Insurance is essential to control healthcare costs
Neeraj Basur, Financial Chronical, 28/9/2011
Life is full of surprises. Take for instance a hale and hearty 20-year-old college graduate who discovers that he has type-1 diabetes or the severe back pain a 35-year-old software engineer, a father of two, faces because of bad sitting posture. Two different incidents, but with the same repercussion on long-term health consequences that impacts one’s quality of life and not to forget the costs associated with such medical treatments that remains forever.
The importance of good healthcare is manifested when one comes across such incidents and adopting healthy lifestyles cannot be overemphasised. Though, in the unfortunate event of hospitalisation, the only viable way to reduce the impact of financial consequences arising from such incidents is health insurance.
Life insurance covers the risk of death and has gained in popularity over the years. What about the risk of poor health and the expenses incurred on it? One tends to forget that as important as it is to take care the financial needs of one’s dependents in the event of death, it is equally important to look at de-risking one’s poor health in their lifetime with health insurance. Health insurance guards against financial loss from illness or bodily injury and provides coverage for medicine, visits to the doctor or emergency room, hospital stays and other medical expenses.
Unlike life insurance, where one can arrive at how much cover one needs based on one’s assets, liabilities and an estimated number of years that one wishes to protect one’s financial dependents for; health insurance has no straight-jacket ways to arrive at the quantum of cover one should take. A lot depends on how much one can afford towards premium and realise the value of this insurance.
For instance in the 20s, one should definitely look for an entry-level basic health insurance plan starting with a minimum cover of Rs 2 lakh. Not only is the premium on health insurance low when you start early, it also builds a healthcare record for you that can go a long way in determining future policy benefits and premiums. Likewise, when you are married with children, your responsibilities increase and so do financial commitments. In such a situation, you should consider a family floater health insurance, which is a single umbrella policy protecting all the family members, including dependent parents, providing a coverage of at least Rs 3 lakh or more per member depending on your premium paying ability.
Despite offering great value, health insurance penetration is low in our country because of poor awareness and also the perception that there are no tangible benefits with this policy. A way out to increase penetration beyond the tax benefits could be to encourage those who are fit to buy health insurance with lower rates and offer the unhealthy the policy at a higher rates, rather than declining them complete cover. After all, taking a health insurance policy does not mean that you can keep illnesses and accidents at bay. But at least you can ensure that if they strike your family, you will be able to avail the best possible treatment without having to worry about the costs.
(Neeraj Basur is the chief financial officer of Max Bupa Health Insurance Company)
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