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Words of Wisdom : "Two roads diverged in a wood and I took the one less traveled by, and that made all the difference." ~ Robert Frost

Are both 'own' and 'group' medical covers necessary?

Financial advisers, including myself, advocate that you must buy your own medical insurance policy even though you and your family are covered under a group medical policy of your employer.

In this regard, I recently received a query "I am curious to know as to how it makes sense for someone to buy a medical insurance even if employer provides full medical cover for the family. Would those premiums paid on medical insurance be not a waste? Most large cos. do provide group medical insurance – so even in the event of change of jobs, this should continue till retirement. And I can buy my policy after retirement."

Here's my response to the same:

1.  Given the age factor, buying a new policy at retirement would be difficult as it becomes a high risk for the insurance company. Whereas renewing an existing policy is now mandatory.

2.  Moreover premium increases steeply in later years. So if there is a continuous policy for many years with no claims, one may become eligible for no-claim bonuses.

3.  Further, in a new policy no cover would be available for the first few years for certain illnesses as all policies have a clause that excludes cover for specific ailments and pre-existing conditions for a certain pre-specified period.

4.  Unlike in the past, a professional nowadays changes many jobs. Also, given the increasing trend of hire-and-fire, there may be times when a person is unemployed for many months in between two jobs. Therefore, there could be periods when a person is uninsured. An own policy takes care of this contingency.

5.  While most group policies cover pre-existing illnesses, some may not. So in case of a job change, one may possibly not be covered for pre-existing illnesses.

6. To cut costs, companies are either reducing the sum assured or not enhancing it in line with the rapid pace of medical inflation. This may lead to inadequate cover.

7. Even the benefits offered are being curtailed by many companies. Some don't cover parents. Some don't cover spouse. (It would not be a bad idea to check the terms of your group policy to avoid any unpleasant surprises later.)

Yes, this will be an extra cost. But medical insurance premiums are anyway not too much of a burden on the pockets. Plus they come with tax deduction. So, given the aforesaid benefits, this cost is worth paying for. Moreover one can start with only a small cover of say Rs.1-2 lakhs and then gradually increase the same as one approaches retirement.

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