Bullet Proof Your Health- COFP FP Pulse Article by Dilshad Billimoria
"Securing Your Health and Financial Well-being"
There's a famous saying that goes, "Without good health, life is nothing but a state of suffering, a mere semblance of death." I'd like to share a real-life case study involving a friend.
Recently, I visited the mother of a close friend who had been in a coma for the past four years following a severe brain stroke. Initially diagnosed with a Cerebro Vascular Accident, her chances of survival were grim, with just a 10% likelihood of improvement even with surgery and medication.
The family decided to proceed with the surgery at a reputable hospital in Bangalore, led by a team of neurosurgeons. While they managed to stop the bleeding, the damage to the brain stem, responsible for the central nervous system, had already occurred. Consequently, the patient fell into a deep coma, with a critical Glasgow scale score of 3. Remarkably, she survived, but after four years, she remains in a comatose state.
The family of four had only a health floater policy worth Rs 4,00,000 (Indian Rupees), a starkly inadequate amount given the substantial hospitalization and ICU costs, which totaled Rs 8,00,000. Luckily, the family managed to cover the difference without taking a loan, but it still imposed a significant financial strain on them.
I asked the daughter of the patient about the impact this situation had on her family, both emotionally and financially. She described it as the most challenging experience they've ever faced, with ongoing financial stress.
This is a heart-wrenching real-life scenario. The question is, have your clients realized the importance of having adequate health insurance coverage?
In situations like this, having a Critical Illness Cover could have significantly alleviated the family's financial burden. Critical Illness coverage should complement regular health insurance, providing a lump sum payout upon the diagnosis of a severe illness, offering some financial relief during such trying times.
It's crucial to understand that different insurance companies offer varying Critical Illness benefits, covering different conditions and coming with specific terms and exclusions. Therefore, it's essential to thoroughly study policy brochures.
Health insurance should be a fundamental element of everyone's financial plan. However, many people either neglect it or rely solely on their company's benefits. Unfortunately, corporate health coverage often comes with limitations, and it might not be enough to meet the unique needs of each individual or family.
Individuals can purchase multiple health insurance policies and claim benefits from each, subject to the terms of the contract with each insurer. It's advisable to use company benefits while employed and maintain personal health insurance for the future to ensure accumulated benefits over the years.
To prevent unexpected health shocks, consider policies that offer annual health check-ups. These not only help maintain awareness of your health condition but also highlight necessary preventive measures.
In India, "portability" of health coverage has been available since February 2011, allowing clients to switch to a better health insurance plan with fewer exclusions, improved benefits, and enhanced value for money.
According to the World Health Organization, health premiums are increasing at a rate of 22-30% per year. As financial planners, it's vital to help clients establish a health care corpus to counter these rising costs, which will continue into retirement and may not be covered by standard health policies.
Considering an annual medical cost escalation of 10%, a 30-year-old individual would need a corpus of over 52 lakhs by the age of 60, just to cover basic medical expenses. The rising costs of healthcare have pushed 40% of hospitalized people to borrow money or sell assets to meet their medical expenses.
In financial planning, addressing health care, premature death, critical illnesses, and life protection should be the foremost priorities. Only then can we move on to achieving life and financial goals.
India faces health challenges such as diabetes, cancer, and a surge in cardiac-related deaths. It's alarming that 30% of heart attack victims are under the age of 40. Some public sector banks offer cost-effective senior citizen health cover plans, which are regrettably underutilized because of their low premiums.
Other health insurance options to consider include permanent total disability cover, permanent partial disability cover, temporary total disability cover, family floater plans, individual policies, group health plans, and senior citizen plans. Additionally, an accident benefit policy for clients and their families can provide financial protection in case of temporary or permanent loss of earning capacity.
Furthermore, there are tax benefits available for medical insurance premiums under Section 80D of the Income Tax Act, which allow deductions up to Rs 25,000 for self and family, and up to Rs 60,000 if senior citizen parents are included.
When analyzing health insurance options, it's essential to consider waiting periods, pre-existing condition coverage, exclusions, policy conditions, network hospitals, and free-look periods. Each policy may have unique limitations, and a thorough evaluation is necessary.
To put it in perspective, the top causes of years of life lost due to premature death are coronary heart disease, lower respiratory infections, and stroke, according to the World Health Organization. The question remains: Are your clients still procrastinating when it comes to securing a health plan, critical illness plan, and an accident benefit policy?
Dilshad Billimoria Director - Dilzer Consultants Pvt Ltd SEBI Registered Investment Advisor ISO 9001(2008) Certified Company.
Sources: healthin.com, Savings and Investment Yearbook, WHO Report, Longer Living Statistics, IRDA.