28 August, 2009

Get medical cover to avoid a hole in the pocket

Taxes and death are the only certainties in life - we have heard that before. And one more to that – Medical situations, that include a stay in the hospital, is also almost a given for everyone, at sometime in life. The problem is that we do not know when that may happen. Medical insurance comes in there.
But, which kind of medical insurance is appropriate? Most people go with a medical insurance policy, which again goes by the generic term “mediclaim”, though it a product of the PSU insurance companies. Let’s see what a medical insurance from a General Insurance company covers.
What it covers?
1) Hospitalisation for more than 24 hours, which will cover room & board, doctor’s fees, ICU charges, nursing expenses, surgical fees, Operating Theatre expenses etc.
2) Pre-hospitalisation expenses on medicines. It is typically between 30-60 days.
3) Post-hospitalisation expenses on medicines. Typically between 60-90 days.
4) A number of daycare procedures ( over a hundred in most cases ) – that require less than 24 hours of hospitalization. Due to medical advances many treatments do not require hospital stay and hence would not have been otherwise covered under medical insurance.
5) Most policies also allow complimentary health checkup once in a few years, upto a certain limit, subject to conditions like certain number of claim-free years.
6) Again, ambulance charges are also paid by some policies
7) Some policies give a cash allowance for the days of hospitalization, to cover various incidentals like travel, out of pocket expenses & stay of relatives etc.
Other features & benefits
• Medical insurance is typically a yearly renewable contract. There are however policies which can be taken for upto three years, at a go too.
• No medical tests are required for upto 45 years of age. Application processed based on one’s health status declaration.
• Now Sum Assured of upto Rs.10 Lakhs is available in most policies
• Individual & floater policies are available, with most companies
• Cashless hospitalization is a reality in most cases today, giving unprecedented benefits to the policy holders.
• 5% bonus for claim free years, allowable upto 1.5 times of the Sum Assured opted for initially
• Family discount of upto 10% is applicable
• One can take treatment from a non-network hospital in which case the expenses will be reimbursed. But, most companies impose a co-pay option of between 10- 20%, as in these cases the insurance company would not have the advantage of negotiated, better rates like in a network hospital.
• Claim settlement has now been taken over by the companies themselves in many cases, to ensure better service & exercise better control. In others, it is done through a Third Party Administrator ( TPA).
Exclusions & conditions
• There is no-claim period of 30 days ( typically ) when one goes for a policy.
• Pre-existing illnesses are not covered in the first year. Most policies cover pre-existing illnesses only after 2-4 years
• Only Allopathic treatment will be considered for claims
• Certain conditions ( like hernia ) & surgeries/ procedures which can be planned ( like Angiogram etc. ) are excluded for a much longer period – typically a year. There are policies which have upto 4 year waiting periods for specific conditions – like joint replacement surgery
• Only treatments within India are covered
• In some policies, there are sub-limits on how much can be claimed as room rent, ICU expenses , doctor’s fee etc. This can limit the amount of claim, even though the expenses are well within the Sum Assured
• Renewal of policy till a certain age. This can be between 70-80 years, depending on the policy.
Policy renewability
Policy renewability was a contentious issue for Medical Insurance policies. However, IRDA has issued a circular that a company cannot deny renewal or force the policy holder to move to another policy, just because there was a claim in the prior years. This is com
Income tax benefit
Premium paid for medical insurance comes under Sec 80D ( as a deduction). Upto Rs.15,000/- pa can be claimed by an individual and Rs.20,000/-pa can be claimed by a Senior Citizen. Additionally, a medical insurance premium paid for ones’ parents, upto Rs.15,000/-pa can also be claimed under the same section.
For most people, this kind of policy will be good enough, since it covers hospitalization, pre & post medications, daycare procedures & other facilities. Policy renewability is a positive development. When taking a policy one should not go by the premium alone. A proper understanding of the benefits offered is a must – for instance, if one policy covers pre-hospitalization of 60 days & post hospitalization expenses upto 90 days, it may be better suited over a cheaper policy that covers these for a lesser number of days. One needs to look at the offering in totality, before deciding.
There are however certain things a typical medical insurance may not address. A) If one wants to enhance the coverage, it may still pose a problem ( due to claim history ). B) Also, if the policy term is only till 70 or 75 years, it poses a problem - as beyond that period one has to remain without any cover at all and be vulnerable. This is probably the time when medical attention will be most required. C) In many diseases and conditions, medication and attention will be required on an ongoing basis. In extreme cases, it could diminish the person’s ability to earn.
The other aspect that is quite common is the overcharging by doctors & hospitals, which is detrimental to the insurer & insured. It is detrimental even to the insured as the coverage amount in real terms diminishes. Many insurance companies have addressed this by entering into a contract with their network hospitals and fixing rates. However, the doctors, surgeon, anesthetist charges vary and in such situations they are prepared to engage only if the patient is from the first / premium class room. So, issues exist even today which would probably get sorted out in future. As of now, one needs to be alive and aware of all the benefits a medical insurance offers, limitations & the problems.
Could some of these be eliminated? Can it be addressed through some other product? Will some other type of offering be more cost effective? There are many other insurance options available today – for Critical illness, senior citizens accident related, hospital reimbursement , top-up. How will these help? Watch this space.

