I recently got my angioplasty done. It was all of a sudden and after about 48 hours I realized that I was added to a list of those who cannot be insured by any insurers in the country.
The irony of insurance is that when they offer, you think you don’t need them but when you really need them they won’t offer it to you. Most of us do not feel the need for it. People in India do not want to talk about insurance. According to ASSHOCAM Report (TOI February 15, 2015), insurance *********** in India is expected to cross the 4% mark by the end of the year amidst the proliferation of insurance schemes.
The foundation of any savings starts with protection. Before we go ahead we divide it into 3 parts
- Life Insurance Cover
- Hospitalization Cover (popularly known as “Mediclaim”)
- Critical Illness cover
Life Insurance Cover:
Lifestyle protection is the primary need of any individual at any stage of life whether he/she is single, married, married with kids, or retired.
A study by Swiss Re Institute says that for every $100 needed for protection, only $7.8 of savings and insurance is in place for a typical Indian household, leaving a massive mortality protection gap of $92.2. This gap is increasing at a compounded rate of 11% p.a. (ET: Oct 16).
There are 2 reasons for this huge gap.
Firstly, there’s a lack of awareness amongst people about the need for insurance. Never in the history of life insurance have agents promoted the need for a term insurance plan. Term insurance is the cheapest form of life insurance where a small amount of premium is paid to obtain a larger cover.
Secondly, insurance agents are not interested in selling a term plan, as the premium is small and the commission is less. So you will find every household having an endowment plan or money back plan with a minuscule cover of 10 times of annual premium which earns agents’ fat commissions.
It’s only recently that a private player to gain a larger market share promoted the importance of and a need for a term plan. Thanks to the online portals, term plans which are cheaper and also offer a basket of additional features like enhanced cover with flat premium, monthly income for 10 years along with an insurance cover, and ability to also add riders with your policy are available.
Health Insurance:
The heart attack was a sudden blow to me and I never thought I may have a cardiac arrest at the age of 42, although we have known of cases of a heart attack occurring as early as 25 years of age. Our sedentary and stressful life plus eating habits have given rise to such Non-Communicable Diseases (NCDs).
According to a report published in TOI on May 19, 2016 “One person dies every 33 seconds owing to a heart attack in India”. “India is currently witnessing nearly two million heart attacks a year and a majority of victims are youngsters,” said Dr. Ashwani Mehta, senior cardiologist at Sir Ganga Ram Hospital. India also has 50 million people suffering from diabetes and is known as “The Diabetes Capital”.
Myth Vs Reality:
The sad part is that only 17% of Indian population is having health insurance. Most of the salaried employees in the corporate sector do not have an individual cover. They think they have a company provided health insurance coverage and hence they do not require additional cover. But the reality is that the corporate health insurance is a group Mediclaim and does not cover you once you leave the organization.
Post being diagnosed with any critical illness; chances are you may not be able to buy any individual health coverage. For any pre-existing disease, the waiting period is for 4 years and premiums are costly too. It is advisable to take a health insurance policy when you are healthy.
Critical Illness Coverage
Like health insurance, the critical illness cover is also ignored by many. Critical illness cover is slightly different from the hospital cover. Unlike the health insurance, it gives you a lump sum payment on the diagnosis of any of the pre-specified critical diseases like angioplasty, cancer, heart attack, kidney failure, etc. irrespective of the medical cost involved. Today the chances of people suffering from these lifestyle diseases are higher. Moreover, the critical illness cover also offers tax benefits.
The Big Question now is “How much cover do I need?
The answer to this is that it depends on the human life value of an individual. There are different methods to calculate the human life value. It will be best advised that one gets in touch with a Financial Planning Consultant preferably a Certified Financial Planner to understand this.
| Type of insurance | Income tax deduction | Minimum | Maximum |
| Life Insurance | U/s Sec 80 C (upto1.5 lacs) | 10 X Annual Income | 20 X Annual Income |
| Health Insurance | U/s Sec 80 D (min 25k to max 60k) | ½ of Annual Income | Equal to annual Income |
| Critical Illness | 5 X Annual Income | 5 X Annual Income |
A detailed financial planning session with your planner will give you answers to all the questions. A periodical review after every 6 months or a year is equally important because what might be adequate today may not be tomorrow. Finally, we all need to ask ourselves “Have I done enough?”