Posts Tagged ‘insurance’

5 Health Insurance Myths that may put you at risk

Health insurance or mediclaim is a labyrinth full of exclusions, room rate caps, pre-existing illnesses, loading, no claim bonus etc. While we do not decode all of these, we do attack some common myths that exist in the minds of the customer. Often the broker is also clueless or prefers to act dumb. The health insurance field is very much “buyers beware”, so read on.

 1.    When I buy health insurance, all I need to do is price comparisons, all plan features are essentially the same

Price is just the first comparison point for health insurance policies. Other important touch points where the polices will differ must be compared:

  • Room rent sub limits – the public insurers sub limits are usually capped at 1% of the sum assured or Rs 5000 whichever is lower. The room sub limit also restricts the reimbursement you will get for other expenses to the same category.
  • Insurance co-pay – It means that the expenses you claim will be divided between the insurer and you. So if there is a co-pay clause of 20% then for a claim of Rs.1,00,000, the insurer will cover only Rs.80,000/-
  • Renewable age: Many insurance companies will not renew your insurance policy once you are past 60 and need it the most. Do watch out for this since there are insurers which will give you insurance even at 80 years.

2.    Once I have brought the policy, I can blindly renew it the next year

Expect changes in your policy every year. The policy pricing and terms will change according to your age, claims made throughout the year, the insurers’ loading policy and the insurers’ internal policy changes. The insurance policy contract is an annual contract (at times two or three years’ contract), hence it is free to change over time. Besides there may be some framework changes from IRDA, the insurance regulator. Do ask your agent clearly about what changes have occurred.

3.    You need a minimum 24-hour hospitalisation to be claim health insurance

While this was true till a few years ago, 24-hour hospitalisation is not a criterion for making a claim. Due to advancement in medicine and better awareness, many overnight procedures can now be completed within a shorter period. Infact many insurers use the number of day care procedure offered as a selling point.

4.    The policy covering the maximum procedures / having the most day care procedures and pre-existing illness covered is the better policy

So which policy would you buy, one which covers a 160 day care procedures or one which covers 85 procedures? Well you might be making a mistake if you buy the first one. Often insurers list all possible variations of procedure make the numbers swell and also to exclude procedure. For instance one insurer mentions 4 different type of Tonsils procedure while another just mentions Tonsils and covers all variations of the treatment (which are likely to be more than 4).

Most insurers will cover pre-existing illness after a delay of 3-5 years. If an insurer is covering this with a first time buyer, then he will load it up in the cost.

  1. 5.    Since my policy offers cashless facilities, I do not need a medical emergency fund

In a cashless system, when you get hospitalized with an approved network hospital, the Insurance Company or  TPA co-ordinates with the hospital and settles the bill without you having to pay first. This however is subject to an approval for the procedure. In case of an emergency hospitalisation, the authorisation may take a few hours or it may even take a day if the insured is admitted on a holiday.

The hospital is likely to ask you to deposit cash before starting any procedure. Hence a medical emergency fund is a must even if you enjoy cashless health insurance facilities.

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Building a financial plan for your child

When it comes to raising children, money is limited, and demands far exceed the supply. Your child, being the centre of your universe, is going to drive a lot of the financial decisions of your household.

From the moment your child is born and even before, if you consider the doctors visits and preparations for the arrival of the child it’s at least 20-25 years before your child can start earning, and is financially independent.

Bringing up a child takes more than can you imagine. Babies tend to outgrow things even before you buy them. As they grow older, peer pressure works not just on the kids but also on the parents. Isn’t it you who also want your kids to wear branded clothes or join a class that is popular? While it is laudable that you want the best for your child, it’s expensive too.

The cost of children’s education is one of the largest expenses that parents face so it’s crucial to start saving as soon as possible. Just the college years will cost you anywhere between Rs. 6-12 lacs depending on the course your child does and her/his   spending habits.

So on a rough estimate an upper middle class family would spend at least Rs.20 lacs on the child’s upbringing, education and to ‘settle the child’.

This estimate is at current levels of cost of living. We have not yet factored in the raging inflation.

Planning for your child’s education in the same way you would plan for other big life events will help enable you to secure your preferred education choices. While education can amount to one of the highest expenses you will incur for your child, it can provide the means for them to pursue a dream, prepare for future success and fulfil their potential.

Where to invest

Financial planning for children should start as early as possible.

There are various ways to save for your child

  • Savings accounts and fixed deposit accounts
  • Insurance plans for children
  • Mutual funds for children
  • Investing in the stock market for long term gains
  • Informal investments like chit funds, buying gold, property etc.

No matter which is your preferred avenue of investment, you need to ensure that you set goals and work steadily toward them.

This article first appeared in Moneylife magazine