Health Insurance is an essential part of Risk Management. It is treated as ‘Asset Protection tool’ in Financial Planning. In case of sickness which results into hospitalisation may cost huge amount of money. In case family has not secured itself with proper health insurance may have to break its savings. One family saves hard earned money in cuts & pieces. One incidence of severe injury or sickness can blow up whole savings.
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Fortunately, in recent years people have become very much aware about the importance of Health Insurance. I happen to meet many people due to my profession. One common question which I often come across is “What should be an adequate amount of health insurance for one’s family?”
Well, there are some factors we need to consider before buying or renewing our health insurance.
- Age: Increasing age increases the probability of illnesses. Statistics says that people who have crossed 45 years of age are more prone to illnesses. We must buy an adequate Health Insurance before we attain the age 45 & before any major disorder like diabetes or blood pressure enters our body. Please don’t wait till any major illness strikes your body. Be informed that Insurance companies does not give health insurance to people who have diagnosed with major illness.
- Area where you live: If you live in a metro city or other urban areas, cost of medication is high compared to rural areas. If you live in a rural area, 5 to 7 Lakhs health insurance is sufficient. But as these areas lack good medical facilities, ultimately people come to urban areas for treatment in case of major illnesses or surgeries. So the health insurance amount must be the same for rural residents.
- Inflation: General inflation in India (for our day to day commodities like rice, pulses etc.) is around 6% to 9% p.a. But inflation in medical cost is assessed around 14% to 20% year on year. That means any treatment or surgery which costs today Rs.1 Lakh may cost you 1,14,000 or Rs.1,20,000 next year. It may cost you 1,30,000 or 1,45,000 in a subsequent year and will keep on increasing every year by that rate. In short any treatment will cost you double within next 5 to 6 years. This rate is an exorbitant rate. We must prepare ourselves for the increased cost of medication every year.But increasing health insurance cover every year is not practical. We all are so busy in our business/profession/job, we generally renew the health insurance like paying any other routine bill. So it is advisable to buy or renew health insurance considering at least next 5 years inflation.
- Critical Illnesses & Major surgeries: Heart disease, Brain Stroke, Cancer, Organ failures are some of the Critical illnesses which cost a huge amount.There are some major surgeries which costs a huge amount. Bypass surgeries, Neurological surgeries, Cancer surgeries, Liver Transplant, Kidney Transplant, Heart Transplant, Bone marrow Transplant are some of them.
Our health insurance amount should be large enough take care of these costs.
5. Take what is available: Experts says that people (especially above 45 years age) should buy whatever amount is offered to them by the insurance company. If company offers 50 Lakhs or 1 Crore, please go ahead & buy. Please don’t argue; “why this much insurance? I am still young, I am fit, I don’t need this much cover.” Please come out of such an attitude.
Putting aside inflation factor for a while, a family must have a floater health insurance policy for not less than 25 Lakhs to 30 Lakhs in today’s time. If we consider the Inflation factor for next 5 years, we must have a floater cover of 50 to 60 Lakhs.
I do understand that health insurance premium is also expensive these days. But your worthy Health Insurance advisor will surely help you to manage this cost & will surely help you to give maximum benefits for every rupee premium.
I will try to incorporate in my next article; how to reduce health insurance premium without reducing your health insurance amount.
