Cash flow – Health insurance.


Many people are not clear about the concept of Insurance.  They consider the payment of premium as a wasteful exercise and drains their financial resources.
Even educated people and successful entrepreneurs also question, why one should continue  health insurance when there has been no claim made say in the last few years.
I would like to highlight a few points here, which help people understand the importance of having a health insuranace.
a.  Insurance is a concept which helps reduces one’s financial losses. It does not help you profit from it.
b. This means one should  not expect to get return on the premiums paid or return of the premiums paid.
c. The premium is based on the probability of the incident happening and hence the higher the probability of the occurence, the premium will be higher.
d. One should not decide on any insurance policy based on the premium paid. It is like deciding to buy a house, based on registration charges
e. Insurance is a concept where losses  of one are shared by all the policy holders. Therefore the question of profit does not arise.
Now having said this, let us understand the cash flow situation. Let us consider two scenarios one with a family and as single holder.
1.  Mr. X taking the health insurance policy as an individual
2. Mr. X is taking the health insurance as a family floater with spouse and two children.
3. Sum assured is 5 lacs
4. Age of the oldest member of the family is 40.
The policy that is considered is a simple policy which has,
a. no room rent limits
b. No sub limits on the diseases.
c. No claim bonus is available
d. Life long renewability
Cash out flow for the next 25 years.
scenario one as Individual Rs 3,55 lacs
Scenario two as family floater Rs. 6.23 lacs.
One hospitalisation in the next 25 years, could easily recover the payouts.
Inline images 1
Advantages are
1.  The effective pay out is only 2.55 and 4.45 acs assuming that he is in the 30% tax category.
2. It is also assumed that the limit may be increased beyond the current 25 K at least after 10 years.
3. One need not compromise on the quality of treatment as they can go to good hospital.
4. Peace of MInd.
5. You do not have to sell your asssets or lose your savings.
As you will see over the years, it would only benefit the policy holder and hence, without any delay have an adequate cover and ensure that your hard earned money stays with you.
Before your choose a policy, check with me.
Vardharajan VS

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