Brace for health emergencies

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 daughters 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 childrens 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 doesnt have to depend on others for managing his
medical bills and his family maintains the same standard of living.
(The writer, Vijay Sinha, is Senior V-P, Marketing, Product Development and Agency Training at Tata AIA Life Insurance)