What is the best time to review your health insurance cover?

Mohit was a banking professional in his late 30s, with a small family consisting of his wife and child. He had taken a life cover after his child was born as well as health insurance with a sum assured of Rs. 3 lakh. He wonders if this is enough and whether he should upgrade. How frequently should one review one’s insurance cover?

Healthcare inflation is on the rise and Mohit’s cover needs to be upgraded. The insured sum may prove to be too low to cover even one hospital bill in the next few years, leaving alone hospitalization expenses in the retirement years. The increase in healthcare costs makes it necessary to periodically review health coverage and upgrade it in line with known current costs and expected future costs. Postponing an upgrade to later years may prove to be expensive. Insurance companies would be happy to upgrade when Mohit was young and healthy. Doing so at a later age may have a two-fold disadvantage. One, it will attract higher premiums and two, if Mohit is diagnosed with a serious illness like diabetes, thyroid or something worse, the costs and upgrades will be too high, or the higher cover may be refused by the insurance company entirely.

A single shot upgrade might need a higher premium that could hurt Mohit’s savings. Instead, a targeted upgrade can be planned for every 7-10 years. Mohit can make an investment instead of paying the premium, and build a corpus that will fund this upgrade. He can then take a single premium upgrade periodically to bump up the cover as required. Alternatively, Mohit can divide his savings between a health cover and a health corpus. The cover can be funded with savings and upgraded at intervals to cover high cost diseases and eventualities. The health corpus is simply an investment that is set aside in case of a need. If there is no event of ill-health, the corpus can be added to the retirement corpus as Mohit ages.

The content on this page is courtesy of the Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

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