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Strategic Security System Against Healthcare Expenses

Fact No.1: Health issues are multiplying

Fact No.2: Healthcare expenses are ballooning

Fact No.3: Health insurance premiums are swelling

Result: Even one instance of a serious illness in the family, can seriously and completely erode your net worth. Hence, health insurance equals wealth insurance.

Beware! The matter does not simply end with merely buying a health insurance policy. No. That's just the beginning.

We all have to build a strategic security system, against the (rapidly) rising costs on medical treatment and insurance premiums.

Accordingly, the five layers of a typical complete protection plan — against the mounting medical bills — are discussed below.

Layer 1: Health Insurance Cover
The first obvious step is to buy a conventional "indemnity-based" medical insurance policy. Under a typical indemnity-based policy, your actual expenses on medical treatment are borne by the insurance company (subject to a maximum of the Sum Assured and other policy inclusions / exclusions).

For a normal family with no adverse family medical history, a cover of say around Rs.3-5 lakhs would, in most instances, take care of the expenses on account of hospitalization due to normal illnesses.

So this becomes your first layer of protection.

Layer 2: Super Top-up Policy
Of course, Rs.3-5 lakhs cover is the bare minimum. Treatment of slightly complicated or prolonged medical aliments will cost much more. However, insuring for such eventualities through a standard indemnity-based policy with a high Sum Assured, could be quite expensive.

As such, instead of buying a large insurance cover, you can take an average indemnity-based cover as mentioned in Step 1; and supplement the same with say Rs.5-10 lakhs of a Super Top-up Health Plan. This will give you the same benefits, but at much a much lower premium outgo.

Given the risk of exorbitant medical bills, don't forget to add this second layer of defence.
Build a suitable protection plan against mounting medical bills.

Layer 3: Critical Illness Cover
As you will note, expenses on treatment of most normal illnesses will be suitably taken care of by the security layers 1 and 2. But, they may prove inadequate in case someone in the family suffers a critical ailment or disease.

This is where Critical Illness covers come into the picture. Depending on one's budget, critical illness cover of say Rs.20-50 lakhs, would be our shield against grave threats of such serious illnesses.

That's not all. Critical Illness cover also offers a unique benefit, which you should be aware of.

Hence, it would not be a bad idea to add this third layer of defence too.

Layer 4: Daily Hospitalization Plans
Given the wide variety of expenses on medical treatment, not all expenses are covered under the conventional policies, super top-up plans or the critical illness covers. There will always be some 'uninsured' extra expenses. Fortunately, these will normally form only a minor percentage of the total cost.

To cover for such expenses, you can buy a Daily Hospitalization type of insurance plan... with a reasonably nominal sum insured. Such policies provide a fixed sum on per-day basis of hospitalization, and can be utilized for such sundry expenses.

Depending on your financial capabilities, you may or may not go for this fourth layer of protection.

Layer 5: Health Corpus
Buying too many policies or very large covers, can become a burden on the pocket and also cumbersome to manage. And, given that the premiums increase with age, this burden will only grow as you grow older. As such, relying 100% on insurance plans is not advisable.

One has to build a medical or health corpus too (on the lines similar to the retirement corpus). This corpus will take care of a part of the medical treatment costs, thereby protecting your investments from serious damage.

This fifth layer of suitable sum of own money — working together with various insurance covers — would be a more prudent and cost-effective approach.

Of course, no security system is 100% perfect.

Nevertheless, planned security is any day better than nil / minimal security.

Since (a) the threat levels are quite significant and (b) the probable damages immense, you cannot be complacent about the financial well-being of your family and yourself.

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