Health insurance before investing: Why protection should come first

As health care costs rise, health insurance will ensure you do not have to deplete your savings or take a loan in case of an emergency

When it comes to personal finance, there are two important aspects: Insurance and investment. Both are equally important for peace of mind. However, insurance, particularly health, comes first and then investment. In this guide, we tell you why protection comes first.

What is health insurance?

An agreement between an insurer and a person where the former will provide financial aid towards medical related expenses against health related issues. This is done in return for timely premiums paid by the person. There are many types of health insurance covering different types of health conditions with varying premiums. An individual can choose based on her capability of paying the premium.

 

Why is it necessary to invest in health insurance early?

Investing in health insurance early in life is important for financial security. With newer illness and better medication available, health care has become expensive. Having health insurance helps tackle these costs in case of a sudden illness. These will ensure that medical costs do not burn a hole in your pocket in case of an emergency.

Advantages of investing in health insurance

Investing in health insurance can be easily considered as critical as your investments because of the following reasons.

• The younger you are and you invest in health insurance, the better coverage you will be able to avail. There are some diseases that ask for expensive treatments and coverage for it may be available on paying higher premiums.
• With medical treatments becoming expensive, having health insurance will assure you financially. You would not have to deplete your savings or take a loan in case of an emergency illness.
• Many companies offer no-claim bonuses that can be used for discounts on premiums the next year or upgrade to premium healthcare coverage for the existing cost.
• One can also avail of tax benefits under Section 80D. However, this is available only under the Old Tax Regime of the Income Tax.

How to choose health insurance?

An individual has to read all offer documents and based on her premium-paying capacity and needs choose an appropriate plan. Based on the plan you choose things like medicines, hospitalisation, diagnostics, room rent, medical procedures etc. will be covered. Once the insurance plan starts, in case of an emergency, the medical expenses are borne by the insurance company.

How do you claim health insurance?

There are two types of health insurance: Cashless and reimbursement.

 

In a cashless facility, all hospitals available under the health insurer’s umbrella will provide cashless treatment. This saves the person from paying any money upfront in case of an emergency medical situation.

 

If the hospital is not listed under the insurer’s network, the individual pays bills and gets reimbursed after submitting documents to the insurer.

What next after health insurance?

Once you have taken a health insurance policy, next is investment. But before that you should also set up emergency funds also known as reserve funds. This will complement the health insurance in case of a medical emergency so that you don’t have to take a loan and pay heavy interest rates on it.

Investment steps

Once health insurance and emergency funds are taken care of, you should invest so that you are financially secure. This investment will take care of your goals such as children’s education, buying a property, going on international holidays and planning for your retirement.

 

Start early with your investments and think long term. For beginners looking at investment, it is recommended to go with Systematic Investment Plans. It is a way to invest money at equal intervals in mutual funds. On the day of investment, mutual fund units are assigned based on the Net Asset Value (NAV).

 

Finally, both health insurance and investments are important for the financial security of you and your family. It is just the order of priority that matters. Be clear and start with health insurance because like the old saying goes “health is wealth”.

FAQs

Is it ok for an individual to take health insurance and investments simultaneously?

Yes. It is necessary to have both health insurance and investments alongside so that your savings are not depleted and you get financial help for both medical related expenses and your goals on time.

Can an emergency fund replace health insurance?

No. Emergency fund complements health insurance and does not replace it. It is important for both to be there so that a person doesn’t have financial problems.

When should you buy health insurance?

A person should buy health insurance when she is young so that he can get maximum coverage on health.