Financial
Planners and advisers advocate buying insurance coverage—be it health and
term—at the beginning of the career so as to lock in at a low premium. We will restrict
the scope of this article to health care policy only.
But
one point that is missed out or mostly overlooked—especially by the
investor/insured is whether the cover that they acquire now will remain
relevant in their twilight years? This coupled with the tendency of the insured
to abhor high coverage in the initial years (and even later in life) usually
exposes them to insufficient medical coverage.
The
young people who do buy health cover and/or term plans usually slip into a
sense of misplaced complacency by thinking that they have (sufficient) cover to
talk about—lasting even in their retirement years.
No
doubt the policy taken today will be sufficient for next 3-5 years. Whether the
cover will be sufficient beyond that is debatable---because of health cost
inflation. Beyond this initial shelf life of say 5 years, the fate of my health
care will be in the hands of the insurance company and my financial
position.(Since after the first 5 years of the job, liabilities also increase
on account of marriage/home loans and other obligations). To bring home the
point, say a 30 year old person takes a health cover of Rs. 3 lacs today.
Assuming he retires at the age of 65 and health care inflation averages 10%
p.a., his health cover requirement at the retirement will be Rs. 84.30 lacs.
Presently
health care insurance is bought on under mentioned considerations:-
- Health care insurance is one which is required mostly in post-retirement years. Hence, it’s a truly long term investment spanning over 30-35 years without any tangible returns/benefits
- It’s a common knowledge that hospitalization costs are increasing. With the state of government hospitals in a pitiable condition presently, without any scope for its drastic improvement in foreseeable future, hospitalization expenses may become unaffordable for a common man.
So
the point to ponder is how much health insurance is sufficient to financially
support you and your loved ones, so that you may have a peaceful retirement
life?
The
answer lies in following points:-
Costs of common surgeries
and hospitalization costs in India
Medimanage
Research team (www.medimanage.com) has come out with a research on comparative
costs of select surgeries between 2007 and 2012. The findings are as under:-
Sl. No.
|
Treatment
|
Costs
|
%
age increase
|
|
2007
|
2012
|
|||
1.
|
Cataract
|
16,000
|
24,000
|
50%
|
2.
|
Angiography
|
14,000
|
22,000
|
57%
|
3.
|
Coronary
Artery Bypass Graft (CAGB)
|
1,65,000
|
2,35,000
|
42%
|
4.
|
Appendectomy
|
28,000
|
42,000
|
50%
|
5.
|
Piles
|
21,000
|
35,000
|
67%
|
6.
|
Gall
Bladder removal
|
32,000
|
52,000
|
63%
|
7.
|
Prostrate
Surgery
|
37,000
|
62,000
|
68%
|
8.
|
Angioplasty
(with 2 stents)
|
1,55,000
|
2,45,000
|
58%
|
(Source: -
Medimanage.com)
It
is evident from above that healthcare costs have increased by 10% on an average
per year. We at AIMS
believe that with rising prosperity, demand for good healthcare facility will
only increase at an increasing rate. Absence of government aided health care
facility coupled with few good modern healthcare centers/hospitals slated to
come up in near future, there will be an upward bias on healthcare costs for
time to come.
Future Costs
Let’s
see how healthcare inflation can blow a hole in your finances at retirement. A
healthcare insurance of Rs. 4 lacs today, @ 12% inflation, you will need a sum
insured of Rs. 12 lacs per member. In 20 years at say 5% inflation you will
need to insure yourself for nearly Rs.20 lacs. For calculation of floater
coverage assuming 50% adhoc coverage for every adult member and 10% for every
child, you will need the following coverage:-
50% additional
|
10% additional
|
10% additional
|
|||
Age
|
Year
|
Self
|
Self+Spouse
|
Self-+Spouse+1 Kid
|
Self-+Spouse+2Kids
|
40
|
2022
|
12 lacs
|
18 lacs
|
19 lacs
|
20 lacs
|
50
|
2032
|
20 lacs
|
30 lacs
|
32 lacs
|
34 lacs
|
60
|
2042
|
33 lacs
|
50 lacs
|
53 lacs
|
56 lacs
|
(Source:-Medimanage.com)
A
middle class person would either have to “afford”, “plan” or “pray” to afford
health coverage of Rs. 50 lacs+ for his post retirement years.
Is
there a solution to as to “afford” or “plan” health insurance available? (Alas,
we do not have any solution for “pray” except but to pray). If
there is a problem, there ought to be a solution also. Solution lies in
following steps:-
- Healthy Living: - Healthy living is the 1st.step to your health insurance. Healthy living involves regular exercise, a proper diet plan, and avoiding ill-habits. A lifestyle covering all the aforementioned habits today is a sure way to avoid high hospital bills in future. (Read Physical Fitness for Financial Health)
- Buy Health Insurance (re-imbursement) along with a critical illness plan (replacement). HDFC SLI Critical Care Plan is an example of the latter type of cover that we strongly recommend to our clients to supplement traditional mediclaim insurance (re-imbursement)
- Plan a healthcare contingency fund by way of SIP in Mutual Fund
family members from medical expenditures:-
Type of Plan
|
Sum Insured
|
Tenure
|
Costs p.a.
|
Mediclaim
|
5,00,000
|
30
|
6,000 (approx.)
|
Critical Care Plan
|
15,00,000
|
30
|
10,000(approx.)
|
Health Care
Contingency Plan
|
35,00,000
|
30
|
24,000 (approx.)
|
It is said
that health is wealth. So why not insure your wealth by insuring your health.
After all, you will be able to enjoy your retirement only if you are healthy
(wealthy & wise).
So to be healthy and wealthy during your retirement, be wise today.(Read :- Health Insurance--a necessity)
