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Hope you are all well and doing good with your finances and financial planning.
Health Insurance, an essential element of one’s financial planning, help them to reimburse their hospital bills up to their policy’s sum assured. Do you have a health insurance cover? Or you are planning to get one?
Well, in both cases, there are some points taken in regard to health insurance policies, that are must be known to people. Do you know that some of the health insurance policies, only pay a part of your hospital bill, even though your bills are well within the overall sum assured?
Ah! No need to confuse, come let us know the point details about it. A Health Insurance Policy helps you cover your hospital expenses, some of the policies have clauses that limit the amount you are eligible to get back. This includes room rent sub-limits and disease-wise capping. The one which is a trend nowadays in health insurance policies is Co-Pay Clause.
What Is A Co-Pay Clause?
The co-Pay Clause, in simple words, is a clause or term in health insurance policies, where the policyholder foot a part of their hospital bills, while another part of the amount is paid by the company.
How Does Co-Pay Ratio Work?
Generally, the co-pay ratios range from 5-30%. Then if in case your Co-Pay ratio is 20 percent and your claim amount is Rs 1 lakh, you will have to pay Rs 20,000 out of your pocket, before the insurance company chips in with the remaining amount.
Also, note that the amount that the insurer owes you will be 20% of the admissible claim. For instance, suppose, your hospitalization bill amounted to Rs 1 lakh. This hospitalization bill features a diagnostic test, costing Rs 10,000, which was not related to the treatment you underwent. Now, the insurance company will treat this expense as an exclusion – that is, the amount it will not pay. So, the actual claim paid out to you will be Rs 63,000 (90 percent of the admissible claim of Rs 90,000). You will have to pay Rs 37,000 from your own funds.
Is It Beneficial To Policyholders in Any Way?
Well, it does help the investors, in minimizing their premium amount. It allows insurance companies to offer cheaper policies because it limits the amount, they need to pay in case there is a claim. It is much helpful for those senior citizens who are suffering from chronic ailments such as diabetes or hypertension. This co-pay clause lets them buy health cover, even if it’s a sub-optimal level.
Do All Policies Come with Co-Pay Ratios?
No, not all policies but Senior citizen-specific policies, come with a co-pay clause in it. This is so because the risk that the insurer is taking is much higher in these Senior citizen-specific policies. They also prescribe shorter waiting periods for pre-existing diseases, a plus for policyholders. For example, Star Health and Allied Insurance’s Senior Citizen Red Carpet health insurance policy covers pre-existing ailments from the second year, while other regular policies specify a waiting period of up to four years.
Should I Buy A Policy with Co-Pay Ratios?
Well, ideally you should not go for health insurance policies that have a co-pay clause. This is because opting for those policies can get you a low premium, but in that case, you would lose the actual meaning of getting a health insurance cover. This is because opting co-pay clause means huge out-of-pocket outgo for you at the time of claim settlement. Simply you must bear the burden of a huge chunk of the claim on your own.
If you are young, good earning, and a healthy individual you might not look for policies that come with a co-pay clause. In fact, at this stage, you can pay a higher premium and buy a restriction-free policy than face heartburn at the time of claim settlement.
Well, in some cases, opting for policies that come with a co-pay option can be beneficial. Like f you are looking to buy a policy for yourself or your parents aged over 65 years, you will have limited options to choose from. Given the higher risk of hospitalization and greater frequency of claims at that age, such policies are likely to come with a co-pay ratio. In such cases, co-pay is the only option you can go for.
For any kind of query regarding financial planning you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).