Health Insurance Policy terms

Understanding the Terms on Your Health Insurance Policy

20th July 2020 8min read 513 views
Buying a

health insurance policy

is necessary, but it isn’t always easy. Almost every policy you browse through will have a number of terms that require an insurance-English dictionary for you to understand. If you’re struggling to figure out what exactly the different terms on a health insurance policy mean, you’re in luck. Here’s our guide to deciphering what’s written on your policy documents:

1. Assignee or Nominee

Your assignee or nominee is the person who will receive the benefit or payout from the policy. Generally, you will receive the payout from a health insurance policy. However, if something were to happen to you, you can name a loved one as your nominee.

2. Claim

A claim is what you file if you’d like your insurance provider to pay for certain covered health procedures or treatments that you have undergone. Before you file or lodge such a claim, you will need to make sure that you fulfil all the policy requirements.

3. Sum Insured

This is possibly the most important term you need to look for when you purchase a policy. The sum insured is the maximum amount your insurance provider is required to pay for your medical treatments in a single policy year. Let’s say your sum insured is INR 5 lakhs. If you undergo treatment worth INR 6 lakhs, your insurance provider will only provide up to INR 5 lakhs.

4. Co-pay Clause

Almost every health insurance policy has something known as a co-payment. Some providers will offer you the opportunity to opt for this clause or not. If you do opt for the co-pay clause, you will be required to pay a certain percentage of each claim. A lot of people choose the co-pay clause as it can bring down the overall premium for the health insurance policy.

5. Deductible

This is a bit similar to the co-pay, but it is mandatory. A deductible is the amount of loss that you choose to bear. This could be a certain amount or a percentage of every claim. For example, you could choose to pay a mandatory deductible of INR 1,000 on each claim or a deductible of 10% on each claim. A higher deductible is likely to bring your premium down a bit.

6. Cumulative Bonus

This is quite similar to a No Claim Bonus (NCB). This is a reward your insurance provider gives you for not making a claim for a whole policy year. If you make it through a policy year without a single claim, your total sum insured will be increased by 5%. It’s called a cumulative bonus because if you make it through several consecutive claim-free years, the bonus or reward keeps increasing. So, for two consecutive claim-free years, you will receive a 10% increase in your sum insured. Generally, the bonus is capped at 50%.

7. Waiting Period

Every health insurance policy has a waiting period. During the waiting period, you generally cannot make any claims. Certain providers will allow claims that arise due to treatment required after an accident during the waiting period. Most policies having a waiting period of a couple of weeks or a month for all claims. They will also have a separate waiting period for claims that arise due to pre-existing conditions you may have when you purchase the policy. The waiting period for these kinds of claims can be a few years. Some policies also stipulate a waiting period for childbirth claims as well.

8. Third-Party Administrator (TPA)

A third-party administrator is a separate company that will help with the processing of claims. When you visit a hospital for treatment, you will have to visit something known as the TPA desk to let them know that you’d like to make a claim for your treatment. They will then help you take the process forward.

Now that you have a better understanding of what all those terms on your health insurance policy mean, you can make an informed decision about the kind of policy that works best for you.

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