencies and also have the convenience of cashless treatment.
Check the Fine Print
Read the fine print in the plan for clarity about limitations and exclusions such as waiting periods, deductibles, sub-limits, etc. A plan with lower or no co-payments is recommended to reduce your contribution.
Look for Additional Benefits
Health insurance plans with additional benefits can further reduce your stress. Look for plans with no claim bonus, the redemption of sum assured up to a maximum limit, and the provision for annual health check-ups that add value to the plan.
Examine the Exclusions and Other Clauses
Read the terms and conditions of the plan to understand the exclusions and other clauses. These may come as a surprise when you file a claim and give rise to a financial crisis and delay in treatment which may cost your health.
High Claim Settlement Ratio
The claim settlement ratio represents the total number of claims settled out of claims received in a financial year. An insurer with a high claim settlement ratio is more reliable. Your claim settlement will be seamless, provided you provide accurate information and documents.
Difference Between a Mediclaim Plan and a Critical Illness Insurance Plan?
The table below explains the difference between a MediClaim plan and a critical illness insurance plan.
Aspects |
Mediclaim Plan |
Critical Illness Insurance |
Type of Payout |
Reimburses hospitalisation expenses, consultation and surgery expenses, nursing and ambulance services, prescription medicines, pre and post-hospitalisation expenses, etc., or settles the bills through the cashless facility. |
Provides a lump sum for the treatment when you are diagnosed with a critical illness. |
What’s Covered |
Covers hospitalisation expenses for any medical condition on submission of the bills and other required documents. |
Only the critical illnesses mentioned in the policy are covered. You can use the lump sum payout for treatment expenses. It does not essentially cover the actual treatment expenses. It can only supplement the financial burden. |
What’s Better |
Mediclaim insurance is preferable for extensive coverage of illnesses and to provide for the exact treatment cost. |
Critical illness insurance is better if you need coverage to manage the exorbitant treatment cost of specific illnesses |
Take Away |
Medical emergencies are unexpected and do not spare even the fittest individual. Being prepared for the treatment of anticipated health issues can rid you of financial stress when you have to deal with one. |
If your lifestyle habits or family history indicate higher chances of developing critical illnesses, it is better to either have critical illness insurance as an add-on or as a separate plan. If it does not cover the actual treatment cost, it can supplement the financial burden. |
FAQs on What Is Health Insurance
Q. What is Health Insurance?
The insurance provider takes care of the expenses incurred for the illnesses or injuries treatment due to accidents in return for the premiums paid by the policyholder.
Q. What are the various types of health insurance?
The various types of health insurance are individual health insurance, family floater health insurance, group health insurance, critical illness insurance, senior citizen health insurance, top-up health insurance, and maternity health insurance.
Q. How to apply for Health Insurance?
To apply for health insurance, visit the insurance company’s website and choose the plan. Fill out the application form with the required details. Upload the KYC documents. Pay the premium.
Q. Health insurance features and benefits
Health insurance features and benefits are coverage of hospitalisation expenses such as room rent, surgical and consultation expenses, nursing and ambulance services, and pre and post-hospitalisation expenses. The other features are coverage for daycare procedures, a cashless hospitalisation facility, and coverage for pre-existing health conditions after a waiting period.
Q. What things are covered under the hospitalisation benefit in health insurance?
The hospitalisation coverage in health insurance reimburses doctor’s fees, room rent, ambulance and nursing services, surgery costs, prescription medicines, etc.
Q. Can we add family members to existing health insurance?
Yes. You can add family members to the existing health insurance plan by providing the family member’s details and required documents to the insurance provider.
Q. What is the best age for buying health insurance in India?
It is recommended to buy health insurance in India when you are between 20 and 30 years old. Since the premiums are fixed based on age, you can avail of higher coverage for lower premiums at a young age.
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- Different Types of Health Insurance Policies in India | HDFC Life
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
Written By:
Vishal Subharwal
Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.
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Here's all you should know about Health Insurance.
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Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.
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