Why do you need health insurance?
“In this world full of uncertainties, one needs to be certain about the protection of their loved ones. This can be done by securing oneself with, the armour of health insurance.”- An unknown author perfectly summarises the significance of health insurance in these few words.
A health insurance policy is a legal contract between you and a health insurance provider. In exchange for regular premiums paid by you, the insurer remits a sum of money to you after a definite period known as maturity or your loved ones in case of your demise.
However, apart from acting as a financial safety net for your loved ones in your absence, health insurance has some other benefits as well. It can act as a savings instrument, provide financial freedom to you in your old age, and helps in reducing your tax liability. The reasons for investing in health insurance are plenty. However, purchasing one of the best plans for yourself can be a little tricky.
How can you choose the best health insurance plan?
Here is a guide to help you select the right policy that suits all your needs.
1. Assess your health insurance goals
Goals may vary from person to person. You must plan for your health insurance goals with the help of a suitable health insurance policy. If safeguarding your family’s financial security is your primary goal, you can buy a term insurance plan that offers a high coverage at affordable rates.
If you are looking to save for your child’s education or thinking of buying a dream house for yourself, you can consider investing in a unit linked insurance plan. You can also buy a retirement plan which will ensure regular income for your everyday expenses post-retirement.
2. Calculate the optimal insurance cover that you need
Many financial advisers suggest that your health insurance cover should be at least ten to fifteen times of your annual income. However, there are several elements that you should consider while estimating the ideal health insurance amount. If you have debts, then meeting the Equated Monthly Instalments (EMIs) might be challenging for your family in your absence. In addition to this, you need to arrange funds for your children’s higher education or marriage. As a result of inflation, your family might also face difficulties in maintaining their current lifestyle in the absence of the principal breadwinner. Thus, you need to find the total of the following:
- Your family’s annual expenses multiplied by the number of years for which income replacement might be necessary
- The total amount of your outstanding debts and the cost of repaying mortgages, if any
- The amount you need to set aside for future expenses like your child’s education, wedding, etc
From the expenses mentioned above, you can deduct the sum of your liquid assets like cash in hand or bank and any other kind of investments to arrive at an adequate health insurance cover.
3. Determine the amount you have to pay as the premium and find the policy offering the best deal
You can use online premium calculators to ascertain how much premium you have to pay for the required amount of health insurance. Compare different plans to find a policy that offers the highest coverage at rates that fit your budget. You should also assess your premium paying term based on your earnings for the upcoming years.
4. Select the correct policy term
The term of the policy should ideally be the number of years your family will be financially dependent on you. The general thumb rule for deducing the ideal policy term is to subtract your current age from the age at which you expect your income to stop or wish to accomplish a particular health goal.
5. Do not conceal facts from your health insurance provider
If you consume tobacco or alcohol, or work in a hazardous industry, inform your health insurer about these details. You must also declare any existing illnesses or family history of critical ailments. These factors influence your risk profile. Providing accurate information is vital to prevent claim rejection in the future.
6. Read the final policy document carefully
Understand all the terms and conditions clearly, before you make the final commitment. Find out relevant details such as the lock-in period and the circumstances in which the claim will not be valid.
7. Buy health insurance at an early age
Health insurance premiums are lower when you are younger. Thus, you can save on the cost of your premium if you buy your health insurance policy as soon as you start earning. You can begin with lower coverage and add more riders as your income increases.
8. Choose a comprehensive plan
Medical contingencies might affect your income adversely. Hence, it’s necessary to choose a comprehensive plan, with appropriate riders for yourself:
- Critical Illness rider provides full claim payout if you are diagnosed with any serious medical condition like kidney malfunction, cancer, or cardiac diseases. This amount can be useful in meeting treatment costs and protect you against the loss of income due to such illnesses
- Accidental Death Benefit rider provides your loved ones with an additional amount in case of your sudden demise due to an accident. This safeguards your family’s future from the threat of impairing the regular flow of income to maintain their current lifestyle
- Permanent Disability rider functions as a waiver for all your future premiums if you are permanently disabled due to an accident. Your health cover continues throughout the remaining policy tenure
- Terminal Illness rider gives you access to funds for dealing with terminal ailments like cancer by providing a full payout before death
It would help if you always looked for an insurance provider that offers such benefits without charging you any hidden fees.
9. Evaluate your health insurance needs regularly
It is essential to assess your health insurance needs from time to time as your financial goals might change with age and life events like marriage or childbirth. You can review your health insurance needs periodically and adjust your cover accordingly. This will also take care of inflation.
Health insurance is an essential financial tool. Keeping these tips in mind, a thorough research can help you make an informed decision to find the best health insurance policy with sufficient coverage.