Normally financial planners suggest health insurance requirement based on thumb rules. I do agree that the answer is bit subjective. However, i personally feel that you are the best judge to assess your health insurance requirement from time to time. Typically, we have a tendency to think that nothing bad/unexpected can happen to us. In other terms, only when we are in dire need of health insurance, do we realize the importance of having one. Let’s check out 5 reasons why it is important to assess health insurance requirement at regular intervals.
5 Reasons Why You Should Assess Health Insurance Requirement Regularly
1. Actual Health Condition:
It’s a no-brainer that probability of hospitalization increases with the increase in age. At the same time, in my opinion, the monthly medical bills are a true reflector of your health condition. I maintain a file of medical bills. Though my objective is to claim medical reimbursement, it helps me to check the medical inflation along with the health of my family members and me.
As a layman, if my annual medical expenditure was Rs 10,000 in 2006 & my health insurance requirement was Rs 2 Lac. Assuming it has now increased to Rs 25,000 in 2016 then it simply implies that my health insurance requirement increased 2.5 times i.e. at present Rs 5 Lac coverage is required. This calculation automatically takes care of medical inflation & health condition. Here I am considering my entire family by referring to the family floater plan.
I would like to add that though on papers the probability of hospitalization is still low because of age factor but an increase in the medical expenditure tells a different story about your health after adjusting medical inflation. Therefore, practical health insurance requirement is different from theoretical one :).
2. Quality Healthcare:
A few months back my daughter had a minor injury while playing. The nearest hospital was a well known Semi-Government hospital and we went to the emergency ward. No offense to anyone but we decided to take her to a private hospital 15 Km away from this hospital. The condition of the public healthcare system is not well. A common man prefers quality healthcare and is not willing to compromise on the same even if it is out of his/her budget.
On our mobile phones, we always save an emergency number of a nearby hospital. This hospital is the one where an individual would like to get treated in case of emergency. Though this thought is always in the back of the mind. For example, I have a lot of trust in one of the nearby private hospitals. Therefore, the cost of treatment in this hospital is a reference point for my health insurance requirement. Though on papers I need coverage of 5 Lac but that is subjected to change, considering the worst case scenario. Keeping in mind the cost of this worst case scenario in the hospital of my choice, I opted for a family floater plan of 9 Lac.
Here the term profession is used literally. For example, everything being equal, as a self-employed individual my health insurance requirement is more compared to a salaried individual. The simple reason being, I don’t have a regular source of income.
Secondly, you also need to assess the so-called health hazards linked to the profession. For example, some types of jobs are more stressful compared to others. On the other hand, if you are in a traveling job then you are more prone to accidents or health issues. Therefore, your health insurance requirement is high compared to an office job.
4. The phase of Life:
Though I might be sounding philosophical but research has proved that stress is one of the biggest killers. Therefore, stress increases the probability of hospitalization. The different phases of life have different stress level. To explain the uncertainty of life, i have a simple example to share.
For example, if your age is 52 years then you may consider & note down the phase of life with a gap of 4 years say 36/40/44/48 years respectively. Trust me life change upside down every 4 years. The next phase is completely unexpected compared to the previous phase. There is a sea change in financial priorities, stress level, and other influencing factors. You must have observed that some people at the age of 40 years health-wise look 50 years old. On the other hand, I know gentlemen and trust me he is 52 years but looks like in the late thirties. This is what you call the impact of the phase of life on your health. In this case, health insurance requirement of 40-years old is more compared to 52 years old.
The point I am trying to make is that health insurance requirement may vary in each phase of life depending on how the life is treating an individual. You may opt for or discontinue the add-on cover to adjust your health insurance requirement.
5. Health insurance premium:
In my post To buy Insurance or not I shared that term insurance, health insurance, and home insurance are must have insurance covers. Out of these three, the premium of term insurance is fixed for policy tenure and home insurance is one of the cheapest i.e. doesn’t pinch your pocket. The health insurance premium may change drastically depending on health condition. Besides these three you must have availed car insurance /2 wheeler insurance as statutory requirements. In other words, you don’t have any choice but to avail auto insurance.
The point i am trying to make is that health insurance has a major impact on your total premium outflow. It can increase drastically thus can potentially upset your household budget. Therefore, you have only 2 options i.e. either to maintain a good health or you can utilize health insurance portability option to fine tune the health insurance premium.
Another key point is that assuming i availed a family floater plan of 9 Lac and my annual premium is Rs 25,000. Now my health insurance requirement is 15 Lac but i would not like to increase my premium. Here i am assuming that i & my family are maintaining a good health. I can take advantage of health insurance portability to transfer my policy to insurance provider willing to provide me coverage of 15 Lac for Rs 25,000. It might not be feasible always. Therefore it is critical to fine tune health insurance premium with the health insurance requirement.
Words of Wisdom:
Health insurance requirement varies from case to case basis. With every passing year, there are mixed thoughts in the mind of an insured. One thought is that health insurance premium money got wasted but at the same time the insured individual thanks god for keeping his/her family members in pink of health. I consider health insurance as a hedge against the risk of hospitalization.
I can conclude that even though the health insurance premium may pinch your pocket but trust me in the case of any emergency, health insurance policy is your sole financial savior. I have gone through these situations and my policy saved me from financial shocks. I consider the premium paid as peanuts compared to the benefits attached. Thanks to health insurance providers :).
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