Have your own health fund

Medical insurance policies for the aged are too expensive, especially if not used

Mankeshwar Pathak, a Varanasi resident, passed away last year due to a sudden cardiac arrest. He was over 80. However, till his death, he was never hospitalised nor had any major ailment. But he dutifully paid his medical insurance premiums — Rs 50,000 annually for a sum assured of Rs 8 lakh — for years, just to ensure his family did not have to bear the cost of hefty hospitalisation bills.

While his policy helped pay the Rs 2 lakh hospital bill when he died, his family members feel he could have saved the lakhs he paid as premium.

With the Insurance Regulatory and Development Authority discussing 'age-free' medical insurance policies for the aged, irrespective of age, the moot point is whether the elderly should be purchasing these. There are several deterrents, the most important being the cost.
 

CREATING A HEALTH FUND

Going about it

• If starting early, set aside a small amount but fund it regularly
• If starting late, set targets and allocate significant sums 
• If no corpus till retirement, set aside a part of the retirement corpus

Other strategies

• Get covered under children’s family floater policy
• Be part of children’s corporate medical cover, but there a co-pay model could be costly
• In addition, look at top-up options

The premium for a Rs 5-lakh policy (for persons over 70) is expected to be Rs 60,000-80,000 annually, because the instance of hospitalisation is high for the aged, experts say. Whether the policy is used, one has to pay the premiums to keep it alive. The only positive being discounts on account of claim-free years. Typically, premium is fixed for age bands — 35-40 years, 40-45, etc — and it increases when you move from one band to another.

Certified financial planner Sumeet Vaid advises against such policies. "Few choices in the market exist for senior citizens. Those that do exist, charge high premiums. Instead, work on building a corpus based on your and family's needs," he says.

The earlier you start, the better. But, if you are late, you need to be a little aggressive. "You need to back-calculate according to your age and allocate money. Higher the age, higher the allocation," he explains.

If you are 50 and wish to amass Rs 15 lakh by the age of 65, start by putting aside money towards building this corpus. Set a target to save Rs 5 lakh at the end of every five years. If you don't achieve this, earmark more money.

If you had never given a healthcare corpus any thought till retirement, take the tough call of setting aside a large part of your retirement money that comes from provident fund and other instruments. If you retire with Rs 50 lakh, keep Rs 10 lakh for corpus. Of this, put Rs 4-5 lakh in high growth instruments and the rest in safe instruments.

The problem arises when one has to decide how much is enough. "You never know when you will be hospitalised or the disease you will suffer from or the money to be required," says Kartik Jhaveri of Transcend Consulting. Your insurance plan and/or the corpus may fail to foot the huge bills, as it isn't easy to have a Rs 1-crore corpus. Therefore, Jhaveri prefers having both, a hospitalisation corpus and a medical insurance policy.

But, he suggests a cheaper way. "Get covered by a family floater or with your children's employer to save on the huge premium. But, corporate covers ask for co-payment of 10-20 per cent of the bill, again not an easy amount," he says.

Gaurav Mashruwala has a more balanced view. He feels, at some point, both health cover and a kitty may have to co-exist. "If you are paying Rs 50,000-60,000 for a Rs 10-lakh cover, it is worth it. But, if you pay this for less than Rs 5 lakh, it may not make sense. Also, factor in the no-claim bonus," he says. So, till you reach an optimal corpus level, you must have an insurance plan in place, especially if you've started working on a health fund late.