Health insurance: Your fire exit to financial freedom

Buying health insurance not only saves you from the expenditures arising out of hospitalisation but also offers you tax breaks.

 Addressing the 40th convocation function of All India Institute of Medical Sciences (AIIMS) in New Delhi, our President Shri Pranab Mukherjee said, “It is unacceptable that almost 80% of the expenditure on healthcare by people was met by personal, out of pocket, payment. I am shocked to note that as many as 4 crore people of our country plunge into poverty each year due to expenses on medical treatment.” (1) It affects one and all The financial burden of medical costs is not restricted to just the financially weaker sections of the society. As India urbanizes, obesity is rising. Lifestyles become more sedentary and more westernized: non-communicable lifestyle diseases now account for the bulk of healthcare spends. Incidences of non-communicable diseases are rising fast and at this rate by 2020 India will be the Cancer and Diabetes capital of the world.

 Advances in medical technology mean that most of these conditions are now treatable. However there is a substantially increased cost of treatment on account of the equipment and trained manpower needed. Health care costs are rising at over 10% annually (2.5% more than our GDP growth rate). Today an angioplasty costs between Rs. 2-3 Lakhs, a knee replacement, Rs. 2.9 Lakhs, hip resurfacing, Rs. 3.2 Lakhs and renal failure about Rs. 5 Lakhs. A bout of dengue can make you poorer by Rs. 1 lakh. There are over a million cases of cancer reported every year in India. Cost of cancer treatment can easily go up to Rs. 10-20 lakhs.

 These costs are beyond the financial means of most Indians. It is estimated that over 40% of those requiring hospitalization either borrow money or sell assets to pay for medical costs. Even if you avoid the poverty trap, you will probably have to make substantial sacrifices to your quality of life in future. It may mean a lower outlay for children’s education and reduced savings for your post retirement years. Shift the financial burden It is important that you look to shift this financial burden elsewhere. Public investment in healthcare in India is abysmally low and quality of care, poor. In spite of the right noises being made by those concerned, the public healthcare funding scenario is unlikely to change much in the future.

 A proper financial planning calls for shifting this burden of medical cost early to an Insurer. Don’t wait for age related symptoms and conditions to show up before you buy health insurance. Insurers chase people who are in good health and avoid people with pre-existing conditions. Even if an insurer were to accept you, they will not cover your existing conditions for up to four years. So insure yourself while you are healthy. One of the common mistakes while buying health insurance is not having proper and adequate cover. If you are single or a couple with no children, insure yourself for at least three lakhs. A family of four would probably need five lakhs or more. Being under insured is as bad as not having any insurance at all. If you are one of the lucky ones who has employer provide

cover, make sure that it is adequate. If not purchase a personal health insurance to cover the gap. Special consideration for critical illnesses Health insurance typically covers hospitalization costs. While this is adequate in most cases, critical illnesses like cancer require additional consideration. These critical illnesses often require prolonged treatment, potential travel outside for treatment and months of leave, sometimes unpaid. Critical illnesses often have substantial costs beyond hospitalization. For example cost of cancer treatment easily goes up to 20 lakh, all added up. Having to pay for the cost of a critical illness out of one’s own pocket can bring absolute financial ruin to most. A critical illness policy will pay you a lump sum equal to your Sum insured on survival of 30 days after first diagnosis to be spent as required. This will help defray cost beyond hospitalization expense or income foregone.

 Consider having critical illness cover of 10 - 20 Lakh minimum. Ditch the majority and take the exit to financial freedom At least when it comes to choosing to buy health insurance, the majority is in serious error. In India today, a whopping 85% of the population has no access to any kind of health insurance. Most of these people, in all probability, will defer treatment until it becomes absolutely imperative. By that time health has deteriorated and cost of medical intervention quite high. This is one case where it doesn’t pay to be part of the majority. It is much more prudent to buy health insurance. And what’s more the taxman will pick up part of the tab by way of tax relief under section 80D. Don’t risk your financial health and wellbeing to the rising inferno of medical costs. Take the fire exit of health insurance to financial freedom and security.

[Source: : http://www.moneycontrol.com/news/insurance/health-insurance-your-fire-exit-to-financial-freedom_2395261.html]