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Plan NOW for future medical expenses

I started interacting with this family as clients over 7 years ago. She was a business correspondent, and he was a senior corporate executive. Their daughter was 11.

We had worked out and started executing their financial plan. Some actions remained pending, and one of those was medical insurance.

A few months later, she moved to a freelance job. Three years ago, the husband too decided to change job, and as is common, took a couple of weeks off. That's when their daughter fell ill, and needed to be hospitalised for a few days.

They had no personal medical insurance that could reimburse their daughter's medical expenses.

These clients got away lightly, but you are well aware that inflation of health care costs is steep. This fact combined with increasing life expectancy and newer, more critical illnesses coming to light, make it imperative for each of one of us to consider medical insurance as an integral part of our financial plans.

The author is the managing director and chief financial planner of International Money Matters Pvt. Ltd.

 

Plan NOW for future medical expenses

Different needs for different ages

There are some medical costs like doctor visits, pathological tests and purchases of medicine which are normally not covered by insurance, and one must provide own funds for that. When you are young, you can incur high costs for illnesses if you decide to live an indisciplined life of late nights, frequent parties, combined with lack of sleep, especially if you are working.

Personal accident insurance is a must especially if you ride a two-wheeler. Later in life, your younger children will incur medical costs and you need to ensure that they are covered till they start earning for themselves.

Plan NOW for future medical expenses

Company insurance versus self insurance

Most of us in corporate life lie comfortable in the belief that the organisation we work for covers us and our families for medical expenses. This would be fine if we are sure (and the company is, too!) that we shall work in that one organisation for life.

As mentioned earlier, the period between jobs leaves you uncovered and exposed to risk. Further, there is the important matter of pre-existing illnesses. Medical insurance policies in India have different rules -- some of them do not cover you for pre-existing illnesses at all, and some have a cooling-off period of two to four initial years during which these are not covered.

We recommend that you have personal medical cover to prevent against this risk, and the sooner you start the better.

Plan NOW for future medical expenses

Individual policy or floater

If you can afford it, individual policies for each family member may be better because you will get more coverage. However, you may consider it unlikely that each of your family may incur say, Rs 5 lakh as hospitalisation expenses at one time.

In that case, and also if you wish to spend a lesser amount, a family floater policy may work out better.

For example, a family of husband and wife, each of 30 years of age, with two children aged four and two, could pay Rs 21,000 per annum for Rs 5 lakh cover for each of the members. A family floater plan for a total cover of Rs 5 lakh will cost them Rs 7,500 per annum. Some policies also have the option of including other family members such as parents and in-laws, though there may be age restrictions for them.

However, one must remember that health insurance or mediclaim policies are indemnity policies which reimburse expenses. To protect against loss of income due to medical reasons, critical illness policies are the right option. But we'll have to live another day for that.