Common Health Insurance Terms You Need To Know


The insurance world is one that is easy to grasp when it comes to its fundamentals, but is riddled with various terms that can confuse many policyholders when it’s time to make a claim. We take a look at the essential tool that is health insurance by explaining the most commonly used terms in this multi-billion dollar industry.

Premiums and Claims
These have been grouped together as they cover the basic functions of the industry. Premiums are the amount that a policyholder has to pay to an insurance company for the coverage. A claim is when a policyholder submits a request for the insurance company to reimburse them for a payment that falls under the agreed stipulations within their policy.

Deductibles
While most people usually only look at their plan’s upfront costs (premiums), the policy’s deductible should also be factored into the overall cost of your health plan. The term refers to the amount of money you have to pay every year to cover eligible incidents before your insurance policy starts covering the bill. For example, say you have a hospital bill of S$10,000, and your health insurance deductible is S$2,000. You will have to pay that S$2,000 out-of-pocket (with your own funds), and your actual claimable amount will only be S$8,000.

Generally, plans with lower monthly premiums have higher deductibles, and plans with higher monthly premiums have lower deductibles. If you are young and in good health, it may be more cost-effective to have the former plan instead of the latter.

Co-insurance
This kicks-in only after you have paid the deductible figure. It’s usually calculated as a shared percentage of the amount both parties (policyholder and insurance company) will pay in the case of a claim.

Following on from the above example, if your bill is S$10,000 and you have paid up the deductible amount of S$2,000 with the co-insurance terms set at an 80%/20% split, the S$8,000 claim will mean that your out-of-pocket expenses are S$1,600 (20% of S$8,000). The total that you will need to pay out-of-pocket based on this deductible and co-insurance rate would be S$3,600.

When it comes to payment, your co-insurance amount can be trickier than your deductible. While the deductible amount is always the same no matter the size of your bill (S$2,000), the amount of co-insurance you pay is variable. Granted, the percentage remains the same (20%) but the actual amount depends on the size of your bill. So if your medical bill is S$50,000 instead, you will have to pay 20% on that amount, which is a significant S$10,000.

Similar to the deductible, your co-insurance percentage is also correlated to your premium – the higher the premium, the lower the co-insurance percentage usually is.

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