Tax Implications, Sub Limits, Bonuses...Health Insurance Jargon You Should Know

Posted by amrina alshaikh on November 7th, 2021

As a person about to buy a family health insurance plan for the first time, you are left confused by several jargon you come across during your online research of different policies. It is important to know what each of these terms means so that you are not caught unawares at a time when you file the policy claim.

Some important health insurance terms and jargon you should be aware of include:

Critical illness insurance: This is an insurance policy designed to protect the insured against the high costs of treating a range of critical illnesses like cancer and renal failure. The critical illness insurance plan pays the coverage amount in a lump sum to the insured upon submitting proof of diagnosis of the illness. The lump sum amount is paid without further ado and is helpful in starting immediate treatment and further testing and surgery.

Daily hospital cash: The best individual and family health insurance plans in India offer a benefit named as ‘daily hospital cash’ which pays a daily allowance for family members making hospital visits. The cash allowance pays for commute to and from the hospital, incidental food costs, etc.

Deductible: This is the amount of money you must pay on admission and treatment before the insurance provider pays its share of the coverage amount.

Room rent capping: This is an upper limit imposed on the room rent charges that the insurance provider will settle against your claim. The policy document clearly explains which kind of room or private suite you are entitled to get coverage for. Any extra charges above the cap must be paid from your pocket.

Tax implications/tax benefits: Health insurance in India has tax implications, i.e. you get a tax benefit under Sec 80D against the premiums paid yearly. The benefit is up to Rs 25,000 for premiums paid on self, dependent children and spouse’s policy, and Rs 75,000 for premium paid on senior citizen policies.

Cashless claim: This is possible only for cashless mediclaim policies. This term implies that your claim is cashless from your end, i.e. you do not pay any money to the hospital despite taking admission and treatment there. However, for the cashless claim to work, you must get the admission in a network or partner hospital only. You can find the list of network hospitals in your city when you buy the health insurance policy. You must submit the policy paperwork to the hospital administration at the time of admission so that they can process the claim and get paid directly from the insurance provider.

Claim settlement ratio: This is the ratio of claims to settlement recorded for the insurance provider. It should be a high number, ideally as close to 100 as possible. The higher the claims settlement ratio, the more dependable the insurance provider. A high claims settlement ratio tells you that the insurer is honest and professional about settling all filed claims.

Co-pay or co-payment: It is an amount of money that you must pay from your own reserves when settling the bill for hospitalisation and treatment. It is often a percentage of the total sum assured of the policy. The remaining money for the claim is paid by the insurance provider once you settle the co-payment.

No Claim Bonus: This one is a little tricky for most people to understand. In simple words, it is a bonus that the insurance provider pays you for every year that you do not file a claim against your health insurance policy. It is accumulated year upon year. The bonus is a strong incentive for many to maintain good health and ensure that no claims are filed against the plan in a year for as long as possible, since the accumulated bonus adds a substantial sum to the plan coverage.

Plan porting: Just like you can port your existing mobile number from your current provider to another one providing better network and services, you can also port your existing health plan to a better insurance provider. Plan porting is allowed and legally mandated to be admissible between insurance providers, albeit with the rider that all formalities for the porting are satisfactorily carried out.