09 August, 2009

A guide in Tough times

Picture this. You are trekking in the Himalayas. The biting cold and breathtaking scenery are exhilarating and the atmosphere within the trekking group is relaxed and serene. And then it happens—an avalanche. It lasts just a few minutes, and immediately after the noise, there is an eerie silence and nothing to be seen for miles but sparkling white. Your group is shaken but manages to pull together. You find that you are lost, with no idea of where to go.
Your guide, a native of the parts, manages to calm the group. He surveys the area, looks around at the peaks and the sky and instructs the group to walk behind him. In a couple of hours, he leads you to the base camp. Without the guide, you would have been lost in the wilderness.
A financial planner is a bit like that guide—helping you achieve your goals through the rough and tumble of life. When times are good, any advice will work. Like they say, all boats float when the tide is high. It is when times are uncertain that you really feel the need for expert, professional advice. A planner can help ensure that you don’t get carried away by swirling rumours and doomsday predictions that abound at times like these.
Because a financial planner is not focused on investments alone, he can help you achieve your life goals through holistic financial management. In times of upheavals, plans may have to be reworked to get them back on track. It might surprise you to know that in times of massive uncertainty, I have found it better to take no action than to act in haste. That’s because financial planning is about achieving long-term goals and not about making short-term profits. In fact, when the market is going through turmoil, your financial planner might even recommend a new action to take long-term advantage of such situations.
But what about adverse situations in life, such as job loss or the death of a family member? Does that warrant a break in financial planning? No, the changed situation may warrant a changed response, not the abandonment of financial planning. A financial planner can actually add tremendous value in times of distress. Assume that one of my clients, Gopal, has lost his job. He is worried about his EMIs and bills. As his financial planner, I would try to shore up his finances. I have already ensured that there is a three-month expense liquidity fund.
Now, the task will be to liquidate assets to take his liquidity to beyond six months. Once this strategy is in place, the next course of action would be to find ways of bringing the plan back on track. For instance, Gopal will need to revisit some of his goals, and remove those that have become irrelevant or unattainable in the current situation. Appropriate course correction will also be made to keep his plan viable to suit his changed situation. If these are done, Gopal will just have to worry about finding his next job, not about the state of his finances.
During times of personal turmoil, a financial planner can be a stabilising influence. Since the planner is not emotionally involved, he is able to offer clear-sighted solutions. All of which is to say that a financial planner assumes more importance when times are uncertain—whether in the general economy or in your life.

Published in Money Today 3 August, 2009 issue