Insurance Terms Explained

Deductible: The amount that the insurance company is not going

to cover. Usually applies to only TOP UP plans.

Base Plan: The “main” plan for either individuals or families.

Coverage starts from 0 (zero) till the covered amount eg. 3 Lakhs.
Base plans are usually the most expensive. The probability of you
making a claim for the first 3-5 L is higher than you making a claim
in the 5-10L range (top up range), therefore the base plan premium
is higher. What people usually do is get a BASE cover of 3 L and then
get a TOP UP plan (of say 5 L) with a 3 L deductible which is much
cheaper and are therefore covered up to 8 L. (8 L = 3 base + 5 Top
up). Buying just a BASE plan of 8 L is more expensive.

Top Up Plan: Is a separate coverage plan. Sits on top of the base

plan (like a rider plan). Usually has a deductible. If you get HDFC
Ergo’s top up plan of 10 L, with a deductible of 5 L, it simply means
the insurance company WILL NOT cover the first 5 Lakhs of your
treatment, but will cover anything that is in excess of 5L upto 15 L
(since 5 L base + 10 Top up = 15 L).

Family Floater Plan: A floater plan is a like a corpus fund. Every

insured member of the family digs into that 1 fund. There is NO
individual insurance. So if you have a 3 L family floater BASE plan,
and your wife (who’s also insured) gets sick and clears the 3 L, pray
and hope you don’t get sick, cause she’s used up all the cover. Least
expensive type of family insurance plan.

Family Individual Cover Plan: Each insured member is covered

for a fixed amount. So if you choose a cover of 5L, then each
member of the family is covered for 5L each. Most expensive type of
family plan.

Restore/Regain Benefit: Simply means the insurance company

will re-add (top up) the base amount if you’ve used it all up. Both
individual & family plans have this.
2 caveats:
1). The amount will be topped up only once, usually after the
first claim. ONLY applies to base cover. So, if you have a base
cover of 5 L and you blow up 3 L. The insurer will top up 5 L
again. Then you’ll have 5 L + 2 L (the leftover).
2). You cannot use the topped-up amount for the same disease
or condition.
No claim bonus / super bonus : This “bonus” is more like a top
up. So every year that you don’t claim, most insurers will add of 10%
of your base cover to your base cover. So if you’re covered for 3 L
(base). If you don’t make a claim for 1 year, your bonus for year 2 is
10% of 3 L = 30,000 and coverage for year 2 is 3,30,000. If year 2 is
claim free as well, then year 3 cover is 3,60,000.

Room Sub-limits / Other sub-limits : Don’t get any plan that

has any type of sub-limit. Room sub-limit applies not just to room
rent, but limits insurers liability for doctors fee and care charges. For
example, doctors fee if you’re in a general ward is cheaper than a
private ward. So room-sub limit, will limit the coverage for doc’s fee
as well. Cheaper premiums, but too many people have got burned.

Co-pay: Basically means you shell out 10% or 20% of the total bill,
and insurance pays the remaining 80 or 90%. Cheaper premiums.
Not worth it in my opinion.

Cashless cover: Insurer directly pays the hospital. Avoids the

hassle of you sending your bills to insurer for reimbursement. Call
the insurer before / during / after being admitted, and if you’re
admitted at one of their network hospitals they will call the hospital
to get details and within a few mins / hours let the hospital know if
they’re insuring you. Insurance company deals directly with the
hospital.

* Medical inflation rate in India is 10%. So in 10 years, cost of treatment &

expenses will double. Keep that in mind when you chose your coverage amount.

* Premiums increase with age. If you don’t get a top up plan now, 6-7 years
down the line the costs will be 3-4 times higher. Most top ups cost anywhere
between 2,000-5,000. After 60 (age) insurance becomes expensive.

* Keep in mind that you’ll be paying insurance premiums even when you retire.
Getting a sustainable premium is important.