Financial plan is a road map to achieve your financial goals by efficient management of your personal finance. These days it is sinful to undermine the importance of a health insurance cover as a part of your overall financial plan, because medical expenses have risen so much that it can shatter your finances if you have not accounted for such unplanned contingencies in your financial plan. A short duration hospitalization can easily wipe off your 1 to 2 year’s savings. At the same time people are becoming more and more susceptible to illnesses these days because of hectic life style, lack of exercise, inappropriate eating habits etc. Hence it is prudent to cover the risk of a financial loss due to illness by buying a good health insurance policy.
How health insurance / mediclaim works:
To put simply, if you buy health policy of sum assured Rs 500,000 for a premium of Rs 6,000 per annum, then on hospitalization the insurer will settle your hospital bill up to 5 lacs, there by significantly safeguarding you from the financial impact of hospitalization. Thus by paying Rs 6,000 you are buying “peace of mind” that in case you fall ill, your bill up to 5lacs will be settled by insurer reducing your liability substantially.
Individual Vs Floater insurance plans
Consider that you are a family of three: i.e. Husband, wife and a kid. Then you have 2 options to cover every one’s health. Either you take 3 separate policies of sum assured 3 lacs for each individual (called Individual mediclaim) or take a single floater plan where the sum assured of 3 lacs is shared by all three of you. Note that in individual policy, your total cover including all three policies is 9 lacs and in floater its only 3 lacs. But floater can significantly reduce your premium liability and at the same time cover all the family members for same sum assured of 3lacs. Thus family floater is advantageous particularly in cases where chances of all the family members falling ill in the same year are less. However there may be cases all family members fall ill in the same year- like for example if they are travelling together most of the times. All these factors should be considered while selecting the type of your policy.
Unit linked health insurance plans:
These are plans where in addition to health cover you get an investment avenue also. Basically part of the premium you pay gets apportioned to buying health cover and remaining gets invested in stock markets to generate returns for you over the long term. However, most good financial planners recommend not to mix investment and insurance i.e Buy health plans only for insurance and look at other avenues like mutual funds for investment needs.
Selecting the best insurance policy:
After deciding the type of health cover, you now have to choose the best health policy from umpteen number of policies & several insurers available in the market. For this, one can compare all policies on following parameters:
1) Check whether cashless facility is available: Cashless facility means, at the time of emergency you don’t have to run around arranging for cash to deposit at the hospital. The expenses are settled by hospital directly with the insurance company. Cashless facility is available only in specific hospitals which are present in network hospital list of insurer. Hence here you have to check which hospitals in your area fall in the list before taking the policy.
2) Check exclusions: Exclusions are illnesses that are not covered in the policy. In many policies, there are many illnesses that are not covered in first two years of the policy.
3) Compare policies on sub limits: Many insurers have limit up to which they will cover specific expenses. For example your cover may be for Rs 300000/- but insurer won’t pay for more than “x” amount for doctors fees or room rates etc.
4) Renewal age: Many insurers do not renew policy beyond a particular age. Select a policy that provides for renewal even at older age because that is when you will need it the most.
Apart from this ensure that you keep all your medical insurance policy documents easily accessible to your family members because if you would be in medical emergency, your family members would have to take care of claim settlement process.
Take cognizance of above factors to ensure your financial plan does not get derailed due to unplanned health contingencies.
ANUJ J SHAH (CFPcm)
Principal Financial Planner