Is health insurance taken to protect wealth?

What if we say that by subscribing to a health insurance plan, you are actually protecting your wealth!

There is no such health insurance plan which can protect your health. Health can be protected only by following a proper diet and exercise regimen.

 Actually when you buy a health insurance, all that you are doing is buying a protection against those situations which demand big amount of hard cash at very short notice towards medical expenses. So rather than treat it as an expense (hence, best avoidable), it’s time that you look at it as an investment towards your wealth protection—since health care expenses have become costly.

The most common notion amongst investors we’ve interacted with is that a life and health insurance are sunken cost- and hence avoided. The logic is that they believe they are not going to suffer any eventuality and that they are not going to fall seriously ill. It’s human nature after all.

In a particular financial plan that we were making for one of our clients, we had suggested subscribing to health insurance of Rs. 10 lacs. The suggestion was summarily rejected by the client. He was adamant about not buying health insurance citing very high premium and since he was quite healthy, he believed that he was not going to be sick!

Since as a financial planner, it is our job to recommend what is good for the client, we told him that by not buying health insurance, he does not want insurance company to pay for his medical  bills should the situation arise. As a corollary, he is prepared to bear the entire cost of his medical treatment –be it Rs.5 lacs, or 15 lacs or even say Rs. 30 lacs(after 10-15 years).

People fail to realize that probability of medical eventuality raises many folds with increasing age. At that time, the wealth that has been so painstakingly accumulated is needed for life’s other milestone payments—viz; your daughter’s marriage. To divert that wealth towards your medical expenses would be unfair to your daughter. A protective shield in the form of medical insurance can be very useful.

Moreover, with medical re-imbursements having been made subject to a ceiling, meeting a part of cost is better than meeting the entire expenses.

So can we suggest that if you love your wealth, better buy health and term insurance first and then go about wealth accumulation.

So protecting wealth is much easier than protecting health!

Q.E.D. (Latin for Quod Erat Demonstrandum)