Health risks can easily become financial risks. Thoughtful financial planning and insurance can fortify your family.Adhil Shetty
The World Health Organization marks April 7 as World Health Day. The WHO’s primary goal is to achieve universal health coverage for all – anybody, regardless of their age, income, or pre-existing health condition, should be able to avail medical treatment and hospitalisation without financial difficulties.
While universal health coverage exists in some countries, in India, it remains a pipe dream. With the launch of the Pradhan Mantri Jan Arogya Yojana, the poorest 10 crore families in India now have a coverage of Rs 5 lakh per annum. This is a good start. However, anybody not eligible to receive benefits under this scheme must seek their own coverage.
Healthcare inflation in India is steep. In 2018, it rose at double the inflation rate. Hospitalisation, or treatment of a critical illness such as cancer, may be required by any person at any moment. The costs of such treatments can easily run into lakhs of rupees, and deplete a family’s savings. This is why every member of a family needs insurance. Let’s take a quick look at some must-have insurance products.
In any health emergency, your health insurance policy is your first line of defence. Which is why it’s important to be adequately insured. While there’s now a law mandating the purchase of health insurance, I would say paying for health coverage is as important as paying your rent. Unfortunately, in India, the health insurance penetration is abysmal. As per a National Family Health Survey in 2018, only 29 percent households had at least one member covered by a health scheme. Only 20 percent women and 23 percent men between the ages of 15-49 were covered.
A single hospitalisation could wreak havoc on the finances of the other 71 percent households. Health insurance is affordable. If you’re a 30-year-old looking for a cover of Rs 5 lakh, you can get one for annual premiums starting around Rs 5800.
However, many people make the mistake of looking at health insurance only as a tax-saving product. Even a basic health insurance policy can protect you against the steep costs of hospitalisation or treatment of critical illnesses.
Beyond basic coverage, a health policy can also cover pre- and post-hospitalisation expenses, daycare treatment, maternity expenses, and annual health check-ups. You could also cover your entire family under a single, family floater cover or a group insurance cover.
The key is to get one while you’re young. The older you are without health coverage, the more expensive and difficult it becomes to buy a policy. Your base coverage can also be exponentially expanded with the addition of a top-up or super top-up policy. For a few thousand rupees, your base cover of Rs5 lakh can potentially become a Rs 20-30 lakh cover with a top-up.
A family’s economy is sustained by its breadwinner. What would happen to a family’s finances if the breadwinner were to pass away? This is where a term plan comes in.
While there are plenty of other life insurance products available in the market, only a term plan offers a pure insurance solution of adequate coverage at affordable costs. For example, a 30-year-old male can avail a life cover of Rs1 crore for a term of 30 years for annual premiums starting from around Rs7000. This way, the term plan can replace a person’s income for the foreseeable future.
The ideal level of coverage should be 10-20 times your current annual income. In case of untimely death, this coverage would keep your family from financial distress. It’s also a more cost-effective way of buying a life cover, than other insurance products that may also offer combined investment benefits.
Term plans also offer added benefits such as terminal illness benefit (where the sum assured is paid out upon the diagnosis of a terminal illness), or a disability rider (where the sum assured is paid upon the diagnosis of a partial or permanent disability).
Beyond insurance, you must also prepare your finances in a manner that allows your family to take any medical challenges head-on. One of the most basic steps is to create an emergency fund which is worth at least three to six months’ worth your current monthly income. This fund can be locked in a fixed deposit, ready to be called into action at any moment.
An emergency fund can cover you in a variety of circumstances such as job loss, repairs and accidents, but especially in a health emergency.With these common-sense steps, you can protect your family adequately from most medical emergencies, and keep your finances secure against predatory healthcare inflation.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)