Health insurance matters: Complete guide to when, why, and how to buy one

As often as not, people say they are saving money for their children’s education, a house, or retirement. Nobody says they are saving to hand over everything to a doctor someday when they fall ill. But to their surprise, they end up doing just that. Many people have a hard time rationalising the need for health insurance when they are healthy. Those who procure it swear by its importance. You get health insurance for an eventuality that no human can escape — like getting an umbrella for a rainy day in the future.

Health insurance is an agreement which binds the insurer to pay for some/all of the medical and surgical expenses of the insured individual. Today, in light of the growing incidence of health issues in people across age groups, health insurance is viewed as a foundational layer of financial planning. According to a Gulf-specific study by MetLife, the average age of claimants with a disability is 38 years, whereas that of critical illness is 47 years — statistics that underscore the need for sufficient insurance coverage for all family members.

Policies and types

In Dubai and Abu Dhabi, it is mandatory for every resident to be insured. Many tend to be covered under a group medical policy offered by their employer. As per the latter’s generosity, the coverage could be comprehensive and extend as much as a million dirhams or beyond, especially with seniority. Some people, typically those who aren’t covered under a group policy, procure individual policies by paying premiums from their own pockets.

However, between group/corporate and individual insurance, there is a good case in favour of the latter. A group policy is contingent on the job; it covers as long as you have the job. For example, if you are diagnosed with a serious illness that inhibits you from performing your job and has a long road to recovery, your employment could be in jeopardy. By then, your chances of getting a new individual policy are slim to none because of the pre-existing condition. So, it is advisable to supplement a group policy with individual insurance with no correlation to employment status for enhanced protection.

Regardless of whether the insurance is group or individual, a person is insured against illnesses as stipulated in the policy. It could cover routine consultation, surgeries, and even post-hospitalisation care, depending on how it is structured. The cost of premiums is subject to several criteria, including but not limited to coverage amount, limits and sub-limits, exclusions, add-ons — dental, maternity, vision, etc. — and, most importantly, the network of recognised hospitals. The scope of the hospital network could be domestic, regional, or global. Policies with global coverage enable policyholders to get higher treatment in countries like the US. Typically, the premiums of such policies tend to be at least 40 per cent higher, on average. The benefits are directly proportional to the cost of premiums.

Policies are changing with digitalisation

Thanks to growing clarity and empirical evidence, insurers are increasingly including preventive healthcare in their offerings. As a result, insured persons have the option to get health checkups and screenings free of cost or for nominal charges. The rationale is that, for insurers, the costs incurred by facilitating preventive healthcare are comparatively lesser than probable payouts at a later date when illnesses would have aggravated. That development has worked in favour of both the insured and insurers.

Likewise, as part of risk mitigation, some insurers are considering the inclusion of experimental and alternative treatments. Genome sequencing, identification of inherited disorders and mutations that drive cancer progression; 3D bioprinting, printing of complete organs for transplantation; and mental wellness are among the disciplines making inroads into the health insurance domain.

Some insurers have already made considerable headway in leveraging tech to customise the policies for customers. Those willing to share their data related to health, exercise, etc. are given incentives in their plans. The shared data serves as a bedrock of insurance underwriting. Such data, also sourced from IoT-based devices and wearables such as smartwatches and bands, enable insurers to assume higher risk and expand coverage significantly for lesser premiums.

Points to remember

In the last decade, the renewability of policies has become a major point of contention between the insured and insurers. Some insurers guarantee the renewability of the policy year after year. Others retain the right to reject, which is exercised under a few circumstances, including in the event of a claim in the last term. The absence of the renewability provision becomes a cause for concern if the insured is aged or diagnosed with a serious/critical illness. The diagnosis limits their ability to procure new insurance. Some insurers, especially global ones, guarantee renewability for increased premiums. The premiums can increase by around 7 per cent annually, subject to inflation and age.

Those wary of cancellable policies tend to supplement health insurance with critical illness (CI) products. CI insurance guarantees the insured a lumpsum payout in the event of diagnosis of a critical illness stipulated in the policy. The hefty payout can offset against the loss of income due to the illness, giving the patient financial relief and a smooth road to recovery. It can also cover post-hospitalisation care, treatment abroad, or alternative medicine — which are often excluded in health insurance policies. Therefore, CI insurance forms an added protective layer in financial planning.

Another important point to remember is co-insurance, the co-payment that the insured has to make for treatment. If you have, say, 25 per cent co-insurance, you are responsible for 25 per cent of the medical bill, and the insurer is responsible for the remaining 75 per cent. A lower co-payment means higher premiums. Likewise, you must also concern yourself with deductibles before buying a premium. Deductibles are the amount that the insured has to pay before becoming eligible for claims. Typically, policies can have deductibles anywhere from Dh10, to deter you from taking undue advantage by making claims for the smallest of ailments. A nil-deductibles policy entails high premiums.

Insurance underwriters have become more scrupulous in recent years due to an increase in claims. Following the pandemic outbreak, both inclusions and exclusions have changed considerably. So, it is advisable to be honest in disclosures before applying for insurance. Even the slightest concealment of an illness or a medication can become grounds for rejection of claims later on. Such complexities can be navigated easily by engaging an insurance intermediary or a financial adviser.

Ashok Sardana is the founder and managing director of The Continental Group, an insurance intermediary and financial services solutions provider in the GCC

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