DIY Financial Plan step 5:
Safeguard your Wealth through Health Insurance

Reading Time: 1min 47sec

17-Mar-2024

Introduction

According to recent studies, healthcare inflation in India has been rising at an average rate of 14% annually, significantly outpacing general inflation rates of ~6%. With such a huge inflation rate, a common man in India must understand the critical importance of having robust health insurance coverage in place for self and family members.

Importance of Health Insurance

While goal-based investment planning is for our foreseen events in life like buying a house, planning for kids' education, or your retirement, insurances acts as the shield against the unpredictable or unforeseen events in our life.

In India, where out-of-pocket healthcare expenditure (or OoPE) accounts for nearly 47% of total healthcare spending (Health Ministry data), having health insurance is essential for one’s financial well-being. Moreover, health insurance policies often cover not only hospitalization expenses but also pre and post-hospitalization costs, ambulance charges, and even day-care procedures, providing comprehensive coverage for various medical needs.

Let's understand this with an example

Consider the Sharma family, residing in a metropolitan city. Mr. Sharma, the sole breadwinner, was diagnosed with Dengue, which became severe due to low platelet count, and required extensive medical treatment and hospitalization. Without health insurance, the family would have been forced to take out Rs.3 lakhs from their savings to cover the hospitalization expenses.

However, thanks to their comprehensive health insurance plan, the financial impact was significantly mitigated.

The policy covered hospitalization expenses, doctor consultations, and diagnostic tests, and even provided a lump sum payout for the diagnosis, allowing the Sharmas to focus on recovery without worrying about finances.

What is the right amount?

Determining the right amount of health insurance coverage is crucial. Experts recommend opting for a sum insured that adequately reflects your family's healthcare needs and accounts for inflation.

Consider factors such as

• age,

• medical history,

• lifestyle habits, and

• future healthcare requirements

when selecting a health insurance plan. It's also advisable to opt for a plan with features like lifetime renewability, no-claim bonus, and a wide network of cashless hospitals for added convenience and peace of mind.

Corporate employees usually get a decent health insurance cover, with an option to take an add-on for including dependents or family members. Looking into the liabilities, one should be prudent in selecting the right amount, which should be sufficient for all family members.

Conclusion

Before starting our goal-based investment planning, we should first ensure that we and our families receive timely and quality healthcare when needed.

Consider it as a proactive step towards securing your financial well-being in the face of uncertainty. Remember, when it comes to health insurance, it's better to have coverage and not need it than to need it and not have it.

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