March 16, 2015
With rising hospitalisation costs and medicine prices, higher incidence of lifestyle diseases and frequent advent of new types of illnesses, it has become important for every family to be covered under some sort of health insurance policy.
A health insurance policy, while annually charging the policyholder with nominal premium, pays for hospitalisation and related costs that a patient may incur on the treatment of his illness. In absence of a health policy, all the expenses incurred on treatment of a patient are borne by the patient (Or his family), which sometime may run into lacs of rupees and can exhaust all the investments made for other financial goals like child education/marriage or retirement or may even leave the family into total financial distress.
Over last few years, people have become quite aware about these issues and have been active to buy health insurance not only for themselves but also for their whole family to safeguard themselves financially.
There are a high number of people who are covered under group health policy provided by their employer but they do not have any personal health insurance policy. Some of the reasons cited by these individuals for not buying a personal health insurance are:
a. We are already covered under one policy so we do not need any other policy.
b. Taking another policy means wastage of money, as we will have to pay premium from our pocket.
c. We will take personal policy when we will retire or when our employer will not cover us.
d. We are healthy and the sum assured provided by the employer is sufficient.
e. The group policy covers parents also which the personal health policy shall not cover. And if it covers, the premium shall be very high.
f. The group policy covers pre-existing diseases, which the personal policy will not cover from day one.
g. Maternity benefits are available in the group policy, which shall not be available with individual policy.
The reasons can be many more. However, after observing my clients’ real life experiences, I can fairly say that having a personal health insurance is crucial even for an individual who is covered under a group policy. My conviction comes from the experiences of my clients that I share below.
1. On change of company, group coverage is not valid.
One of my esteemed clients was working with a large multinational, financial conglomerate in Gurgaon. He had quit his job and was under notice period when his son got infected by dengue. The hospitalisation expenses were 60k and this gentleman thanked his stars for only 3 days were left for the notice period to get over. Had the dengue mosquito bitten his son three days later, he would have borne the entire 60k expense, as the group cover would have become invalid. Question is, ‘Was he planning to take a personal health insurance when he was leaving the company or while he was in the notice period’? Obviously not. Taking a health insurance is never a priority of any individual when he leaves his current job.
2. Sum assured in group coverage may not be sufficient
One of my Noida based clients underwent kidney transplant at age 35. He was covered under group health insurance of 3 Lacs provided by his well known media employer. The whole treatment and transplant cost was more than 7 Lacs which was spent over 6 months period. Fortunately, he had a personal health insurance through me, which shared the burden of 3 Lacs. The balance amount of one lac was paid by him from his resources.
The group health covers are normally 1-3 Lacs sum assured and are meant to cover routine illnesses and are not sufficient to fund critical illness treatment. The additional cover of a personal health policy provides financial support at such hard times.
3. In case of development of any lifestyle or chronic disease or surgery, buying a new cover may not be possible
Many individuals believe that since they are healthy, they don’t need personal health cover, and that as such they are currently covered by their employer. They think that in case there is any medical treatment need, it shall be covered by the group policy, and later when they will leave the job or retire, they will take their own health policy.
How big this fallacy is. These individuals should understand that if and when they use their group health cover for some critical illness, they will not be able to buy a personal health insurance later as it is almost impossible to get a comprehensive plan once you have been treated for a critical illness.
Not only critical illness, due to adverse lifestyles, there is a high tendency of people getting affected by conditions like hypertension and high blood sugar. Again, in case a person develops these as the age increases, chances of insurance company issuing a new health insurance policy becomes very low.
A policy can only be bought when you are healthy. If you wait for your health to deteriorate to decide on to buy a health policy, you may not get one.
4. Continuing group cover benefits cannot be ported to any other company policy
A personal health insurance policy has waiting periods from the date of issuance for different illnesses. Also, a personal health policy provides no-claim bonuses because of which the effective sum assured in the policy increases with time for every claim free year though we pay premium only for the basic sum assured.
These kinds of benefits are not available with group policies. Even if we are covered by group policies for 10 years and don’t take a claim, these benefits of continuous past coverage and not availing of claim do not get passed to a personal health policy with another insurer. When we buy a personal health cover, it starts fresh from the day of its issuance and does not provide freedom from waiting periods and does not consider claimless history to enhance the risk cover of the policy.
5. Co-pay clause-Burden on individuals
Nowadays, due to high/bogus claims in group policies, certain group policies have co-pay clause wherein a certain percentage of claim (Normally 20-30%) has to be borne by the individual. In such cases, even a nominal claim of 50k means that the individual has to pay 10k (20% of 50k) from his pocket and only balanced 40k (80% of 50k) is paid by the insurance company. Knowing that a percentage of total claim shall be borne my himself, a person may refrain from availing the best possible treatment due to higher costs.
By spending a much lower amount than one shall spend as co-pay amount in case of a hospitalisation, a person may as well buy a health cover on his own and get himself treated in best possible manner without worrying about the co-pay amount.
I sincerely believe that any person reading this blog and not covered under any health insurance should immediately opt for a health policy for his whole family. By not doing so, the individual is taking huge risk on his current investments.
With premiums as low as 8-10k per annum for a family floater policy for of 3-4 members, persons covered under group insurance plan should start thinking about buying a minimal risk cover for the whole family. This plan shall act as an enhanced risk cover over and above that of the group policy. It will also be easy for the policyholder to increase the sum assured in the same policy in future without any medical tests, when he is changes his job or when he grows old and retires.
Just like any individual who builds his own house even after being provided a company accommodation, just like you would own a car despite being provided a company owned car and like so many other assets that I can list here, one needs to build his own health insurance kitty despite getting health coverage from the company. You do not run any risk on your investments when you leave a company and leave its house, car, laptop, mobile etc. behind, but you do run a risk on your investments if you don’t have personal health insurance.
So, think of personal health insurance as a part of your overall financial plan and go for it today. You may not have it or you may not get it when you most require it.
Pawan Agrawal is the founder and managing partner of Investguru. You may reach him at firstname.lastname@example.org .