List of Common Mistakes while Buying Health Insurance
Now, note that after mentioning the actual mistake, I have suggested a solution. Plus, an explanation as to how the insurance industry works and some of its common practices and customs have also been elaborated on.
1. Premium and Cost Over Coverage
A common mistake that almost all of us fall prey to is considering the total price of the insurance, rather than the total health insurance coverage. Not to worry, it's simply the human nature and psychology at its worse. What happens is that we go to shop for a health insurance, and we end up with a broker who offers us a policy at great premium and a nice payment schedule. It completely fits into our income structure and all. The mistake here is that we are so attracted by the lucrative premium scheme, that we fail to consider the flaws in the coverage of the policy, and we end up making a significantly bad choice.
- The Truth: The rule of thumb is that the better the coverage, the higher is the premium. Now, when you take up a policy which has a low premium, it is cheap, in almost all aspects, by the virtue of price as well as coverage. Ultimately, the compensation that you are going to get is well, negligible.
- The Solution: In order to avoid such a mistake, one can initiate a simple solution. When you go insurance shopping, you can simply take a look at the 'terms and conditions' of the policy. These will give you 3 important tell-tale facts, namely, the body parts which are covered by the policy, the ailments, diseases, the incidences and situations in the light of which the medical procedure was initiated, and lastly, the medical conditions, ailments, and diseases which are excluded all together from the coverage. In case of a 'cheap' policy, you will find that the last list is pretty long.
The second error that we tend to make is not comparing the coverage, premium, deductible, and the compensation against the claim.
- The coverage is the total amount and the extent of incidence upon which the compensation is payable as per the policy.
- Secondly, the premium is the payment (monthly, quarterly, half-yearly, or yearly) which is made to keep the policy going and the coverage active.
- The deductible is a small portion of a medical bill which one needs to pay before the remaining amount is compensated for (this figure is usually stated in a percentage in the terms and conditions of the policy).
- The claim is the total amount of medical bill minus the deductible.
- The compensation on the other hand is the total sanctioned amount of the claim which is paid to you by the company.
- The Truth: The coverage and premium or the deductible and the compensation are never going to be equal, yet they need to be reasonably proportionate.
- The Solution: When you take up an insurance policy, the premium and the deductible should not be outrageously disproportionate in comparison to the compensation and coverage. If you find anything irrational and exorbitant, put the policy quotation in trash. You will of course find the deductible percentages, covered and excluded items, claim protocols, and such other details in the documents of the policy.
The 'terms and conditions' and the 'coverage clause' explicitly state the things which are going to be covered by the policy and which are not going to be covered by the policy. Before making any decision, we need to go through these items about a hundred times and try to understand the core meaning of every clause. We do need to understand and accept the point-blank truth that there are several things which are not being covered by our insurance provider. For example, an insurance provider would cover a bone fracture's medical expense if it has been caused by a hit-and-run case, but for a sports related fracture, we are bound to get the reply, "You were well aware of the risks of playing football, hence we cannot compensate you for the claim". Well, this does happen. A lot.
- The Truth: The insurance company is no buddy of yours, so read the covered items and the ones which have not been covered as there is a very fine and thin line between the two.
- The Solution: Simple enough, take a look at the covered and non-covered items and then compare the same with your lifestyle. If you play football, then get a policy which covers sports injuries.
The last two ones are pretty foolish, but yes, we do tend to commit such blunders. We tend to look up our insurance policies in the product lists of a handful of providers. This usually tends to be harmful, as we often end up buying policies which are not meant for our propose. Simply put, these policies don't suit us.
- The Truth: As mother is the necessity of invention, there is bound to be a policy that does suit your purpose really well. All you need to do is buck up and hunt down the right one, companies make policies to sell them.
- The Solution: The solution is actually a two-word phrase - 'relentless research'- and you will get the one that you need.
Though simple, this mistake is committed even by actuaries and owners of insurance companies. You need to properly plan out your insurance according to your age. As you grow old with every passing day, your health insurance also needs to change every decade.
- The Truth: As you grow older, insurance companies tend to provide you with a quotation where the 'not covered' is unreasonably frequent. The insurer deems you to be a very risky customer to insure.
- The Solution: Plan out not just your insurance policies but also your Social Service and Medicare, as they will accompany your medical insurance. Fit them in an equation till you feel that your medical expenses have been properly taken care of.
Now, when it comes to health insurance, I would recommend you to be your own 'actuary'. For an insurance company, an actuary is a professional who churns out certain numbers, which are, the total coverage, total policy amount, deductible/s, your premium, your claim, compensation against claim, charges, and what not. Now, though you cannot control the premium or the compensation or even the charges, you can definitely decide, that what you want to cover with the policy and the total amount that you wish to pay against it. Conclusion is:
- Be your own actuary.
- Decide what you want to cover with the help of your insurance policy.
- Do not hunt for a policy within the brochure of a specific company. Instead, decide what you want to cover and then go hunt for a health insurance policy from the brochures of at least a thousand ones.
- Lastly, do not base your decision on the preachings and sermons of one insurance broker or agent of one specific company. Half of it is rubbish. He or she is working on commission and representing one single company. Make up your own mind.
To be fair, the common mistakes, listed here, are just results of poor awareness. They don't teach this stuff to everybody in high school. The 'we care about you' advertisements of companies is also not exactly, completely 'caring'. Fact is, avoiding blunders will not only save you a lot of money but also help you achieve mental peace. Remember, a health insurance policy is like a burger-the two burger buns at the top and bottom are your premiums and deductibles, fluffy pieces of bread. The coverage is the lettuce-a bit of fiber for your tummy. Lastly, the compensation is the nice crispy and juicy patty in the middle, slathered in pickle.