Health Insurance is probably the most important and most overlooked part of financial planning, more so health insurance for parents as they are not covered in many employer policies. In this post, we will cover points that will help in buying the right health insurance for parents.
So why is health insurance important
Insurance is something that seems like a waste of money when nothing adverse is happening in life and hence it feels like an unnecessary drain of money most of the time. However, when something does go awry, insurance can play a critical role in saving one’s wealth that was accumulated over a long period of time.
While buying insurance can be a small drag on the budget, however, not buying it can make you poor and that too in already adverse situations.
Health insurance can actually also help get better care (than what people might be able to afford without insurance) in case of a medical emergency. So there is peace of mind that wealth is not getting eroded while receiving superior care.
From a numbers perspective also, healthcare inflation is double the overall inflation and hence the medical costs are becoming costlier at a rate at which even investments are not able to keep up.
Let’s now come to why health insurance for parents is extra important
While health might seem good when you are young and often people take it for granted (eating unhealthy food, not exercising, etc.) the ill effects often catch up once people start getting older. Therefore the probability of medical issues for parents is much more than the probability for younger people.
Secondly, at older age medical problems take longer to heal and hence higher costs from a period of treatment perspective.
So the probability is higher and the costs are higher per instance so it is always a good idea to have health insurance cover for parents.
But my parents are covered under my employer’s insurance
Many companies provide health insurance for employee’s families (group cover). While some may classify dependent parents in the family and allow for their insurance, others might not or may charge extra premiums.
So, either because of dependent classification or because people don’t like to give a higher premium to include parents or otherwise, many times parents are not included in the group cover.
Even when parents have been covered the sum assured is generally low considering the number of people and health needs explained above.
Sum assured meaning and how much is sufficient?
Sum assured is the maximum amount the insurance company pays in case something might happen. While most people know the meaning, the sum assured that they take is generally very low compared to what they should take.
Generally, the policies that the employers give are around 2-3Lacs, mid-senior folks may get around 5L. When people take personal policies also, many people prefer the 5L policy owing to lower premiums.
So generally these policies are around 5L, while healthcare costs have skyrocketed. Even minor operation can also run in lacs, therefore there is little cover for major health problems. Also, if used at the beginning of the year, you might be left with 0 cover for the remainder period.
Generally speaking, parents’ cover should be separate from the employer’s cover because you might switch jobs and then the next job might not have parents covered. If you take the policy then, there is the issue of the waiting period for pre-existing diseases and some diseases which develop in the long term.
It is a good idea to take the policy when the parents are covered by group insurance – any expense for waiting period can be covered by group insurance and you can get no claim bonus on the personal policy.
Parents’ policy’s sum assured should be taken considering:
1. The kind of risks that they face because of age or medical issues,
2. The care you would want them to receive,
3. Your premium paying power.
When taking a floater cover for the family and deciding about the sum assured please do keep in mind diseases like COVID-19 or even accidents which can affect multiple people of the family at once and thereby take appropriate cover.
As mentioned above, the healthcare costs are much higher than the cover provided by group insurance. Hence, according to me, people should get top-up for themselves.
There are options in some plans to get higher cover by paying extra premium. If you want to stick with the employer long term then you can pay an extra premium and get a higher cover without any waiting period.
However, if you don’t plan to stick around, it would be better for you to get a top-up from outside for your (+spouse +kids) policy and get a separate policy for parents as discussed above.
Now let’s come to the disclosures. Many people have the habit of not disclosing their medical conditions at the time of taking policies. They do so because they want to save on premiums or get a better policy without waiting periods.
Do note that if at all there is a medical situation, you would tell the doctor the truth and he will note it in your chart and that chart will go to the insurance team. If at that point the team finds that you have lied or withheld information from them, they can deny your claim.
Now, there is a concept of plausible deniability in disclosures. If you know material information about a case, you should tell the insurance company. However, you are not obliged to tell something if you don’t know about it. So if a person has high Blood Pressure but has not got tested and hence does not know about it, his claim cannot be rejected. There is a Supreme Court judgment about this.
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Selecting the insurance provider and policy – important factors
Now since it is clear that health insurance for parents is imperative, let’s discuss how to finalize the provider and policy. There are many big and upcoming names like Care Health Insurance and Max Bupa which can be good options in case one does not wish to do a lot of due diligence, however, one should look at the following factors while selecting the insurance provider and the policy. To compare the following, it might be good to get multiple quotes and go with the best-suited option.
Claim Settlement Ratio
This might be a very important consideration while selecting a provider. Going with those who have higher settlement ratio means that, there will be lower chances of rejections when you actually need to make the claim. Even if premiums are a little higher you should go with trusted providers.
Age and Pre-Existing Diseases Cover
Not all providers/ policies will be approved in case age is higher or there are pre-existing diseases. You need to first research if the policy will be issued in your specific condition then only do the payment.
Otherwise, salespeople will just take your money and then return it after a month and a lot of heartaches and you will have to start all over again.
While instinctive, it is important to compare the waiting period of the policies to see if you can get similar policy with a lower waiting period of claim commencement of pre-existing diseases.
This is something that many people are not aware of and is also very important in case of buying health insurance for parents. Many policies don’t allow renewal after a certain age. Ideally, you should opt for policies that allow unlimited renewal because at an old age, getting a new policy would be very difficult or extremely costly.
Sum Assured coverage
As discussed above, we need to take the proper sum assured. Not all providers/ policies provide high sum assured for aged parents or those with medical conditions. You need to check which policy is suitable and decide accordingly.
Many times because of age and or medical conditions, getting normal policy might not be possible and there would be a co-pay clause. While this clause should not be taken to reduce premiums, sometimes it becomes mandatory. Try to choose the policy which asks for the least co-pay percentage.
Last but not the least, try to opt for a policy that has the lowest premium. However, do make sure that you optimize for the other factors first. Premium should be a constraint because of your budget and not how you choose the policy.
Insurance is important, health insurance is even more important and health insurance for parents is paramount. Do not rely solely on employer’s insurance for parents and get them a policy with proper sum assured. Do keep in mind the various factors mentioned above while purchasing.
So while health is wealth is true, however, purchase health insurance properly and do not lose wealth when you lose health.
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