For past few weeks, I have been doing quite a lot of research on finding the Perfect Health Insurance Policy. And my research has led me to one simple conclusion.
That there is no such thing as the Perfect health insurance policy. Ofcourse there are good policies. And then, there are few great policies too. But there is no Perfect policy out there.
So should I (or for that matter anyone) avoid buying one, just because I am not able to find the perfect policy?
The answer is a big No!
It is the same as the idea that one should invest, even if you cannot beat the stock markets.
Now what exactly is the ‘Perfect’ in this Perfect Health Insurance Policy?
Atleast for me, a perfect policy would cover all the diseases (including critical ones), should offer unlimited renewals, have hassle free claims procedure, no co-pay clauses, no hidden clauses which I might easily overlook, no caps on room rent, fees or anything, no disease-level or category-level caps, provide lump-sum amounts in case of critical diseases, etc. And ofcourse, it should not be very costly.
Though I can easily get into my preaching-mode and say that health insurance is not an investment, the fact is that I will still love to buy a policy that is cheap and offers me the world. The money I can save because of the low cost of the so-called perfectpolicy, can be redirected towards investing for the long term.
By the way just to put it on record, I do believe that health insurance should not be treated as an investment or a tax saving instrument. Period. You might still get tax benefits for buying health insurance, but that should not be the primary reason to purchase it.
Now you might have already found a policy that meets all the above-mentioned criterias of a perfect policy. But I am yet to find my perfect policy. Or maybe it exists and my definition of ‘not-very-costly’ is different from other people. In any case, I have moved on and purchased a policy which might not be perfect, but is still good enough.
The point that I am trying to make is that even if a policy passes on 7 of the 10 parameters you set, then you should buy it. Don’t wait for too long and try your luck.
This brings me to the topic of the post.
How can health insurance protect your wealth? I mean, isn’t health insurance something which one buys for health?
Yes it is.
Before we move forward with our discussion, please think and answer the following 3 questions:
Will buying a health insurance help you stay healthy?
Will not buying a health insurance, result in your poor health?
If not for health, then why am I even bothered about this whole concept of health insurance?
You have answers for all three? Great.
I am sure you have the right answers. But for the sake of making this post look complete, I will tell you the answers to first two questions.
And the answer is NO for both.
Buying a health insurance will not help you stay healthy.
Not buying a health insurance, will not make you unhealthy.
Wasn’t that obvious?
And now when you think of it again, it might seem strange that you never buy health insurance for good health. And to be brutally honest, majority of people buy it for tax benefits!!
But I am telling you…. One visit to a hospital without health insurance and you are sure to realize the importance of health insurance! I have seen it happening and it can be ugly. Really ugly.
So what exactly is this health insurance?
Simply speaking, it is an insurance coverage that covers the cost of an insured person’s medical and surgical expenses. So when you buy a health insurance policy, you are paying a small premium now, so that you don’t have too pay large hospital bills (if any) in future.
Health Insurance is neither a tax-saving product nor an investment. It is just a contractual promise by the health insurer, to pay a part or all of your hospital bills in case there is a need. Though there are many clauses and terms and conditions that govern this contract, we can ignore them for the sake of keeping this discussion simple.
So the whole point is that you don’t want to pay the large hospital bills. And rightly so. Who wants to pay them? No one.
But let us suppose that for some reasons, you don’t buy health insurance. And unfortunately, you get hospitalized and the bill to be paid is Rs 10 lacs. Now your health is not insured. So there is no one to pay the bill, except you. So you end up paying the bill by liquidating fixed deposits, selling shares, gold, etc.
Result is that you lose a major part of your wealth that you had accumulated.
Had you had a health insurance policy, you could have easily saved your wealth from being used up in paying medical bills!
Doesn’t buying Health Insurance help protect your wealth?
It does. No doubt about that.
Lets take another example to drill down this concept.
Now once again, you get hospitalized and the bill is Rs 10 lacs. But in this scenario, you had a health plan with a coverage of Rs 3 lacs. So you end up paying the remaining Rs 7 lacs.
Better than the first scenario. But it still makes a dent in your wealth.
Now even after getting it right, i.e. having bought a health insurance policy, you end up getting screwed. And that is because you had low health coverage. The reason can be lack of adequate funds on your part, or intentional decision to save some money by taking a low premium plans offering lower coverage.
Whatever the case may be, you end up getting screwed.
I really hope that you understand the importance of having health insurance in protecting your get-rich-plans.
In reality, it’s all linked. You. Your Health. Your Wealth. Everything.
You save and invest to get rich. But you try to cut corners by saving a few thousands and don’t buy health insurance. Bad luck strikes. You get hospitalized. You pay the bills by selling your assets. All your savings are gone. Your get rich plan is screwed. You start saving and investing again. You buy health insurance this time. But you have lost out on the benefits of compounding, because you sold all your original assets. You can never be as rich as you could have been in first place. And that is just because you saved a few thousands by not buying a health insurance in first place.
There are quite a lot of points which come to my mind about health insurance and various scenarios linked to it. For example, what should you do if your health is already covered by your employer’s health plan, whether your policy can help you beat inflation in medical costs or not, how to buy health insurance if you don’t have a lot of surplus funds, etc. But I guess its best to dedicate individual posts to atleast a few of these thoughts and scenarios, instead of clubbing all of them in just one post. So I will be doing such posts soon. Do share your personal experiences with health insurance and if you have more ideas that can help me further explore the concept of health insurance, then do connect through comments or mail me at [email protected]