Remaining underinsured until it is too late

It is a bitter truth that Insurance companies don’t want KNOWN RISK. That’s why they will offer you insurance coverage while you are healthy. Second truth is that we all are ordinary mortals. Someday, we will catch a disease/disorder that will put us in the negative list of insurance companies. As a result, we will be left with little or no insurance coverage when we would be needing it most. Hence, buy adequate insurance coverage while you are healthy.


Ignoring the importance of Critical Illness Cover

Different ailments affect differently. A knee replacement will be a temporary interruption in your routine life. But a heart ailment may slow you down forever. If you were a half marathon runner, heart ailments are potent enough to restrict your run to 500 meters at max. Past two decades tell us that epidemics are more frequent than estimated. There is always an epidemic being fought somewhere in the world at any given point in time. Since we are a globalised world, these epidemics can travel very fast across the world. COVID19 has shown us this in most blunt manner. A corona virus victim may recover fast but will have lasting suffering on various counts. The virus adversely impacts heart, lungs, kidney, lever and brain over a long period of time. This can affect your career over long term, besides increasing the chances of facing a critical illness in one form or the other. If you are a holder of Critical Illness policy, the lump-sum money you will receive at the time of diagnosis will help you in creating a corpus for loss of future income. People make a mistake of comparing Critical Illness policies with mediclaim policies. They don’t substitute each other and serve different purposes.


Relying on group insurance coverage available from your employer:


I know a retired couple who surrendered their mediclaim policy because they were getting covered by their daughter’s employer. After marriage, the daughter decided to take a sabbatical and therefore medical coverage came to an abrupt end. They applied for a fresh medical cover. But it was too late now. The wife had been diagnosed with cancer a couple of years back, and therefore was not eligible for fresh coverage. I think it was a huge miscalculation on their part to surrender their own policy.


Not going through the fine print of your policy:

Often we wish to compare various policies before we buy one. We refer brochures, talk to agents, read blogs and compare premiums. Honestly, mediclaim policies are bit too complex to understand.  Policies can differ on premiums, cashless facilities, network of hospitals,  reliability of claim settlement process, pre & post hospitalization coverage, ambulance coverage, room rent limit, surgeon fees limit, no claim bonuses, 24 hours list of procedures that can be claimed, pre-existing disease moratorium, etc, etc..These are too overwhelming to understand for a common man. Therefore, people go for the cheapest, or the most glossy advertorial, or with the best selling agent. It is only at the time of need that they realise that there was a room limit and surgeon fees limits being doled out for cheaper premiums. Or, that the insurance company doesn’t enjoy great reputation amongst the TPAs and Hospitals, and therefore the amount of initial deposit required to pay by the patient goes higher at the time of hospitalization.


Under-estimating the inflation in medical costs, and not aligning your policy with it:


For over 20 years now, the average medical cost inflation has been around 11 percent per annum. At this rate, the costs become double every 6 years. But, people generally don’t double their medical coverage at the same rate. Secondly, beyond a particular age, the insurance coverage will be difficult to get. But the costs of medical treatment will continue to rise. Unless the policy coverage is increased much in advance before retirement, there can be a frightening gap between the actual costs of treatment versus the coverage claimable from the insurance company.


Buying too much of Cancer coverage:


The name CANCER is terrifying enough to induce you into buying a special policy for Cancer bills only. To support this, there are true stories around where affected families became penniless due to exorbitant surgery and chemotherapy bills. Since there is lot of fear associated with cancer disease, there is a fair chance that people go overboard in seeking highest possible coverage. This sometimes lead to wastage of precious resources. You should be mindful of the upper and lower limit pdf coverage that you may need, and accordingly allocate your money to optimise the insurance coverage



By Sameer Rastogi

18 years of experience, PG in Finance and has delivered Wealth Management lectures at IIM Lucknow, IBS Gurgaon and IIPM Delhi. Contributed to various newspapers. Strength – Application of Economic fundamentals to Investment

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