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.
