Large medical expenses, disability and death can sometimes seriously affect a family’s personal finances. While we cannot predict, we can definitely plan to mitigate the financial issues concerning such events. Below are our key thoughts which could be applied while building one’s health and life insurance portfolio:
1. Always do a complete disclosure of self/ insured person’s medical condition while taking insurance plans. It is easy to get an insurance policy but the claims might be rejected if there was concealment of material medical information. It is ok to have your premiums loaded or the policy proposal rejected than to be in the wrong impression that you are covered. Pre-existing diseases get covered after 2-3 years waiting period when disclosed while buying the policy, else the claims will not be paid. Whenever in doubt, disclose.
2. If you are part of an employer’s group health insurance plan, do subscribe for the maximum cover as these are cost effective and also the claim settlements are easier. Also, include your elderly parents/in-laws into these plans for their cost efficiency.
3. Deductible and Co-Pay are good methods of reducing your health insurance premium outgoes while covering the larger risks. Also, if you are part of an employer’s insurance or already have insurance in some other geography (especially NRIs) do opt for deductible and copay. Premium for large Super Top Up covers are always lower than the Base covers. Hence, try to cover the bigger risks and pay from your pocket the smaller outgoes.
4. It makes tremendous sense for NRI’s planning to settle back in India to buy health insurance plans much early to build a claim history. GST charged on the premium might get refunded if NRIs pay from NRE account.
5. A simple Base family floater health plan along with Super Top Up floater would be a good way to build your health insurance portfolio. You do not need to add too many riders and complicate the plan. This would needlessly increase the premium. Use deductible, Co-pay and Super Top Up options judiciously to reduce the premium outgoes.
6. Do note the eligibility of your room in a hospital (as per your health insurance plan) while getting admitted. If you select a room much higher than your eligibility, there might be significant out of pocket outgoes.
7. Personal Accident and Disability insurance products are extremely important for professionals and entrepreneurs. Buy these products through a health insurance company for cost efficiency and better choice of products.
8. Critical Illness products are pretty expensive and best to be bought from a Health/General Insurance company. This could be bought last after completion of Basic Health and Life Term Insurance covers.
9. Buy Health Insurance Plans from Health and General Insurance companies only and not from a Life Insurance company.
10. Buy Pure Term Plans without return of premiums and without any other riders. Buy a sufficiently large number so that your family’s lifestyle is not compromised on one’s demise. The maximum term need not be more than 60-65 years. Opt for one time receipt of claims if the dependents have capacity to manage the funds.
11. Married men can opt for the Married Women’s Protection Act benefit while buying Life insurance. The death benefits of the insurance plan under this Act will solely go towards protecting the financial interests of your wife and children and will not be misused/or used by any creditors in any way. This does not cost anything extra.
12. There might be a lot of fine prints, sub limits etc in insurance products especially in health plans. Hence, it is not important to get the full claim but atleast a significant portion of the hospital bill.
13. It makes sense to have a health/emergency fund handy in case some portion of the medical bill has to be managed or there is no cashless facility or if one is ineligible for insurance. Keep this handy in a banking products and safe mutual funds.
14. One can port (transfer the health insurer) the health plans to a better service provider. While doing these please understand the porting is always to a similar product and the past bonuses are lost. Let not cost considerations drive this porting.
15. In case, if the medical insurance premiums are prohibitively expensive (especially for the elderly), it makes sense not to take medical insurance and to keep saving money in good investment options. This could be used for medical expenses as and when required.
16. In the early phase of life, both term insurance and health insurance are important. As we become older and financially bit secure, health insurance takes more precedence than term insurance.
17. If one has no financial dependents, then one can only have health insurance and no term insurance.
18. Do not buy insurance plans as an investment product, tax saving option, children benefit plan or for profits. Always wish that the premiums should be lost. Do not ever mix insurance and investment products, else, as you will be the loser.
19. Insurance plans can be bought online through the company website or the brokers. But do not underestimate the importance of a good insurance agent/advisor especially for good documentation and handling claim settlement. Deal with IRDA Certified Insurance intermediaries.
20. Keep reviewing the insurance portfolio for any important development like marriage, birth of child, loss of job, taking a loan etc or at least a year.
21. Keep your family/closed people/spouse informed about your insurance plans so that intimation is done to the company in case of a claim.
22. Do not select a plan or product just because it is cheap. Buy because it makes sense and suitable for your needs.
23. Do pay your insurance premiums in time so that you are adequately covered always.
24. All Insurance companies are well regulated by IRDA (Insurance Regulatory Development Authority) in India. Any closure, merger or acquisition of an insurance company does not make any difference to the policy holder.
25. Do update/review the nomination for any major changes like marriage/divorce/death etc in your insurance plans. Also, update your email id, phone number and address if there are any changes.
26. Rs 25 lakhs should be the minimum base health cover and Rs 1 crore should be the minimum life cover. These should be increased taking into consideration individual circumstances.
27. Opt for regular premium options (rather than single pay or limited pay) in life insurance plans as they are cheaper. In health plans you could take a 3-year option to reduce premiums.
28. Do take care of your health and fitness even if you have a good health and life insurance portfolio.
29. Insurance plans will not give you good health and a long life. But they will reduce your financial worries in case of any health or life event. Your existing financial portfolio could thus be used for funding your/family’s other life goals.
30. In case of mis-selling, one can completely cancel the insurance plan with full refund within 15-30 days of the policy receipt.
The above are our thoughts and philosophy while recommending a personal insurance portfolio for our clients. These are definitely not exhaustive. Feel free to connect with us @ 9845557582/ naveen@naveenrego.com for detailed review of your insurance needs. Do visit www.naveenrego.com to know the Engagement Options to benefit from our expertise.
Note:
1. The above are our thoughts and should not be construed as Investment Advice.
2. We are not registered with IRDA and our insurance recommendations are beyond the scope of SEBI (Securities & Exchange Board of India) grievance mechanism.
3. We do not have a commercial tie-up with any insurance company, agents and brokers.
4. One should buy insurance products either online through the company’s website, brokers platform or connecting with physical agents/advisors. Do check for their IRDA certification.
5. Our insurance advice would be restricted to selecting the most appropriate product based on the client’s circumstances. We would not be part of any documentation and claim handling process.
Have a wonderful day!!
Naveen Julian Rego-CFP
MD & Principal Officer
Date:13-09-2024
Disclaimers:
1. Investment in the securities market is subject to market risks. Read all the related documents carefully before investing.
2. Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.