How to protect yourself when a single event throws your life off course?

March 11, 2022

Consider for instance a trip to the hospital. It can drain you physically. It can drain you mentally. And it can drain you financially. The prospect of healing from physical and mental trauma is already daunting as is. But to deal with a massive financial burden as you’re recovering from a debilitating illness can be crippling. Some would argue that this is an isolated experience. That the government aids individuals who truly need the money. However, reality tells a very different story. Two-thirds of all medical costs are borne by individuals in their personal capacity. In some areas, it can be as high as 90%. You don’t get a lot of help from outside and even when you do, you have to work really hard for it.

An alternative here is to simply buy a health insurance policy so that you don’t have to deal with the financial burden. However, people consistently screw up while going about making this purchase. 

For instance, when we ask people to pick a cover while buying a health insurance policy, most people choose a sum no greater than ₹2–3 lakhs. Ask them to justify this response, and they’ll often fall back on their lived experience. Hospitalizations are rare. And when they do happen, it’s the usual suspects doing the damage — Malaria, a broken bone, or a bad case of appendicitis. Medical expenses seldom exceed the ₹2–3 lakh mark, and a cover in excess of this sum seems needless.

But this isn’t a good way to think about health insurance. Sure, ₹2–3 lakhs isn’t a modest sum by any account. But it isn’t a life-changing sum either. If you’re ever hospitalized for an ailment, you will likely be able to put together this kind of money without an insurer. It won’t be pleasant, and it most certainly won’t be easy. But it’s something that you can hope to cobble together if you really need the cash.

What will cripple you however is the bone marrow transplant that costs ₹25 lakhs. Or the recurring cancer treatment that can push you to the brink of financial ruin. Your only option then is to binge on debt or crowdfund your treatment — Seek help from friends and family. If that doesn’t do, you’ll have to settle for the public healthcare system and see what they can do for you.

This sequence of events can fundamentally alter the course of your life, and it can leave you battered and bruised. So the first thing you do is this — 

1. Choosing the right cover amount: Now most people will tell you that there is no such thing as an optimal cover amount since there are so many variables at play — Where are you being treated? What’s the cost of living in your area? What kind of premiums are you willing to pay each year? How can anyone suggest a cover amount without taking these variables into account? Well, you can’t. But if there was a rule of thumb, we’d start with 10 lakhs. This figure offers considerable protection in the here and now and can also extend reasonable protection in the future.

What do we mean by that?

Well, medical inflation is at 7% right now. So in a few years, the ₹10 lakhs won’t be worth all that much. On the flip side, if you start with a lower sum, say ₹5 Lakhs, then you’ll be left with paltry cover. It won’t protect you fully from the life-changing events that we discussed earlier. So starting at ₹10 lakhs makes some sense, however, if you can’t pay the premiums consistently, maybe ₹5 lakhs will do just fine. 

The moment we bring this up, most people want to go higher —₹ 20 lakhs, ₹50 lakhs or even a crore. However, we wouldn’t suggest going down this route since there are other more affordable ways to add protection.

Think Super Tops: These products offer you considerable protection, up to a crore, at a more affordable price. How do they do it? Well, for starters, most super top-up products only pay for costs incurred beyond the deductible. So if you have a super top-up policy with a cover of ₹1 crore and a deductible set at ₹10 lakhs, then you’re expected to pay the first ₹10 lakhs before the super top-up can kick in and pay the rest. However, if you already have a base plan, then you use it to pay for all expenses up to ₹10 lakhs and then use the super top for what’s left. 

Bottom line: The best approach is to consider a base policy of ₹10–₹20 lakhs and then add a super top-up (up to a crore) for those extra rare cases.

2. Buying a comprehensive product: A comprehensive policy doesn’t have to include all the bells and whistles (think Dental cover, international treatments, and OPD costs). It has to do the basics well without imposing mindless restrictions. For instance, you don’t want your policy imposing restrictions on room rent — where you’re asked to cough up extra money each time you rent a room beyond the prescribed limit. Or disease-wise sub-limits — When a policy offers you a large cover but then tells you, you can only claim a fraction of the total cover for a list of diseases including cataracts and cancers. 

