The best investment you can make is in yourself.
Why buy a medical insurance?
Investing in self ultimately results in good health and wisdom. The ultimate riches of life is both of these things (health and wisdom). How good you can enjoy your life is dependent on health and wisdom.
So, any investment in your health and well-being should be prioritized. But, no investment can guarantee a definite return, and all investments are risky to a certain extent. Luckily, we can reduce our risk by getting insured.
While a proper diet and exercise are investments in one's health, and education is an investment in one's wisdom. The major risks associated with these investments are getting hospitalized or untimely death.
How bitter or unfair it may sound, but we are more likely to get ill or meet with an accident. All of our hard work and investment in self will be destroyed in a matter of a few hours.
Hence, to mitigate this risk, we get insured. We transfer our risk to somebody else for a small fee called premium. When you buy a medical insurance, you will get refunded for what you spend(hospital bill).
Suppose that you bought a 5lac medical insurance plan for an annual premium of 7k but spent only 2lac under hospital bill, then you will be refunded 2lacs. So you don’t have to shell out from your savings.
How to buy a medical insurance?
Let the devil be out! Buying a medical insurance is tough, and it is tough, so the insurance industry can make money.
However, We will try to simplify this by making sure we have the below listed features covered in a policy as a must-have. Before that, we need to understand two more things.
First, how much do you need to get covered?
This question is subjective as it is dependent on the city you live in and the hospital you want to go to. Since healthcare tends to be expensive in metro cities than in towns. On an average, a 20lac medical insurance would be enough if you are living in metro cities and 5lac medical insurance if you are living in a town.
The price and claim rate are two most important factors before you choose your insurer(insurance company). Since the price (or premium) of medical insurance change every year unlike a life insurance which stay fixed throughout the maturity, tracking the price history should give an idea about how the price is varied with time. Look for a linear change in price compared to other insurance company’s policy prices.
Also, make sure that the policy claim settlements done by the company is not less than the 95%. That means for every 100 claims filed, at least 95 are settled. Look at the complaint data against claim settlements too and make sure the complaints are less.
Once you finalize the amount you want to get covered for and choose your preferred insurance company. Let’s see at the must-have features of a policy before you buy one from your preferred insurance company.
Co-Payment Clause: Always ensure that your policy does not have a Co-Payment clause. If your policy has a Co-Payment clause, then you’ll be forced to pay up to 30% of the bill, while the insurer will pay the remaining 70% of the bill.
Pre-Existing Disease Clause: If your policy has Pre-Existing Disease Clause, then it will not cover for the disease which you may already have before buying the policy. Policy might offer you to wait for a certain period for a claim on a pre-existing disease. This waiting period tends to be in between 2-4 years. So it is better to opt in a policy that does not have a lot of waiting-period for pre-existing diseases which you might have.
Disease Waiting Period: Same as the Pre-Existing Disease Clause, but for specific diseases. Some policies might have a waiting period for a specific disease before the insurer pays you the money. Always check for the policy that does not have the waiting period on diseases.
Sub-limits: Insurers may impose limits on hospital room and room rents. Restricting you of the flexibility to choose the room as per your preference by refusing to pay the bill beyond the set limit. Some insurers might also impose limits on the refund paid to certain disease. So, make sure to choose a policy with this kind of sub-limits.
Pre- and Post-Hospitalization costs: Diagnostic tests and medications also add up a lot to your bill, other than the hospital bill for surgery and room rent. It is best to buy a policy which would cover for your costs before and after hospitalization.
Day-Care Procedures or Treatments that last <24hrs: Some treatments might not require you to stay in hospitals for a whole day. Dialysis, Cataract surgery, Chemotherapy, and others kinds might be done in less than 24hrs. Make sure your policy will cover for these kinds of treatments or procedures too.
Good to have these features.
No-Claim Bonus: If you did not make any claim in a certain year, then your insurer might offer a bonus cover to your existing cover. It would be great if your policy offers this at the cost of the same premium. A 10% increase in cover as a bonus at no increase in premium is a good benefit.
Free Annual Health Checkups: Some polices offer you free health checkups every year at zero cost. If your policy has this feature, then it would be a great benefit.
A few more points before we wrap up.
Avoid buying insurance offline as much as you can, insurance agents makes money out of you by selling a wrong product. Commission business incentivizes them highly. And they also do not have the best interest in selling you the right product.
Get a medical insurance as soon as possible and don’t relay on the insurance provided by your employer as it won’t consider all the above stated must-haves in a medical insurance.
Finally, Insurances are not investment, they are only to mitigate the worse effects of bad times.
Let’s discuss the life insurances and tax saving that insurances offer in the next edition of the Minutia newsletter.
Until next time. Peace Out!