One known fact is that when you are young, medical expenses are not much and rare. As a result it is not much of a concern. But after you cross 50s those expenses become regular. If you ask someone who has crossed this age, you will get to know how common it is for them to spend regularly on healthcare.
Free On-call Financial Advisory Portal, MoneyMindz.com discusses about one of the most important aspect of life and financial security i.e. Health Insurance.
You can look around that people are now living much longer than previous generations. Therefore each passing year, people need to spend more and more on maintaining their health. Let take an example, if someone is 50 and the life expectancy is 80, then he has to spend on healthcare for 30 more years.
There is a definite need for proper health insurance for most old people. Without it, one or two hospitalisation events can majorly deplete their retirement savings and can be disastrous. If someone is old, unhealthy and without money, it is a very scary scenario to even think of.
But do you think having health insurance is enough? Not exactly! As people get old, it’s not just only about hospitalisation expenses. Keep in mind hospitalisation is a low (not zero) probability event. Instead being more portable can be onset of regular, on-going healthcare expenses that old people need to spend money on. Some cost like medicines, diagnostics and regular consultations for lifestyle and chronic diseases (like diabetes, thyroid, etc.) in itself can be a lot. So, basically the problem is that health insurances do not cover these out-of-hospital expenses (your regular health upkeep spends).
Let’s take an example like if you have a health cover of Rs 5 lakh which pays in case of hospitalisation. But you will get to see over the years and by the age of 50, you develop a lifestyle related to medical condition that requires about Rs 2-3 lakh every year for proper maintenance. Such treatment is on-going, will last a lifetime and doesn’t require hospitalisation, so health insurance won’t pay for it. Therefore it becomes a regular expense from your own pocket.
This can be regarded as a very simple example of why health insurance alone isn’t enough for old age. It is for such scenarios, that having a Health Contingency Fund is advised. You can consider like having a second level of buffer in your health portfolio. The best part is that it can also be used in case the hospitalisation bill exceeds your health insurance cover.
Can you be sure that the insurance companies in future would not introduce any new terms and conditions that impact you adversely? Certainly no. So, basically insurance companies are for-profit organisations which will do whatever works best for them. In order to increase their profits or to reduce the claim amounts, they might insert new clauses about exclusions, previous claims, increase in premiums, treatment cost caps on various diseases, etc. You will never know that when they might change something (in the policy) for the worse.
It can be another reason to consider saving some money separately for unexpected healthcare expenses, which isn’t paid for by health insurance.
It is quite obvious that if you are young, you might feel that it’s too early and not required. But you will have to remember that if you have dependent or soon-to-be dependent old parents, then you should consider having this fund in place as early as possible. Especially for those who themselves are getting old, they should without a doubt do something about this.
So, do remember that health insurance alone is not sufficient for old age. Therefore you need to have a separate healthcare contingency corpus too.
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