Finally, you want to take a look at the specific illness list. Now, this list isn’t talked about often. But every insurance company will throw in a waiting period of 2 years for a list of illnesses (where they believe customers have an opportunity to delay treatment). You can understand the logic behind the move. The last thing that the insurance company would want is for a customer to figure out he/she has a cataract problem and then buy a policy soon after to get the insurance company to pay for the procedure. However, sometimes insurance companies take this mandate too far by including every serious disease they can think of — including cancer. This may not be ideal, and you may want to look at other alternatives. 

Also, a comprehensive policy almost always throws in free health checkups every year to give you that extra bit of protection. Some companies will have tied up with diagnostic partners to offer you a whole host of health tests (within a prescribed limit of course). Even others will have a designated section describing all the diagnostic procedures they will pay for as part of the “free health checkup” program. In fact, if you already have a health insurance policy, just glance through it to see if your company throws in this benefit too. You may be in for a surprise.

Finally, you want to work with an insurance company that’s diligent while paying out claims. Now, bear in mind, no insurance company is perfect in this department. However, you can optimize for your outcomes, by parsing through a company’s track record. Does the company in question consistently boast a high claim settlement ratio (neat 90%) over the past few years? If the answer is yes, maybe it’s a good option. 

3. Buying young and being honest: Most people don’t want to buy a health insurance policy when they’re young. They think they’re indestructible, and they believe they could postpone this purchase until the first symptoms start showing. However, this kind of thinking is riddled with flaws. For instance, if you want the best rate on the market, then you have to prove to the insurer that you’re healthy. If you have pre-existing conditions or other strange symptoms, then your premiums go up. Way up and sometimes companies may not even cover you depending on the severity of your condition. It may come as a massive blow. So it’s always prudent to buy a health insurance plan when you’re young and healthy. 

Second, if you’re thinking of getting yourself a health insurance plan by not divulging sensitive details about your existing condition, let us assure you that it’s not even worth trying. Insurance companies will eventually find out that you’ve been dishonest during the medical assessment. They’ve been in the business for far too long, and they have dedicated teams to weed out frivolous claims. The only thing you’ll be doing here is paying those premiums diligently with the naive hope that your non-disclosure won’t affect your outcomes when you eventually try and claim protection. 

However, insurance companies can simply repudiate your request the moment they find the slightest discrepancy. On the flip side, if you’ve held a policy for a few years and you’ve been honest throughout, then insurance companies are likely to be sympathetic to your cause even when paying out the big money claims. They’ll have more faith in your request and the likelihood of them coming through, increases rather disproportionately. So it always makes sense to buy a health insurance plan when you’re young and healthy. 

Shrehith

Co-founder at Finshots and Ditto insurance. Trying to make finance simple for the masses. Ditto: https://joinditto.in | Finshots: https://finshots

34 comments

  1. Jayasurya says:

    Excellent article! Can you please suggest some good comprehensive policies that you recommend?

    • srikanth says:

      i have taken Manipal Cigna insurance for 10 lakhs with top up for anothee 25 lakhs..They are fairly good with no limits on the room. They process claims fast without major deductions. my experience so far..others may differ. (no way involved with Manipal Cigna)

      • Sudhir Kumar Singh says:

        Dear Shrehith,
        I am having Optima Restore with 10 lac basic sum insured for 2A+2C. After 1 year of completion with no claim i renewed it PROTECTOR RIDER and with multiplier benefit the total sum insured at present it 15 lacs.

        Touchwood with no medical history in my family of 4 (except I take medicine for hypothyroidism which is already declared in policy), which top of HDFC Ergo should I have to look for??

    • Shrehith says:

      There’s no one size fits all when it comes to insurance. We need to consider your past medical history, any existing illnesses, your current location (number of cashless hospitals available would depend on this).

      If you are someone with no existing conditions and not looking for any over the top features (like OPD, Dental), you can consider the following policies-

      1) HDFC Optima Restore – https://joinditto.in/health-insurance/hdfc-ergo/optima-restore/
      2) Care Plus – https://joinditto.in/health-insurance/care-insurance/care-plus-youth/
      3) Niva Bupa ReAssure – https://joinditto.in/health-insurance/max-bupa/reassure/

      I would recommend consulting an insurance expert before you finalise any plan.

