The increasing stress at the workplace, sedentary lifestyle and inability to spend time on physical activities is resulting in our nation’s poor health. Critical illnesses like heart disease, stroke and cancer are becoming more prevalent and affecting us early in life. The lifestyle diseases like diabetes, if not treated in time, can cause multiple related diseases leading to a higher financial burden. Since these illnesses are sudden and unpredictable, it is becoming difficult for individuals to plan their healthcare expenditures.
As there is a risk of substantial expenditure on health care for each family particularly in later stages of life, it is imperative that health insurance be part of our financial planning.
A recent survey conducted with a group of people shows that majority of them have health insurance through the company group plan but only 45% of them have health insurance outside their work plan.
This leads to our question and the title of the topic – “Do we need individual[1] health Insurance policy in addition to the group insurance policy through work?”
Let me first start with some of the key advantages of the company’s group health plan. The two major advantages of these plans are – 1) Coverage of pre-existing[2] diseases 2) Inclusion of parents/in-laws as part of the coverage, as it is hard to get insurance coverage for senior citizens outside group plans. Well, these advantages have resulted in increased claims cost for the insurers who are passing the cost back to the companies through the increased premium. The companies, in order to keep the costs down, are changing the group plan with reduced benefits e.g. addition/increase in co-pay, decrease in coverage, increase in exclusions. In short, a company’s health plan is becoming more limiting and hence sub-optimal for the employees.
What happens to the insurance coverage during the transition from one job to another? There is a potential risk of the family remaining uninsured during the transition period.
What about the insurance coverage, if you want to start something on your own or if you want to retire? Do you think you would be able to purchase an individual health insurance policy at that time and at a reasonable premium?
You would think that the portability legislation from IRDA[3] would make it simple and you would be able to port your company’s group Insurance policy to an individual health insurance policy, which will allow coverage of pre-existing diseases covered through the company policy. By law, the new insurer is liable to port your policy. However, the decision of accepting (underwriting) your insurance request and the premium amount, is at the sole discretion of the new Insurer. Based on your family’s prevailing health conditions, the insurer can charge a higher premium or even deny the policy.
So what is the solution? Well, if you are in your 40’s (sooner the better) and if you still do not have an individual insurance health plan, seriously consider taking a comprehensive family floater plan outside your work with good coverage and sum insured. Increase sum insured year-on-year to adjust for inflation. If you are planning to go on your own prior to the ’40s, please ensure that you take the individual insurance health plan at least four years prior to your plan of going solo. This will ensure that the maximum four-year waiting period[4], for any pre-existing diseases, is over by the time you start on your own.
Well, so much planning to manage the cost of cure! What about prevention? Please take out some time regularly from your busy life to protect your most important asset i.e. your own health and hope that you do not have to use insurance at all.
Please note that this article focuses on highlighting the need for purchasing an individual health insurance plan in addition to the company’s group health plan. More articles on health insurance will follow.
“I believe that the greatest gift you can give your family and the world is a healthy you” – Joyce Meyer
[1] the individual here refers to a non-group policy taken from Insurer directly
[2] a disease is said to be pre-existing if it has occurred prior to taking insurance coverage
[3] Insurance Regulatory and Development Authority
[4] the waiting period is the period after which the insurer will pay for the claim for pre-existing diseases and varies by the insurer
You may also like to read Solving the maze of a health insurance purchase.
The writer is a SEBI Registered Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services. If you want to know more about him, click on https://finmyn.com/about/.