A Helpful Glossary for Confusing Insurance Jargon
With the growing importance of health insurance, many people are opting for it. But, selecting the right health insurance can be a daunting task and left people in the sea of confusing jargon. There is a knowledge gap amongst the common mass; as a result, most of them often fail to choose a plan that meets their health and financial needs. So, in order to determine the right coverage and avoid overpaying on premiums, you should understand the basic terminology of health insurance. Here is a helpful glossary of common insurance terms with their explanation.
It is the maximum payout that an insurance provider is liable to pay you as in insured in case of any medical emergency. It follows the principle of indemnity that states that the insurer is liable to compensate for your exact loss to combat your financial distress. For instance, if you have the health insurance policy of with the sum insured of Rs.2 lakh but your medical treatment costs you Rs.1 lakh so you are entitled to get the claim of Rs.1 lakh subjected to the terms and conditions of your health insurance plans. Rest you must pay from your own pocket.
It is the amount that you must pay to the insurance provider periodically for covering your health risk. It is regarded as the cost of health insurance plan that is subjected to various variables like age, number of insured persons, type of employment, income, and medical conditions. It can be monthly, quarterly, annually, and single premium. Premium paid against health insurance plans for self; dependent parents, spouse, and children are exempted from tax. It is a mandatory payment to avail of the benefits of the policy. Failure of timely payment may result in a termination of the policy.
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Under a cashless claim, the insurance provider settles either the part of the claim or the entire claim directly to the network hospital, where you get admitted for the treatment. With this facility, you do not need to arrange a lump sum amount of cash at the time of a medical emergency. Intimation to the insurance company is required within the stipulated time to avoid delay in claim settlement. No amount is transferred to your account, but all the expenses will be paid by the health insurance provider on your behalf.
Claim Settlement Ratio (CSR)
It is the yardstick to major the ability of a health insurance company to settle the claim. A higher claim ratio assures the higher possibility of hassle-free claim settlement. Otherwise, your purpose of investing in health insurance plans will be defeated if your claims being denied or delayed by the insurer. CSR refers to the total number of claims settled by the insurance company. For instance, if an insurer has an 80% CSR it means that the company is able to settle 80 out of 100 claims. An insurance company with higher CSR is good to go and trustworthy.
It is the amount that you have to pay to your insurance provider before it begins to pay you. The percentage of a deductible is generally low. You will get the claim from the insurer only once you paid your deductible. The amount of deductible should be listed in the terms and conditions of your policy. You usually have the choice of how much the amount of deductible you want. The higher the deductible, lower the cost of health insurance. But sometimes the insurance company sets a minimum deductible that you cannot decrease. So, ideally you should choose a company that give you an option of low deductible.
In simple words, it is the percentage of the claim amount that you must bear from your pocket for the treatment. For instance, you bought a health insurance policy and agreed for a co-payment percentage. You have the approved claim of Rs.1 lakh. In this case, you have to bear 10% of 1 lakh i.e. Rs.10000 as a copayment of your own, and the rest 90% will be paid by your insurance company.
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No Claim Bonus
No Claim Bonus (NCB) is one of the most confusing insurance jargons for most of you. It is the bonus amount that you get from the insurer under your health insurance policy for not claiming during your policy tenure. It gets accumulated to the sum insured for every claim-free year. It makes you strong to face any medical emergency in the future and an incentive for being healthy. For instance, read the example: You have health insurance with the sum insured of Rs.4 lakh. You didn’t claim for the first year. In that case, your insurer offers you 5% of cumulative NCB with a maximum of 50%. So, the total sum insured after every claim-free year is:
For 1st Claim, Free Year Sum Insured =Rs.4, 20,000
For 2nd Claim, Free Year Sum Insured= Rs.4, 40,000
It is the right accorded with you as a policyholder to switch to another health insurance provider in case if you are not satisfied with the current insurance provider services. For portability, you must inform your current insurer within 45 days before the expiry of your existing policy. It is currently applicable only to health insurance policies in India. You do not lose the benefits you have accumulated in your existing policy.
Over to You!
Insurance is not just buying a policy, but it is trusting on the insurance provider for assistance during medical exigency. Therefore, these are some basics yet important insurance terminology that is used by insurance companies in day-to-day dealings. The better you understand these terms, the better you will be prepared to get the most value from your health insurance without stress.