In Asia Health 2020 conference organised by the CII, it was mentioned that about 50-60 million Indians are pushed into poverty every year due to their inability to finance out-of-pocket healthcare expenses. India has one of the highest out-of-pocket expenditure (OOPE) in healthcare where 70% of the health care expenses are borne by customers. Out of this healthcare expenses about 95% of it is funded by pocket expenses and 5% by health insurance. This results in the additional 7% of people being pushed into poverty every year.
Out-of-pocket expenses on health eat into your savings and can derail your financial planning journey. If you want to avoid these expenses, there is only one solution – invest in a health insurance plan. You cannot change the OOPE in India, but you can surely increase the insurance portion of it!
Health insurance plans have become a necessity in today’s times. The medical expenses are rising, this is no secret. Along with this, diseases are also on the rise. Today the world is grappling with the COVID pandemic, who knows what disease would befall in the common years. Moreover, if you are covered under a health insurance plan, you can protect against lifestyle illnesses, hereditary diseases and even accidental injuries.
Here are some common ways how health insurance keeps your financial planning on track –
1. It prevents a financial crisis
If you check the coverage benefits of health insurance plans, you would find that the plan covers almost all types of medical expenses that you might incur. As such, when there is a medical contingency which results in a hospitalisation, you can get coverage for most of the medical expenses that you incur. When your medical costs are covered, you can avoid a strain on your finances.
Takeaway: Thus, health insurance plans help you prevent a financial crisis. They cover your costs and prevent your savings from being drained. You can, therefore, plan your financial goals without worrying about a medical crisis from wiping out your savings. Your financial goals are, therefore, protected.
2. It helps you plan for rainy days
Do emergencies announce when they are going to strike?
They don’t. However, if you plan right, you can meet them whenever they strike. Most of the emergencies require you to be financially prepared and so, one pillar of financial planning is emergency planning.
Takeaway: Health insurance plans help you plan for medical emergencies. They help you ensure that if any untoward medical contingency occurs, you would be prepared to face them, without derailing your financial plan.
3. They allow coverage for the whole family
Health insurance plans are available as family floater plans that cover all the members of your family. Moreover, if your parents are quite old, you can even invest in senior citizen policies that cover their medical needs.
Takeaway: When all your family members are insured under health insurance plans, no member’s medical needs would impact your financial planning. You would be able to meet the medical expenses easily, without breaking into a sweat.
4. There are different types of health insurance plans
Did you know health insurance plans extend beyond the scope of normal hospitalisation?
There are different types of health insurance plans allowing you a complete scope of protection against any medical emergency, whether it involves hospitalisation or not. For example, critical illness plans cover major dreaded illnesses and medical procedures. They pay a lump sum benefit so that you can meet your financial obligations if you suffer from any covered illness. Thus, if you have a debt whose repayment becomes a burden due to a critical illness, the benefit that you receive can be used to pay it off. Similarly, there are COVID specific health plans that help you battle the financial implication of the current pandemic.
Takeaway: You can opt for these different types of health insurance plans for a complete financial arsenal at your disposal. Whatever medical attack that you face, you can wield a health plan and protect your finances.
5. Let’s not forget the tax angle
Okay, so this one is not so much about preventing a derailment but more about increasing the mileage of your financial plan. Health insurance plans help in tax saving. The premium you pay earns you a deduction under Section 80D. You can claim deductions up to INR 1 lakh and save up to INR 45, 000 in taxes (considering you are in the 30% bracket). Imagine what you can do with these savings!
Takeaway: You can invest this saving towards various avenues and supplement your investments. This tax saving would bolster your financial plan and help you accumulate a larger corpus for your goals.
In your quest for financial independence, make health insurance your travelling companion. The plan would protect your finances and ensure that your journey does not get side-tracked or that you don’t have to take any detours along the way.
(By Dhirendra Mahyavanshi, Co-Founder, Turtlemint (An InsurTech Company)