Self-reliance is the only road to true freedom,” says author Patricia Simpson. And, true self-reliance comes from financial freedom.
Throughout our lives, we strive hard to earn, save and invest for the future, precisely to ensure a happy and self-sufficient retired life. As we age, our busy and erratic lifestyles invite health problems that steadily aggravate to become major illnesses later on. Invariably, most of us spend much of our current salaries or retirement savings on health care, decisively lowering the quality of life. Thus, financial independence comes from leading a financially balanced life, having availed the optimum instruments for specific purposes in life—be it savings, investment or insurance.
As per the 2016 National Sample Survey Office (NSSO) on health and morbidity in India, around 86 per cent of the rural population and 82 per cent of the urban population were not covered under any health insurance scheme. According to the World Health Organisation (WHO), 47 per cent of rural areas and 31 per cent of urban regions in India depend on emergency borrowing or sale of assets for hospital admissions and bill payments. Additionally, 3.2 per cent of Indians fall below the poverty line every year, owing to exorbitant medical bills.
By and large, Indians have no medical contingency funds. Hence, health care costs continue to ruin families across rural and urban India. Some of us may ignore a personal health cover, citing one provided by the employer, but such coverage would largely depend upon their budget and the number of people covered. Thus, if one takes an ideal health cover as early as possible in life and continues in line with age and health issues, financial freedom can be achieved to a great extent.
HOW TO ATTAIN FINANCIAL FREEDOM
Protection against emergencies: If planned well, your health insurance can provide adequate risk coverage from unforeseen medical emergencies, including the cost to treat critical illnesses. One must analyse one's requirements in detail, including the number of family members to be covered, common medical or hereditary problems and the average medical spend in the last few months. One would see that on an average, costs of medical tests, doctor fees, hospitalisation and medicines have gone up. As inflation continues, not acquiring an adequate health cover can ruin your financial independence.
Don’t be under-insured: One should seek a higher sum assured if the family is large, especially if parents and senior citizens are involved. You can start with a cover that you consider reasonable to meet regular and emergency expenses so as to avoid the trap of under insurance—seeking a lower sum assured for the sake of a lower premium. However, even if the sum looks large or good enough, restrictions like sub-limits and co-pay in policies (including the cap for a particular illness or a facility and limits on surgeries) can ruin your expectations. One way to get a good sum assured is to use the 'top-ups' smartly (if you need Rs 15 lakh cover, you can take a base cover of Rs 5 lakh and a top-up of Rs 10 lakh—saving on the premium).
Lower your costs through smart choices: You can secure your family’s health through a family floater plan, which is available at a reasonable premium. Basically, a family floater medical policy covers you, your spouse and your dependent children (up to the age of 23 to 25). The premium price would depend on the opted cover, the number of members, selected sum assured and the eldest member’s age. However, keep the health status and medical history of the insured in mind so that you estimate a sum assured far more accurately. This way, the entire family gets financial freedom, knowing that no medical emergency can drain their resources. Also, opting for individual sum insured, especially for parents, helps provide adequate coverage and also gives a family discount in premiums in most health policies currently available.
Don’t liquidate assets for hospital payments: Besides consistency in coverage, choose the right options to avoid any financial burden. Look for the nature of the benefit (must be cashless), network of hospitals (an ideal policy must have a few leading hospitals near your residence) and other benefits. For example, you must preferably buy a policy with no or suitable limit on rent for a room in the policy, considering the costs in your city. Or else, you may end up paying the difference in room rates.
Choose the right insurer: A claim is a moment of truth for any health insurer and having systems and processes in place helps them rise to the occasion. Hence, a trusted brand and a promoter-driven organisation are key factors to keep in mind. Also, one must check if the insurer processes claims in-house or through a TPA (third party administration). Apart from this, it is important to check for the claims settlement ratio, claims paying ability, claims and cashless turn-around-time (TAT) of the health insurers. Ideally, opt for an insurer with an in-house claims unit, which usually have a better TAT and grievance handling processes.
One should not wait till old age to get insurance. Many of the health insurance policies cover the preexisting ailments after a particular point of time, hence it is ideal to start early at a lower premium rate than be denied one later in life.
Rastogi is chief actuary and head, retail underwriting and claims, HDFC ERGO General Insurance Company Ltd.