  2. Samarth H says:

    Great writeup!

  3. Jyothi says:

    Inherent laziness – as in general insurance. Think companies should make it portable..like PF…so at least the person keeps getting increasing cover

  4. Aditya says:

    My dad is 71 years old.He is a farmer still he wakes up 6 in the morning and does farming. He never had health insurance in his life but now I am worried about him when he will cross 80.What should I do. Are there any health insurance companies which can consider insurance for him, I mean I am ready to do health checkups for him.

    • Shrehith says:

      There are health insurance policies that do cover people aged 71. However once again, this will depend on a thorough medical evaluation. If he has pre existing diseases that won’t be covered for a few years. And there will also be a 2 year specific illness waiting period we described in the article earlier.

      Ultimately it depends on your dad’s health condition.

    • Nilesh parekh says:

      Yes
      Hdfc ergo health insurance
      Covered him

  5. Msk says:

    As we already have health insurance from the company that we work, do you still suggest in having one outside the company offered health insurance ?

    • Satya says:

      Yes better to take outside

    • Shrehith says:

      It’s always a good idea to have a health insurance plan that isn’t incumbent on your employment status.

      1. The employee health plan may not be all that comprehensive

      2. You may want to quit at some point and do something of your own. At this point in time, you may not have the opportunity to pick a comprehensive plan if you have pre-existing conditions. So it’s best to have a personal health insurance plan just in case

  6. Nodito says:

    Insurance is a waste of time and hard earned money.every customer will learn the hard painful truth about health insurance when it comes to claiming the insurance.and the customer will see how the insurance company makes them run around and denies or never ever pays the full amount.that is why the post of the senior citizen has gone unanswered.
    Talking after 15 years of experience with dealing with health insurance companies.take LIC they have so much money now because of millions of people invested in their schemes .but never got anything. Notice all health insurance schemes are max 1-2 years and you will see them changing names of your schemes over the years and the money is never compounded.

  7. Praveen says:

    Sir , Pls suggest good health policy for my parents , mother 68 and father 75. They have only hyper tension and not any major illness .however whatever I searched almost all companies consider this as ore existing and say not covered for 3 years . do we have any policy which covets comprehensively for aged parent’s

    • Shrehith says:

      Hey

      Unfortunately the pre existing condition is a staple of most insurance policies. You can’t get around this. Some policies do let you reduce the waiting period if you’re willing to pay a higher fee. But we haven’t seen them allow this for older folks.

      And what policy to buy. Once again that will depend on a whole host of factors. Including the severity of the hypertension. We would advise you to talk to an insurance expert before you make a purchase!

  8. Aman miharia says:

    I have medical policy from company with 10% copay and 1% room rent limit. Current base policy is 5 lakhs. I had taken a policy outside last year as previous organization was not providing health insurance. What will you advice should i increase limit to 10 lakhs or continue both personal and corporate policy

    • Shrehith says:

      Hey Aman,

      It depends on what you can afford right now. The coverage you have right now is decent in itself. But if you can afford the extra premium, I would urge you to increase the limit to 10 lakhs.

  9. raghav says:

    I have existing star health insurance for 10 lakhs coverage since 4 years. Can i add super top up for 1 crore with any other insurance providers. I don’t find any top up in star health.

  10. Manju says:

    Hi Shrehith, Which are the companies that are liberal in accepting policies with Multiple but not serious Pre-existing ailments for a 30 yr old guy. I am okay with premium loading.

    • Shrehith says:

      Hey Manju,

      Once again, this depends on the nature of the pre-existing conditions. If it’s benign as you state, you’ll have no problem getting insurance in general. If I had to make a recommendation based on leniency, I would argue Star Health. They may be lacking in other departments, but we’ve seen them come through on cases where others haven’t.

  11. Sanket says:

    what are the regular health checkups that should be done each year?

  12. Asha Bhat says:

    Thank you very much for an informative article.

    Have been trying to get a health cover for last couple of years. So far I got rejection s from 5 of them after they went through my discharge summary from my hospitalization in 2019 – due to a type of chronic polyneuropathy.

