How does Health Insurance Work?

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What is insurance? Why is insurance necessary? What are the different types of insurance available? These are some of the questions one encounters whenever there is any talk of insurance.

Insurance is a risk mitigation tool: Life is full of risks. In spite of all the risks one has to live. Risks cannot be avoided, but they surely can be mitigated. Insurance is one such risk mitigation tool. There are various types of insurance available in the financial market. Life Insurance, Health Insurance, Medical claim Insurance etc are some of the popular insurance schemes available. We shall concentrate on Health Insurance for the present.

Health insurance is a must: Health related problems are those which one cannot avoid. One has to face them and strive to get over it. All such efforts cost money and one may or may not be able to afford the same depending upon the severity of the problem. Moreover medical emergencies have an uncanny habit of coming in unannounced. Considering the cost of medical treatment today, it is best if one takes out a health insurance policy.

Basics of a Health Insurance Policy: Let us now understand how a health insurance policy works. Nothing comes free in today’s world. Taking care of medical emergencies involves cost and there are health insurance companies willing to take care of this liability on behalf of its client. Health insurance involves a payment of a certain sum of money known as the premium to the health insurance firm. The quantum of premium depends upon various factors such as the age of the insured, the amount of insurance, the nature of illnesses covered, and so on and so forth. Once the sum assured is ascertained and the payment of premium effected, the policy comes into force subject to certain terms and conditions listed out in the policy document. Usually the period of health insurance is one year subject to periodical review and renewal on an annual basis thereafter.

How does a health insurance policy work? A medical emergency can happen at any time. Now, when one is armed with a Health Insurance policy, one need not worry about the costs involved in the treatment. One can approach a hospital which is approved by the insurance company for treatment. On furnishing the details of the policy, the hospital authorities confirm with the insurance company about the veracity of the policy and the amount of insurance available. On receipt of confirmation the treatment of the patient commences and the liability now shifts on to the shoulders of the insurance company. On successful completion of the treatment, the bill is raised in the name of the insurance company who pays the same according to the terms and conditions set out in the policy document.

Different types of policies explained: The above mentioned scenario is an example of a cashless health insurance policy claim. There are other methods of claims available such as the reimbursement claim wherein the expenses are initially incurred by the patient and later on claimed from the insurance company. These types of policies are now not much prevalent as people prefer the cashless insurance policy and rightly so. One thing people should take care of is the prompt renewal of the health insurance policies as lapsed policies are not honored by the insurance company. While preferring a claim for insurance one also has to ensure that the disease and its treatment is covered as there are a number of pre-existing ailments which are not covered by the company.

There is no loser in an insurance policy: As detailed above, there are three parties in a health insurance claim. The insured, the insurance company and the hospital offering the treatment complete the chain. The beauty of the insurance business is that it is a win-win situation for all the parties involved. Prudence demands that every person gets himself insured for all health related ailments.

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