Sunil is in his late 30s. One day he went to see his family physician after experiencing a minor discomfort in the chest. An angiogram done the every next morning revealed blockages leading to an immediate angioplasty.
He was advised complete rest for a few months and the cost of the treatment was around Rs 5 lakh. He was the only earning member of the family. Sunil had a medical reimbursement policy for about Rs 2.5 lakh. However, this was not enough to meet the expenses, so he had to pull out money from the amount he had saved for his daughter’s education.
Primarily, there are three likely situations that would seriously impact the income of an individual – critical illness, disability and medical exigencies that require surgeries.
When a critical illness or disability strikes, the regular income gradually goes down and the expenses rise, as there is an added burden of huge medical bills besides regular household expenses. This is a typical situation when the bread earner of the family also turns into a dependent. Initially, one would manage this added burden from savings accumulated for important financial goals such as children’s education, their marriage and retirement. But once they are exhausted, there is no other option but to take a loan from family member or friend.
As World Health Statistics of WHO suggest, public sector contributes only 26.2 per cent of total healthcare spend in India and the remaining 73.8 per cent spending is done by the private sector. While globally, the public sector spends account for 59.60 per cent. This implies that much of healthcare financing in the country is borne by individuals, which leaves them with an enormous ‘Health Protection Gap’.
These days many employers offer health cover under group insurance schemes. However, the benefits of such policies are limited only to reimbursement of hospitalisation expenses and do not cover pre- and post-illness costs such as medical investigation, doctor fees, travel, trained medical attendants and expenses related to family attendants, especially if hospitalisation is required to be done in a place other than the city where the family resides. More importantly, as we discussed earlier, these policies do not compensate the ‘loss of income’ that occurs due to an illness.
So, while we must go for a medical reimbursement policy covering all the members of our family, we also need to look at ways to seek protection against the remaining sources of expenses that are likely to drain our finances.
A life insurance policy that pays a lump sum amount on the diagnosis of a critical illness, in case of surgeries or in the event of an accident is an ideal solution for such a situation is a must apart from the medical re-imbursement plan one has. The lump sum proceeds received from the life insurance company would ensure that the individual doesn’t have to depend on others for managing his medical bills and his family maintains the same standard of living.
(The writer is Senior V-P, Marketing, Product Development and Agency Training at Tata AIA Life Insurance)
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