Every industry has its own set of jargons; so does the insurance sector. It does not matter whether you are a first-time insurance buyer or an existing customer, insurance terminologies can prove stressful to those who do not understand them. Understanding every word becomes even more important when it could be talking about your insurance cover, inclusions and exclusions, claims settlement method and more. You may even end up choosing the wrong coverage if you fail to comprehend the insurance language. Irrespective of the nature of the policy be it life insurance, health insurance, personal accident insurance or a group mediclaim policy—you may encounter these terms at some point or the other.
Common Insurance Glossary:
1. Sum Insured
It is the amount provided by the insurance company to the insured during unforeseen situations such as a medical emergency. Sum insured refers to the amount that the insured receives as part of the reimbursement when they bear the loss during an uncertain event.
The insured has to bear the additional cost if the amount exceeds the sum insured. The sum insured is the compensation given by the insurer in the event of hospitalisation, loss, damage or injury. The sum assured is based on the indemnity concept.
The sum insured is influenced by several factors such as:
- Age - If you are young, it is advisable to go for a larger sum insured as the premium amount will cost less.
- Health issues - If you have a medical condition that necessitates ongoing medical monitoring, surgical treatment or hospitalisation, you must opt for a higher premium insurance policy.
- Lifestyle - One must choose the amount of sum insured depending upon their lifestyle. This way, you can manage any unexpected occurrence while staying within your budget.
2. Claim Settlement Ratio
You have heard people advising others to check the claim settlement ratio of an insurance company before buying insurance for themselves or their loved ones. An insurer's claim settlement ratio is the number of claims settled divided by the number of claims filed. Always choose an insurance provider with a higher claim settlement ratio. What is the benefit of buying insurance if the beneficiary's policy claim is denied by the insurer? As such, you should check if your insurer has a decent claim settlement ratio or not. A health insurance claim settlement ratio of more than 80% is generally regarded as satisfactory. However, you should not choose your insurer solely based on this ratio.
3. Network Hospitals
When a person purchases health insurance, personal accident insurance or gets a group mediclaim policy, the insurance provider will provide him/her with a list of network hospitals. Before buying insurance, one must check the list of network hospitals on the website of the insurance provider. Insurance companies have tie-ups with these hospitals to provide the insured with the benefit of cashless hospitalisation. The insured does not have to worry about raising funds for bill settlement in this situation. Instead, the health insurer will pay the hospital bills directly.
4. Waiting Period
A waiting period is a length of time before a certain list of conditions are covered under your chosen health insurance policy. For any pre-existing disease, most health insurance providers have a waiting period of four years. This, however, differs from one insurance provider to another.
Types of Waiting Period:
- Initial Waiting Period: In health insurance, this period is also referred to as the cooling period. The insured has to wait for a certain amount of time from the date of issuance of the policy. One can avail of the benefits of the policy only after the end of this cooling period.
- Pre-Existing Disease Waiting Period: When you buy a health policy, the insurer asks you to furnish the details related to any pre-existing disease. They may also ask you to undergo a few medical tests to gain an idea about the same. A pre-existing disease, according to the IRDAI, is any condition, sickness, accident or disease that was diagnosed up to 48 months before purchasing your health insurance policy.
- Waiting Period for Specific Diseases: When it comes to claiming for treatment and hospitalisation associated with a list of specific conditions, a waiting period means that you will have to wait for the specified amount of time before making a claim. Usually, the insurance provider has a waiting period of two to four years for specific diseases.
- Maternity Benefit Waiting Period: For those expecting a baby soon, there is an option to incorporate a maternity benefit and newborn baby add-on. Apart from only planning for the baby, it is also wise to plan financially for the expenses that occur during and after childbirth. The waiting period for availing of a maternity benefit ranges between one year and four years.
Apart from the above, there is a waiting period for complimentary check-ups, accidental hospitalisation and bariatric surgery.
5. Health Check-Ups
A health insurance provider may require you to undergo a medical check-up before providing insurance coverage to you. This is not necessary, though, if you renew your insurance policy on time. If your current health plan expires and you want to get a new one, you may need to undergo another medical check-up.
The co-payment in a policy refers to the portion of the claim amount that the policyholder has to bear under a health policy. Some insurance plans include an obligatory co-payment clause while others provide policyholders with the option of making a voluntary co-payment that helps in lowering their policy premium amount.
7. No Claim Bonus
A no claim bonus is a monetary incentive provided by an insurance provider to the policyholder. It is a small gesture for the insurer to thank the policyholder for going a year without filing a claim. Furthermore, in India, a no-claim incentive is regarded as one of the most important aspects to consider when acquiring a health insurance plan. The insurer might offer a discount on the premium if the policyholder has not filed a claim for a specific period.
8. Grace Period
Your health policy is operational only for a specific period after which it needs renewal. If you fail to pay the premium on the deadline, your insurer may grant you a grace period to renew your policy. During this time, your existing policy benefits would still be effective. Usually, an insurance provider offers a grace period of 15 to 30 days.
Whether it is health insurance, personal accident insurance, or group mediclaim policy, choosing appropriate insurance coverage for oneself may appear to be a simple task, but if you do not understand the insurance terms, it may quickly become a painful and lengthy journey. Before purchasing insurance for yourself or your loved ones, it is a good idea to familiarise yourself with the glossary.