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  • Writer's pictureAkshay Nayak

Gun For Wealth, But Don't Forget Health

Health is wealth. One of those timeless sayings that has translations and manifestations in almost any language. And rightly so, because this is one saying will always hold true. But in today's ultra competitive times the focus very clearly seemed to have shifted away from health in favour of the constant quest for success and wealth. Life has now given all of us a timely reality check in the form of the current coronavirus pandemic. It is becoming increasingly clear with time, that the virus can affect any of us. We may not be able to prevent the virus taking a toll on our health. But it is very much within our control to prevent the virus from taking a toll on our finances. The best way to do this is to invest in health insurance. An ideal health insurance policy ensures that most, if not all of the policyholder's medical expenses are paid for by the insurance company. To understand how health insurance works, look at the graphic below.

Of course life insurance is important, but I would go so far as to say that it is more important to invest in health insurance than life insurance. And I say this for a simple reason. During our lifetime we die only once but we fall sick and face health issues multiple times. And medical costs today are capable of burning a hole through the pockets of even the wealthiest. Health insurance should therefore be an indispensable component of an individual's finances.

In today's world, where a major portion of the younger population is gainfully employed, health insurance is provided for by the employer in almost all cases. But it is advisable to buy health cover even when it is provided by the employer. Given the current coronavirus situation, jobs have become highly uncertain. And it is likely to be the case for the foreseeable future. So anyone who gets laid off would automatically lose the medical cover provided by the company.

Secondly, when someone retires, they say goodbye not only to their job, but also to the medical cover provided by the company. Moreover, by then medical conditions such as diabetes, heart disease, lung disease, hypertension and so on may also have set in. Insurance companies are usually reluctant to offer health cover at low premiums to those with existing health conditions. So getting fresh medical cover at that point of time would be all the more difficult and expensive. It should be clear by now as to why individuals would be better served investing in additional health cover whilst they are young and healthy.

The thumb rule with regard to the amount of health cover required would be to cover of Rs 5 to 15 lakh per person. People in smaller towns and parts of the country can stick to the lower end of this spectrum. Those in bigger cities and metropolitan areas would definitely need to look at the higher end this range. It would also make sense for nuclear families to buy a Family Floater policy. Such a policy would automatically provide health cover to any member of the family that needs it.

Most senior citizens in India are usually under insured with respect to health cover. The usual health cover held by Indian senior citizens range between Rs 1 lakh to 3 lakh. An effective option for senior citizens in such a case would be a Top Up Plan. A top up plan gives the policyholder additional insurance cover subject to the payment of a certain threshold amount known as a deductible. For instance, lets say you have a top up plan worth 5 lakh subject to a deductible of 1 lakh. Suppose you end up having to pay a medical bill worth Rs 4 lakh, you pay 1 lakh and your top up policy would pay for the remaining 3 lakh.

When selecting the right health insurance policy there are a number of aspects that one needs to look at. Premiums on a medical insurance policy change as we age. You can ask your insurance agent to show you these calculations at 10 year intervals to get a sense of how premiums change over time. Also ensure your policy does not come with something called a Co-Pay Clause. A co-pay clause requires the policyholder to pay a certain percentage of the claim amount from their own pockets. For instance, if your policy comes with a 20% co-pay clause and you have a claim of 1,00,000 rupees, you will have to pay 20,000 rupees yourself and the insurance company compensates for the remaining 80,000. The very point of getting medical cover is to have the insurance company pay for your medical expenses. A co-pay clause therefore falsifies the very essence of medical insurance.

Also check for the Disease Waiting Period. Most policies have a waiting period of 30 - 90 days after treatment for certain ailments like cataract and hernia during which no claim amount is paid. Look for a policy which doesn't come with a waiting period.

Also check for Sub-Limits. Sub limits specify the extent to which the policy will cover for expenses such as room rent and hospitalisation expenses. For instance, your policy may say that it will cover room rent of upto Rs 2000 per night. So if your hospital room costs you a rent of say Rs 4000 a night, you would still be paying 50% of your room rent yourself. Look for a policy which does not come with any sub limits whatsoever. Also check the Exclusion List which specifies the diseases and conditions not covered by the policy. Choose a policy with the least number of exclusions. Pregnancy and dental treatment are standard exclusions.

It is also important to understand what percentage of the pre and post hospitalisation expenses your policy will cover. They should both be as high as possible. One can usually claim expenses for doctors fees and tests conducted before hospitalisation and also post hospitalisation expenses for a period of three months.

Check for the list of Day Care Procedures which are covered by your policy. There are a list 130 standard procedures such cataract and ligament tear surgery which are classified as day care procedures. Such procedures do not require you to be hospitalised for a minimum of 24 hours to file a claim. The more such procedures covered by your policy the better.

Also look at your policy's No Claim Bonus (NCB) mechanism. Health insurance policies usually give the policy holder a no claim bonus by increasing coverage for the same amount of premium. So for instance if your policy gives a coverage of Rs 20 lakh with a 10% annual no claim bonus and an annual premium of Rs 30,000, you get 22 lakh (Rs 20 lakh + 10%) as coverage if you file no claims for one year, with your annual premium still being Rs 30,000.

Lastly look at your policy's Claim Settlement Ratio. Your policy must have a history of settling at least 95 out of every 100 claims made. This works out to a claim settlement ratio of 95%. Also your policy should not receive more than 30 complaints per 10,000 claims made. This works out to a ratio of 0.3%.

Also add in an Accident Cover rider and a Critical Illness rider with the policy you ultimately zero in on. These will give you coverage in the event of an accident, and in the event that you are diagnosed with a critical illness such cancer, heart disease, kidney failure, organ transplant and so on. These riders will help you meet the heavy out of pocket expenses that arise in both these cases.

One of India's leading business newspapers, The Mint, along with SecureNow Insurance, has initiated India's most comprehensive health insurance ratings mechanism under the name Mint SecureNow Mediclaim Ratings. It gives details of the best mediclaim policies offered by various insurance providers in India, and also rates them based on certain metrics. Click the link to check it out.

Those who find it hard to get health cover due to pre existing health conditions can opt for a policy with higher premium, a co-pay clause, waiting periods and sub limits. It is undoubtedly expensive and highly restrictive. But, it is better than not having any health cover at all.

I understand this post has gone on for a bit too long, but today's subject, along with being about finance was also about your health. So I have tried to give you as comprehensive an understanding of health insurance as possible. Use all the information above the next time you buy health insurance, so as to be able to make the right choice. This will ensure that you will always gun for wealth, but never ignore your health.

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