The financial implications of not having health insurance in times of distress

If you do not have health insurance or enough funds to cover medical treatment, it is highly likely that you will avoid visiting the doctor even when it is absolutely necessary for you to do so. It is said that a stitch in time saves nine, which is all the more true for medical emergencies.

When disaster strikes, you will not be in a position to think rationally or logically and may make financial decisions that could cost you big in the long run. Whether it is borrowing money through personal loans, credit cards, unscrupulous money lenders or even relatives, it could leave your financial future in trouble, as it can ruin your credit score if you do not pay back your loans on time and in full. This will impact your ability to obtain future loans like home loans, car loans or business loans and drastically reduce your quality of life.

Preventive health care, too, is usually covered by insurance in the form of free annual health checkups. This helps ensure that health issues, if any, are detected at the early stages and hence can be treated more easily.

Rising medical expenses

Healthcare inflation in India increases at a significantly higher rate than salary increments or general inflation. The cost of common medical procedures like a cardiac bypass surgery, total knee replacement or treatment for a brain stroke are high enough to derail most people’s financial planning and set you back a couple of years or even decades.

Reliance on savings for medical expenses

If you don’t have adequate health cover, you will have to rely on your savings to fund any essential medical treatment.

In dire situations, once your savings get over, you may need to sell your investments and assets to fund your medical treatment.

Many Indians take loans from friends, family and nowadays even resort to crowdfunding platforms, asking for donations online to fund their treatment after exhausting every other possible route.

It is important to save money in an emergency fund and a medical expenses fund. Having adequate health cover helps reduce your risk until the time you are able to save enough to fund your medical treatment by yourself, if you so choose.

Cashless claims are often approved within less than 2 hours of hospital admission. However, if there are issues with documentation, usually on the part of the hospital, these could be denied by an insurer, leaving you to pay for hospitalization with your own savings and then claim a reimbursement later, within the timelines specified in the policy document. For this to happen, you should have a medical expenses fund saved up and ready for emergencies.

You must also note that not every item of the bill will be considered as medically necessary and reimbursed by the insurer, so you should budget for being able to pay about 10% of the total bill as non-medical expenses. This includes items such as refreshments for an accompanying person, hospital issued visitor identity cards, certain consumables like gloves etc. depending on the policy document and what is covered by your plan.

How health insurance can ensure financial well being

Health insurance helps drastically reduce the chances of financial distress by taking responsibility for the risk of hospitalization of the insured person. Some plans also provide for outpatient (OPD) expenses, ambulance expenses, pre and post hospitalization expenses and alternative medicine such as AYUSH treatments.

Health insurance companies collect premiums from a wide pool of people, which helps distribute the risk of hospitalization and medical expenses among all of them, resulting in a win-win situation for both the insured persons and the insurance company.

Tax benefits

According to the Income Tax Act of 1961, Section 80D, health insurance premiums paid up to ₹ 25,000/- in a financial year can be claimed as a tax deduction. A further amount of up to ₹ 25,000/- can be claimed for parents, and up to ₹ 50,000/- if your parents are senior citizens. Therefore, getting good health insurance is a no-brainer.

Your responsibility

As an insured person, it is your responsibility to know how much cover you need, based on the average costs of various common procedures at your choice of hospital near you. It is prudent to call up the hospital before buying a cover and ask them about the average billing value of various procedures and make a decision based on these amounts so that you do not have inadequate coverage when you need it the most.

It is also good to know if the hospital you choose to visit is part of the insurer’s network. Most good hospitals have tie-ups with many different insurers, making the claims process easier.

Conclusion

Health insurance is a complex product, as it is usually customized for an individual based on their unique medical needs and history. Therefore, it is important that you have the right guidance to choose a policy that fits your needs. Contact us if you need any help in choosing your health insurance plan.