What is an Indemnity Health Insurance Plan and Why You Need to Know about It?

Sep 03, 2018 | 2 months ago | Read Time: 3 minutes | By iKnowledge Team

Rupesh had never invested in health insurance before. When he asked a few colleagues about which policies to invest in, he received contrasting points. There was so much information available that he didn’t know which health insurance policy would be the best for him.

Many people invest in health insurance just to save tax under Section 80D of the Income Tax Act, 1961. They don’t pay attention to different terms and types of health insurance plans. This leads to underinsurance and lack of renewal because of low benefits.

There are two types of health insurance policies:

  1. Indemnity Plans
  2. Defined Benefit plans

Let us examine the most popular health insurance policy, indemnity plans.

Indemnity health insurance is a traditional health insurance policy. These policies protect you against unexpected and sudden medical expenses. Such policies reimburse the hospitalization charges, up to an assured sum. This assured sum is pre-decided between the policyholder and the insurance company. Indemnity plans also include health insurance plans for family.

For example, Aegon Life has an iTerm Plus plan which combines a term insurance with health insurance, known as Life and Health and Life and Health Plus. Under this plan, you get the benefits of term insurance, and coverage from critical illnesses. This plan is flexible and offers different variants to ensure a comprehensive coverage for the policyholder. It is a great health and life insurance plan for family.

Basic health insurance and family floaters come under indemnity insurance plans. These plans list down the different types of charges that will be reimbursed on making a claim. Some of the charges are:

  1. Doctor’s fees
  2. Medical equipment fees
  3. Surgical fees
  4. Operation theatre charges
  5. Consumables used during surgery
  6. Hospital room rent
  7. Medicine charges

Most plans do not include pre- and post-hospitalization charges. Pre- hospitalization charges include charges to diagnose the problem, doctor’s consultation fees, medical tests, such as blood tests, scans etc. Hospitalization charges include room rent, nursing charges, medicines and other consumables during hospital stay. Post hospitalization charges include doctor’s consultation fees and medicines.

Indemnity Health Insurance Plan

For example, a policyholder having a coverage of Rs. 5 lacs, undergoes a cataract surgery for Rs. 80,000. Depending on the deductibles in the policy, he will get either the entire surgery cost or a percentage of the cost. The balance amount is available for a future claim during the policy duration.

Indemnity plans require supporting or proof of expenses. These bills need to be submitted to the insurance company at the time of making the claim. If the policyholder opts for cashless treatment, the hospital submits relevant supporting to the Insurance company.

Clauses of an Indemnity policy:

Most indemnity policies have either one of these clauses, with regards to payment of compensation:

  1. Deductibles: Under this clause, the insurance company deducts a sum from the list of charges to be reimbursed and settles the rest of the claim. For example, on a cataract surgery charge of Rs. 80,000, 20% of the doctor’s fees may be disallowed. In this case, 20% of the doctor’s fees is to be borne by the policyholder. Not all indemnity policies will have a deductibles clause. The percentage of deductible and the items which incur this clause will change from company to company.
  2. Co-payment: Under the co-payment clause, a certain percentage of the claim amount will be paid out of pocket by the policyholder, and the rest will be paid by the insurance company. Senior citizen insurance policies usually attract the co-payment clause.

Insurance Policy in India

Benefits of Indemnity health insurance plan

An indemnity health insurance plan lets you take treatment in any hospital. Most insurance companies offering cashless treatment have a network of hospitals which make it convenient to choose from. Even without cashless treatment, these insurance policies do not restrict the doctor or clinic where the policyholder can get treated.

Indemnity health insurance policies offer tax advantages under Section 80D. They are also flexible health insurance plans for family.

Indemnity policies are a must have in these times of increasing medical costs. Getting compensated for hospitalization expenses is a major relief in times of emergencies. And, investing in health insurance is necessary to protect life savings. So, have you got one?

Advt. no.: II/Aug 2018/4333


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