If you have a protection portfolio, you need to include a health insurance cover plan in it. It’s an absolute must-have! However, in certain cases, a few of the plans you have may not add any value whatsoever to your portfolio. If that happens, it’s best to dump the plan that’s not of any value to you.
But what are the specific situations in which you should scrap your health cover? What is the ideal time to do it? Here’s when renewing your policy or purchasing might not prove to be the healthiest option-
Renewal premium hike
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Over the last couple of years, many senior citizens have had to pay up a renewal premium hike of up to 100% for their health insurance. Afraid of not having a health cover when needed the most, they’ve gone ahead and paid the steep renewal premium anyway. If you ask a financial planner, about it, this was a grave mistake.
As per leading financial planners, the ratio of premium to sum should not exceed 20% as beyond that it’s no longer a viable option. In fact, the premium to sum ration should be treated with caution even if it increases by 10%, say health insurance advisors.
For instance, if you opt for an INR 4 lakh insurance cover as a senior citizen and discover that the renewal premium has increased to the amount of INR 54,000 per annum, you should let this particular policy lapse. Especially if you have to endure room rent restrictions or opt for co-pay.
Most financial advisors reiterate the point that when the premium amount exceeds 10% of the insured sum, careful thought should be put into it before proceeding. You should figure out if it offers utility and then decide accordingly. As for renewal premiums that exceed 25%, they simply do not make sense.
It’s better to start a whole new medical emergency fund altogether by keeping the amount aside in a fixed deposit or other similar substitutes.
Sub-limits on room rent
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Let’s begin by painting a picture-
You purchased a health cover worth INR 3 lakhs a couple of decades ago, say 20 years, when you were at the age of 45. At that time, the plan had a room rent limit of 1% of the insured sum, which comes up to INR 3,000. This amount proved sufficient to cover hospital bills and get you the room you want shall you need it. Fast forward to the present day and your premium has shot up to INR 22,000. Also, the hospital and the room you want now come under the premium category.
The point? Your chosen plan may have been suitable for 10 years but it’s not always going to be. In such a case, you’ll face a severe reduction in the total claim payout. Why? Because expenses such as OT, anesthesia, the doctor’s fee – all of these come under the category of room rent.
So if you pick a room that is priced at INR 5,000 when your eligibility covers a room of INR 3,000, you will incur a equal deduction of 33% on each charge head. Hence, let’s say if your claim amount comes up to INR 1.5 lakh, the amount you’ll get likely won’t be higher than INR 1 lakh. By this logic, the amount of money that outgoes would be INR 72,000, which shows that a renewal is simply not justified.
As per financial advisors, if you have to go through the hassle of co-pay, sub-limits and coverage exclusions, you are better of creating an emergency medical fund on your own.
With that being said, ensure that you don’t solely look for feature-packed policies of the highest sum that guarantee max tax benefits. If you’re a family of four and you, being the eldest, are above the age of 40, you should ideally get a health cover of INR 5 lakh after reviewing your requirements. However, when you do get a health cover, make sure you take inflation (of every 5 years) and hike into account.
Capping on the basis of disease, co-pay
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Think about it. You take an INR 4 lakh policy for which you pay a premium of INR 35,000 and the policy comes with a co-pay of 20%. What would your cover be? Well, it depends on the approved claim. If that is INR 1 lakh, the payout you get will amount to INR 80,000; and your outgo will come up to INR 55,000. Of course, this amount does not take registration exclusion and non-medical expenses into account.
Capping on the basis of disease can also lessen your health cover’s overall utility. In this case, the payout for surgeries, specific diseases and other charges come up to 25-50% of the insured sum or an ad-hoc amount.
Steep premium at old age
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Experts and insurers will tell you that you should purchase policy for yourself at a young age so that the terms and conditions of it work in your favor. However, chances are you won’t get a health policy for yourself till you grow older or suffer from a disease. Of course insurance will cover you at this stage as well, but the premium you pay will be much higher. So will be the restrictions you face.
As per health insurance advisors, if you suffer from grave ailments before opting for a health cover plan, the insurance you get will be fraught with restrictions and hence, not worth getting.
The alternative way
The claim experience you have with your insurer matters too. If the insurer you have keeps rejecting your claim, you should move on. At least that’s what financial advisors have to say. Should your insurer pose to be a challenging one, it’s best to move on to greener pastures as soon as you come across a better deal. After all, you still have other options rather than simply forming a health contingency fund for yourself.
If a health insurance is out of the question, you could opt for a cancer plan or a plan that covers other critical illnesses. Just make sure that a minimum of one expensive disease is a part of the plan you get. You can even get a top-up insurance if you want; especially if the basic policy proves to be a bit too pricey.
However, you can only get a top-up insurance if you have already spent your pre-agreed amount. So keep that in mind.
To conclude, you should only scrap your existing health cover if you’ve exhausted every other option available to you. It should be a carefully executed decision after all because if one policy lapses, signing up for another one is going to be far from easy.
According to health insurance advisors, health insurance serves as the perfect weapon on account of being an annual contract with the guarantee of lifelong renewal. Health covers are basically the best wealth protectors in your insurance portfolio. No matter the size of the corpus, you can be sure it will be exhausted as your cover is renewed on a yearly basis.