Real Life Perspective on how to be ready

At 55, you’ve planned for a lot—but is your medical insurance really ready for the years ahead? Hospital bills can wipe out savings faster than you’d think, even with a policy in hand. Medical expenses are the biggest unknown expenses in retirement, and unfortunately, you do not have your employer taking care of them (unless you work for the government of India)!

Before you trust that card in your wallet, let’s dig deeper and make sure your health cover truly has your back when you need it most.

This article is not about how to choose the best medical insurance. Many articles discuss the key features to look for in a good medical insurance, including coverage of pre-existing ailments, no caps on room charges, cashless settlement, coverage of pre- & post-hospitalization expenses, etc. This article discusses the challenges you might face despite having medical insurance.

Your Medical Insurance does not cover all your medical expenses!

It is a given that you need to have good medical insurance coverage. The real challenge is that you would come to know how good it is only after you reach a hospital. What if you found out that your medical cover was inadequate or did not cover the treatment that you were looking for? For example, medical insurance generally does not take care of dental treatments – what if you needed a tooth implant? If you were to get broad coverage, your premium expenses could go through the roof! You may need a longer-term rehabilitation program post-surgery, and your medical insurance may take care of only a part of it. Clearly, there are limitations in terms of expenses that can be met through insurance.

Never forget to renew your medical insurance on time!

Further, medical insurance policies need to be renewed every year. If you miss making this payment, you will have to take out a new policy. The new policy will not only be expensive but is also unlikely to cover your existing ailments. There is generally a deferment period for covering existing ailments.

The point that I am trying to make is that medical insurance, however good it is, is unlikely to take care of all your medical expenses. You will have to budget to meet some of the expenses on your own.

The first step to deal with this problem is to budget for some medical expenses in your monthly household budget.

The bigger problem is that medical insurance does not adjust for inflation. If a Rs 25 lac coverage seems adequate today, it may not be adequate 20 years from now. Medical technology is progressing at a rapid pace, and there are newer methods of treatment that keep emerging. Knee replacements were unknown 5 years back, but have now become a routine procedure. It is quite possible that your medical insurance could be grossly inadequate when you need it the most.

Build an Emergency Fund to meet expenses not covered by your insurance!

The simple solution to this problem is self-insurance. All you need to do is block some funds to meet your medical expenses. You could invest this money in a debt mutual fund or a Bank FD and use it only for meeting any major medical emergency. This amount is over and above your medical cover and would be used only to meet those non-routine expenses that are not met through your medical cover. The money that you have invested will continue to grow and hence help you hedge against inflation or any significant medical procedure that is not within the ambit of your current medical insurance.

To conclude, you need to supplement your medical insurance by 

a) Budgeting for some medical expenses while you plan for your monthly expenses.

 b) Investing a meaningful amount in a debt instrument that provides for a hedge for increasing medical costs or any other treatment not covered by your medical policy.

Above all, there is no substitute for building a healthy lifestyle – Prevention is always better than a cure!