Health insurance is one of the critical elements in any financial plan. Inspite of its criticality, it is one of the most confusing, misunderstood and mismanaged aspects in personal finance. Absence of health insurance is amongst the biggest threat to derailing investment plans. In this article I have tried to cover some of the questions about health insurance that I frequently come across as a planner.
Do you need a personal health cover if you are covered by your employer?
The straight answer is yes, even though this might mean an added expense. The first reason is that your employer provides this to you as a benefit. They might decide to change the terms and conditions at any point in time in conjunction with the health insurer with which they have tied up. This will be without any reference to your individual situation. Say for example you have been meaning to include your father in your health insurance as a dependent once he retires. In the meantime the company policies change and disallow addition of senior citizens or include a co-pay clause, this might affect you personal position. While with a personal cover you can request for the changes that you need as per your convenience and requirement, subject to the insurers rules and regulations.
A personal health insurance will also protect you in situations where you will be out of health coverage from your employer like job loss or if you decide to take a voluntary sabbatical.
How much insurance should be bought?
This is a very subjective question. A practical way to answer this would be to list down hospitals in your area where you would prefer to get treatment in case you need it at any time. Take a look at the room rates in such hospitals and an estimate of expense on major surgical procedures. This would be the minimum amount that you and your family should be covered for. Beyond this the amount can be increased as per your capacity to pay the premium in order to cover rising costs due to inflation. You might also want to look at your family health history to check for any diseases/disorders to which you might be more susceptible. In such cases you would want to look at expenses related to that particular ailment and cover yourself accordingly.
Individual policy or floater policy?
While floater policies offer a much cheaper cover for the entire family, it might pose a problem if more than one family member requires medical attention at the same time, say for example in case of an accident while travelling together. In such situations, individual policies offer better protection.
What about children?
Serious Illnesses can strike at any age. Children should be covered for the same amount as parents either individually or as a part of floater policies. Besides this will help the child move to his/her own policy without any pre-existing clause when he/she attains majority.
What about parents (pre-retirees/senior citizens)?
If your employer provides for it, please include parents in the group policies even with a co-pay clause. Apart from that it is advisable that parents also be covered in a separate policy that is bought before they retire. An early purchase of separate cover is to avoid certain issues like co-pay or restrictive clauses in terms of health like permanent exclusion of certain pre-existing diseases which might be creep in as the age of entry increases.
This has become a very thorny issue. Currently many private insurers have tie-ups with the leading hospitals for cashless facility, most public insurers don’t. The public insurers work on the Preferred Provider Network (PPN) model. Only those hospitals registered under the PPN network will allow cashless facility. Unfortunately in the current scenario most leading hospitals are missing from the PPN network of the public insurers.
There are two ways to look at this issue. One is that you opt only for those insurers which have your own preferred hospitals in their cashless facility list. The problem with this is that the list keeps changing every year. Though technically you have the option of porting your policy to another insurer who continues to offer the cashless facility in your preferred hospital, it not a very practical solution.
The second way is to maintain sufficient contingency funds to tide over a situation where the cashless facility is not available. There are various ways of maintaining the contingency funds like linked deposits, liquid funds etc. If your cashflow permits, this would be a more feasible solution to tide over the time till you can get reimbursed for your expenses.
The basic benefits that you need to look at when buying a personal health cover is the renewability factor. The policy should facilitate lifelong renewal. While the general view is that a limit on room rent is a negative factor, I feel it is in a way good. If a limit can reduce frivolous expenses, it will benefit the insurer and keep it in good health. A company in good health will be able to sustain genuine claims for a long period of time without resorting to tactics to refuse claims. If there is a limit of 1% of sum assured on room rent, you can take a policy of say Rs.5 lakhs. So Rs.5000 per day is your limit for room rent and double that is your limit for ICU. If you feel your preferred hospitals have higher room rents, cover yourself accordingly.
There are many policies that come with add-on benefits like maternity cover, coverage of day care expenses, daily cash allowance etc. Look at these as add-ons only. Do not make them the primary reason to buy the policy. More often than not the benefits offered as add-on are miniscule and might not cover your actual requirement. For example maternity benefits offer a cover of about Rs25000-40000 only, that too after a waiting period of anywhere between 2-6 years. So will you really need this? If you do, will the amount suffice? In most of the good hospitals in metro regions the maternity expenses in case of C-Section are much beyond what is offered by the policies.
When to claim and when to avoid
Claiming at every instance is not a good idea. Small amounts that you can manage by yourself should be covered from your regular cashflow. Say a fracture or a minor surgery which is done in day procedure should ideally not be claimed. You might end up losing your no claim bonus or the benefit of reduced premium that you get for not making claims. Keep the insurance for bigger expenses which might eat away into your savings and investments. That is when the health cover will save the day for you.
All said, there is no way you can protect yourself against all possible happenings. Do the best that you can within your means with lot of common sense in place. Keep proactively healthy and have faith that life will find a way!