Why your corporate medical cover is insufficient

Mar 31, 2022
Bhavna Nagrani of ThePrudentinvestor.in explains why all individuals need a personal medical cover. 

A couple of years ago, my friend’s mother was admitted into hospital due to dengue. It was then revealed that the patient had a hernia and was diabetic. When all the tests, the treatments, medical purchases and hospital visits were taken into account, the bill touched Rs 18 lakh.

At the start, my friend Sharanya was not worried about the finances as she had an employer health insurance cover of Rs 5 lakh. As she exceeded that amount, she and her father (who is self-employed) was forced to cough up the balance Rs 13 lakh. They borrowed from family and friends and dug into their own savings.

I wish I could tell you that this was a rare incident. It is not. As per WHO statistics, 31% and 47% of the hospitalizations in urban and rural India, respectively, are financed either through loans or by the sale of assets.

Why everyone needs health insurance.

There’s no dearth of reasons to purchase a medical insurance policy. The drastic change in our lifestyle has made us more susceptible to a wide range of medical conditions. A sedentary lifestyle, stressful work schedules and poor eating habits have increased our chances of developing health disorders. Sadly, more and more individuals are being diagnosed with lifestyle diseases at a younger age.

Even if you are extremely healthy, everyone needs health insurance to take care of unpleasant surprises.

One way to be financially prepared for uncertain health risks is by acquiring health insurance. Health insurance coverage pays for medical expenses incurred by the insured.

Healthcare costs are high and inflationary. As per the Hindu Business Line, the rate of medical inflation was 8% in 2021. Hospitalisation can be a major expense and send your financial plans haywire. It is worse if the breadwinner is the one hospitalized and cash flows by the way of income cease.

Medical insurance protects your savings. A medical emergency can turn your world upside down. While the physical, emotional and mental turmoil may be unavoidable, the financial stress and anguish can be avoided. By buying a medical insurance policy with adequate cover, you’re less likely to have to dip into your savings.

Why everyone needs a personal insurance policy even if you have a company cover.

There is no doubt that employer health insurance is a blessing. The problem is that we consider it an end-all solution to our healthcare needs. What we have to ask ourselves is “Is there enough cover for my family’s health?” or “Is the sum assured sufficient to meet medical emergencies?”

Sadly, for many of us, it isn’t.

Let’s look at why we need personal cover over and above employer medical insurance.

Insurance provided by group policies is generally worth Rs 5 lakh or less, which isn’t much for a family. The number of dependents may also be limited, which means part of your family may have no insurance cover at all. The right sum insured should ideally be based on your age, life stage, number of dependents, lifestyle, and medical history.

What if you switch jobs and your new employer does not offer a cover?  Even if your new employer provides health insurance, a medical emergency during the time you are in between jobs could leave you with a hefty bill. What if you quit to start out on your own as a consultant or entrepreneur? What if your company shuts shop or terminates your services? All these “what ifs” will mean that you can no longer reap any benefits from your employer’s group health policy. Unlike individual plans, a group plan cannot be extended or renewed for as long as one wants.

Many employer-provided insurance plans have the room-rent capping and co-payment clauses, which need you to pay out of your pocket for medical care services. In the co-payment clause, a certain percentage of the bill has to be paid by the policyholder. The insurer is only responsible to pay a specified percentage. When buying a regular policy, you can select one that has a bare minimum or no co-payment clause and offers higher coverage for hospital room tariffs.

As you grow older, the risk of acquiring diabetes, cholesterol or hypertension increases. Once you suffer from a chronic lifestyle disease, the insurer may hike premiums by 20-50% to cover the additional risk. Over time, there’s a risk that your proposal might be declined altogether. Imagine approaching your retirement date only to learn that you have to choose whether to go without a health cover or pay an unreasonable premium for a mediocre cover.

Please ensure that you have a personal health insurance policy with an adequate sum insured. Should your employer plan fail to cover all expenses, you have a contingency plan and don’t need to tap into your savings.

Why you need to buy the personal insurance cover when you are young.

We get asked this a lot: When is the right age to buy medical insurance? Especially by younger audiences who are healthy, seldom visit the doctor, some of whom are on a tight budget and so consider skipping this annual expense.

  • Health insurance foots the bill for medical emergencies like a car accident or an ankle dislocation while playing cricket. Surgery, hospitalisation, rehabilitation can set you back financially. You might also miss out on pay if you are unable to work during recovery.
  • By buying health insurance before you need it, you will sail through the waiting periods for pre-existing illnesses, specific surgeries, special treatments so that all these benefits are available to you when you actually need them.
  • Individual plans offer the No Claim Bonus (NCB). This is added to the sum assured on policy renewal if there have been no claims made during the previous policy year. Private plans offer free annual health checkups, lifelong renewal, and portability of the NCB.
  • The premium paid toward your health insurance policy is tax deductible under Section 80D of the Income Tax Act. Though the main reason to buy insurance is protection, tax saving is always welcome. The limit for health insurance deduction under Section 80D is Rs. 25,000 and Rs 50,000 for senior citizens.

Also read: 7 things to note when buying medical insurance

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