    Currently I am a completely healthy individual.. thanks to the rejections
    that inspired me for a daily routine of light Yoda and meditation! This routine has given tremendous benefits to both my body and mind!

    Everything happens for good!

    If you know of ways I can still get a health cover, please suggest!

    • Shrehith says:

      Hey Asha,

      If you’ve already been rejected by 5 separate insurers, then it’s unlikely you’ll find a company extending a retail policy. The only other option you could pursue is an employee health insurance policy. If you’re a working individual or if you have family members working in the corporate sector, you could see if you could get yourself inducted into one of these plans.

      Wishing you good health 🙂

  13. Jerin says:

    Is there any insurance that cover reoccurrance of cancer with pre-existing cancer. The insurance we had does not cover them.

    • Shrehith says:

      Once you are diagnosed with cancer, it is unlikely you will find a health insurance plan that will actually afford any meaningful level of protection. The most effective option is to see if you could get the individual included in an employee health insurance policy. In my opinion, that’s your best bet.

  14. Anand Surana says:

    I have a family floater health insurance from HDFC ERGO OPTIMA RESTORE for 5L sum insured.
    Want to take a Super Top Up. Hdfc ergo does not give benefits like bonus and restore. Also charges for things like bandages/cotton etc. Therefore super top up is on hold. HOWEVER TATA AIG Health insurance gives all the benefits in Super Top Up.
    Therefore my query is
    Can I take aa Super Top Up from different I surer. If so will I face any issue in Claim procedure as both the insurer are different. In such case what is the Claim Procedure.?
    Can you suggest any alternate or my choice is a good one.
    A reply will be appreciated.
    Regards

    • Shrehith says:

      Hey Anand,

      Not sure, when you bought HDFC Restore. But the product does offer a no-claim bonus and a restoration option. Hence the name Restore. Now the problem with HDFC Super Top policy is that they don’t extend a cover beyond 20 lakhs. The upside however is that you can claim the full amount on a cashless basis. If you buy a super top up product from TATA AIG, you’ll have to get any claims attributable to the Super Top Up reimbursed. You can’t do it on a cashless basis. The upside here is that you obviously get a higher cover (although it maybe a tad bit more expensive for some cases)

  15. Sachin says:

    One question that hasn’t been solved for me as yet.
    Person A takes insurance in his 40 without any disease. Assume he get some serious disease in 42 and take heavy claim. Now, in 45 when renewal time will come. It won’t make any financial sense for insurance company to renew as they will be aware that next claim will come soon and there is no real ROI in insurance premium. Why will they renew? It may happy in 40 or 60 age. But this situation will come at some point. What do you suggest, how do companies deal ?

    • Shrehith says:

      Hi Sachin,

      There are two reasons to do it. One, it’s mandated by the regulator. Two, if they did not cover an individual once he/she falls sick, then the product loses all value. Why would anybody buy insurance if they can’t get benefits once they’re actually sick?

      Insurance products simply wouldn’t sell. So yeah, they’ll have to come through on their promise once you buy the product.

  16. Sudhir Kumar Singh says:

    Dear Shrehith,
    I am having Optima Restore with 10 lac basic sum insured for 2A+2C. After 1 year of completion with no claim i renewed it PROTECTOR RIDER and with multiplier benefit the total sum insured at present it 15 lacs.

    Touchwood with no medical history in my family of 4 (except I take medicine for hypothyroidism which is already declared in policy), which top of HDFC Ergo should I have to look for??
    or I may opt for top from any other insurance?

  17. Shrehith says:

    Hello Sudhir,

    Glad that you’re doing well. You can top up your plan using HDFC only. However, I believe they do not offer a coverage beyond 20 lakhs. So you’ll have 35 lakhs worth of protection, which is pretty robust. Also, when you’re buying the super top up from the same company, you can claim the full amount on a cashless basis. If you go for a different insurance company, then you can only claim the super top up, via reimbursements. However, the upside is that you can even get cover up to a crore.

    So those are your choices. But if I were you, I would prefer a full cashless process over an exorbitant cover. Hope this answer helps

Post a comment

* Investments in securities market are subject to market risks; Read all the related documents carefully before investing.