26 June, 2011

A strategy to get the right medical coverage

It is almost a cliché to say that the medical costs have sky-rocketed in the past several years. But, this is entirely true. We all tend to spend a lot of time and grey cells on how to save money for the future to meet our various goals like children’s education, retirement, home purchase, vacation etc. We generally don’t give as much thought to medical exigencies.

Well, we should… for medical emergencies can truly be draining on the family finances. If one does not have a proper medical cover, expenses on medical emergencies can empty one’s savings and even put a person in debt. This means your entire future can get compromised by not having a proper medical cover, to take care of unexpected medical emergencies. Time for some thought and planning…

Many people assume that since there is no history of ill-health in the family, it will continue that way in future. Medical emergencies don’t announce themselves in advance, before striking. The only thing to do is to be prepared.

How do we start?

We need to start by assessing how much cover may be required in one’s situation. That depends on the age of the family members, family history of illnesses, one’s vulnerability should a medical emergency strike, how much & what kind of protection one is seeking & how much premium one is willing to pay for it. Clarity on this will help us proceed to the next step.

Most people are advised to take at least Rs.5 Lakhs for every adult member and Rs.3 Lakhs for every child. There may be seniors who may not be eligible for Rs.5 Lakhs in some policies and may have to make do with Rs.2-3 Lakhs, the policy may be offering. But, will this be enough?

The question is moot. There is no way to predict how much could be medical expenses, in case of an emergency. We just need to look at the probability of covering most events. A Rs.5 Lakh cover for an adult should cover 85-90% of medical situations. There is always a possibility of the medical expenses going beyond that. But that is the risk one needs to retain. And have a cash-backup as a contingency reserve. Else, more cover could be taken ( say Rs.7 Lakhs instead of Rs.5 Lakhs ). But this will entail an increased premium outgo. Here, one narrows the risk and is not eliminating it. Hence, the right approach would be risk transfer by taking an appropriate medical insurance cover and be prepared for spending, in case the expenses go above the cover opted for.

What kind of policies to consider and what are the things to look for?

We generally recommend individual medical cover. A normal medical insurance policy covers hospitalization & also an exhaustive list of daycare procedures. They also cover domiciliary hospitalization, pre & post hospitalization medical expenses, hospital daily cash ( in some cases ), Health checkup expense reimbursement in some cases. These days, the policies allow cashless settlement, which results in a hassle-free experience. Depending on the policy there can be other bells and whistles, like maternity expenses coverage, dental expenses, eyecare expenses etc., after a certain number of years. Before selecting a policy one needs to clearly understand the benefits that the policy offers. Premium alone cannot be the sole consideration for deciding on the policy. Claim settlement is of paramount importance. If you have got a thumbs up there and policy benefits are good, that company’s policy should be considered in your shortlist.

There are people who prefer floaters, which are comparatively cheaper. Benefits in a floater are similar – only that there is one umbrella cover for the entire family. A family can take for instance a Rs.8 Lakh floater and may save some money in a family of four. It also stands to reason that all members may not fall sick in the same year. But, they could too – like, if there is an outbreak of Chikangunya. That is a call one needs to take. For a smaller premium, one will have to assume higher risks.

What about Group medical cover?

For many people who are employed, they enjoy cover from their employers. This would be a group insurance cover that generally tends to be more beneficial than a general medical insurance policy. A group medical insurance policy covers preexisting illnesses from day one & maternity benefits on an immediate basis. Some of them may also allow coverage of parents, who may not otherwise be eligible for medical covers. Some of these policies also allow one to pay further premiums and increase the cover. The premium in a group medical insurance policy are also lower as compared to normal policies. There is one major downside to it – this cover ceases when one leaves employment. Today, when people are mobile and change jobs frequently, this can become a problem. When a person is in transition from one job to another, there may not be any cover at all. This is one of the pitfalls of depending on a group medical cover. Also, the next employer may or may not have a medical cover which is as comprehensive as the current one.

Hence, it is always a good idea to have a separate medical cover, even though there maybe a company cover. The separate medical cover one opts for, can be at an appropriately lower level.

What about other covers to consider ?

There are several covers like Critical illness cover, Hospital cash, Surgical covers, accident covers etc. These are all good to have – not must have. There is no end to the extent of the security net that you may want to have. But everything costs money. So, one needs to tread the fine line after taking into account appropriate cover required & the premium outgo.

Article by Suresh Sadagopan ; Article published on 26/6/2011

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