Taking care of medical expenses at each life stage

Many people don’t buy medical insurance at an early age. The reason is the belief that since they are given insurance by their employers, they won’t need additional insurance. However, it makes sense to have additional more.

Health care costs are rising at about 20 per cent annually, whereas medical insurance premiums and sum assured aren’t keeping pace, which necessitates the need to have extra medical insurance. Experts suggest other than the plain vanilla medical plan, top-up and critical illness insurance can help expand the cover at each stage in life.

Between 20 and 30 years of age, a single person should opt for plain vanilla health insurance, with a sum insured of Rs 3-5 lakh. The premiums for these can be between Rs 5,000 and Rs 7,000. Buying a health insurance at an early stage will ensure you accumulate no-claim bonus, if any, and also get the clause of pre-existing illness out of the way. Depending on the insurer, pre-existing illness is covered after two-four years.

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“There are policies that offer increase of cover if there are no claims. The percentage of hike varies from company to company. Such policies are more beneficial if a person buys at early age,” said Lovaii Navlakhi, founder and chief executive officer of International Money Matters.

Those between 30 and 40 years should convert their existing policy to a family floater if they have existing insurance. “Customers can get the bonus and pre-existing illness benefit if the single-person plan is converted to family,” said Sanjay Datta, chief of underwriting & claims at ICICI Lombard General Insurance Company. The premium for such a plan with a cover of Rs 5 lakh for a family of four is available from Rs 12,000.

“At this stage, we also suggest people add critical illness cover. The sum insured depends on the person’s affordability,’ said Suresh Sadagopan, a certified financial planner. If the person feels the insurance sum insured is inadequate, after taking into account the cover from employer, only then should one go for a top-up plan, which gives a large-coverage at a cheaper cost.

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Some insurance companies are also willing to raise the cover but they might ask for a health check-up for members  above 40 years. Depending on the condition of their health, the premium would change. In some cases, the policy is treated as a new one, which means the bonuses and pre-existing illness are not covered. That’s why experts suggest a top-up cover. Once in the 50s, top-up is a must along with critical illness, as you are preparing for life after retirement. If you have an insurance policy of Rs 10 lakh sum insured, you can take a top-up of Rs 20-25 lakh. In this policy, the company will pay for the bills once the threshold is crossed. In the example above, it will be expenses above Rs 10 lakh.

According to Navlakhi, one way to keep pace with the rising health care cost is to invest in stocks of pharmaceutical companies. “Their stock price will reflect the rising prices and once the person keeps it for a goal, it gets easier to resist the temptation of selling it.”

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