The average human spends around eight hours of their day sleeping, with another hour devoted to meals. A few hours are allocated for working, and most of the day is spent simply going about their business. Regularly, nothing significant happens, and as such, days look and feel the same. People go to sleep expecting this repetition to endure.
We are like chickens, trusting that the hand that provides will keep doing so endlessly. We assume life will go on as usual, expecting no major changes. But this is a fool’s errand; at some point, the same hand that has been caring for us may one day kill it. Things would never be the same ever again after that.
This classic problem of the human mind is well-illustrated: Our lived experience often leads us to have a false sense of security, creating a distorted perspective on the risks that life may bring. Consequently, when bad times come, we are ill-prepared to confront them.
When picking a health insurance policy, most people opt for a sum of no more than Rs 2–3 lakhs. When challenged on this choice, their reasoning is usually rooted in reality — hospitalisations are pretty uncommon and typical medical bills rarely surpass these figures. A cover amount beyond Rs 2–3 lakhs, therefore, appears to be unnecessary.
It’s clear that Rs 2–3 lakhs are by no means a small amount of money. However, it is far from life-altering either. In case the need arises, one can squeeze up this kind of amount for hospitalisation without necessarily requiring medical insurance. It won’t be easy – and there may be some discomfort involved – but it is achievable with enough effort.
A bone marrow transplant which costs Rs 25 lakhs, together with the ongoing treatment for cancer, can quickly bring about financial mayhem. As a result, your only alternatives are to take out loans or get help from family and friends to fund the procedure. If that doesn’t amount to anything, you must consider applying for aid from the public health system.
This sequence of events can have a drastic effect on your life and potentially leave you devastated. That is why it is suggested that you take out a policy to adequately protect yourself from such experiences.
Agents will go over various treatments with expenses in excess of Rs 50 lakhs, encouraging you to obtain a large cover. For example, they may mention Ramesh’s case, who was not ready for the financial issues he faced trying to treat a rare neurological disorder, as he had only taken out a small policy of Rs 5 lakhs.
This may appear to be sound advice, but it is, in fact, a deception.
This time, the hypothetical agent was encouraging you to explore an alternate route to maximise their financial security, regardless of your health outcomes.
The truth is, we are nothing like chickens. They don’t have the capability to calculate probability and likelihoods, whereas we do. Even when unexpected events occur and disrupt our lives, we can still roughly estimate the possibility of their occurrence.
You may think that it’s only cancer and transplants that can be costly, but how much do these treatments really cost? On average, what is the expense required to recover from such illnesses?
In our experience, treatments usually don’t cost more than Rs 20 lakhs. It is rare to find an extensive treatment plan that would set you back more than that. Though it is possible to get a large bill at a premium hospital, most people are conscious of their expenses.
When they realise their medical expenses could be high, they search for a hospital and room that are within their budget. Consequently, the chances of accumulating a large bill of Rs 50 lakhs are almost null, rendering it irrelevant to consider at this stage.
The agent’s argument is also full of logical fallacies.
It is doubtful that a Rs 50 lakh cover will be able to shield you from any and all eventualities. What if the treatment you require costs more than one crore? Or, what if it can only be obtained overseas? Furthermore, some illnesses insurers may not even provide coverage for.
If you want to make sure that you’re properly covered, it’s best to draw up a list of diseases and scenarios where your insurance won’t provide coverage. That way, you can easily find an appropriate policy for maximum protection. It’s a never-ending cycle, but if you take the time for this process, your efforts will pay off in the long run.
This is an ongoing issue, and trying to cover every contingency with insurance cannot guarantee a positive result. The agent may be attempting to extract more money by making you anxious. However, there is no guarantee of protection from any misfortune.
Health insurance policies usually offer you a far more comprehensive degree of protection than you might expect. With an all-inclusive policy, you can be assured of a basic coverage of, for example, Rs 10 lakhs, with the potential to increase this to Rs 20 lakhs due to a no-claims bonus and a restoration benefit that provides an additional amount worth of payment.
Altogether, without a huge outlay, you can gain protection for up to Rs 10-20 lakhs. Some may think, ‘if I can get the same coverage for Rs 30 lakhs with a Rs 10 lakh cover, why not go lower?’
It may be possible to begin your health insurance journey with a Rs 5 lakh cover. However, it’s essential to keep in mind that healthcare costs are not static – they rise approximately 6–7% annually and could soon surpass the coverage of such a plan. It’s also worth considering that unless you’re completely fit, insurers will be wary of increasing the amount.
If you’ve made substantial claims in the past or suffer from a heart ailment, there’s a chance that insurance firms won’t be able to offer a suitable policy. Consequently, if you’d like comprehensive coverage for the next decade at least, it may be wise to look for more than a Rs 5 lakh plan.
Can one argue in favour of basic cover? Certainly, if you are elderly, the risk of hospitalisation rises considerably, and those with pre-existing conditions could face skyrocketing premiums. Therefore, for such individuals, it may be worthwhile to take a small plan if the policy costs seem too high.
If you don’t have the capacity to make consistent annual payments, a lower fee is probably your best bet.
You don’t want to find yourself in a situation where you have bought a policy, paid your premiums and then stopped it all due to insufficient money. It is very common, sometimes just simply because there isn’t enough cash or a budgeting issue.
The burden of ever-growing premiums is an impossible one. People should be concerned about potential outcomes and often are taken aback when they see insurance costs shift each year with policy renewal.
Every year, your premiums will go up by 4–6% to account for inflation and higher costs of treatments. Your insurer will adjust the rates accordingly to cover these extra expenses.
Your premiums could also increase if you move from one age band to another. For instance, an insurer may ask for more money from a 36-year-old than those between 25 and 35. But as soon as you reach the 35-year mark, they will raise the amount to do with the increased risk associated with your age.
Insurers will have their own pricing system based on different age ranges, and they’ll make adjustments when you switch between them.
The insurance company may adjust their pricing structure if they conclude it cannot make a profit. However, they have to work with the regulator before doing so. Keep in mind that this can be done unexpectedly.
– Insurers are unable to raise premiums simply due to a claim being made in a particular year. This is largely a misconceived notion.
No matter the cost, it’s important to take out a health insurance policy that you can afford. Although the premiums may rise annually, some coverage is better than none at all. Making sure you have protection in place is invaluable, so if you’re unsure about your ability to cover higher payments, it’s wise to opt for a less comprehensive cover.
On the other hand, if you’re worried about the not-so-common events that can be costly, understand that there are cost-effective solutions, such as Super Top Ups, which provide significant cover at a reasonable rate. We’ll discuss this further later.
To conclude this chapter, there’s nothing wrong with opting for a policy with Rs 50 lakhs or a crore of coverage. If it gives you peace of mind, go for it straight away. But if this is something an agent suggests.