Financial planning is an essential activity that allows you to effectively plan for the goals of your life. With the help of financial planning, you can set your financial goals and make arrangements to achieve them. However, when creating an effective financial plan, you need to plan for medical emergencies as they can derail a well-defined financial strategy.
At the Asia Health 2020 conference hosted by the ICN, it was mentioned that around 50-60 million Indians are pushed into poverty each year due to their inability to finance their health expenses. India has one of the highest personal expenditure (OOPE) in health, where 70% of health expenditure is borne by clients. Of these health expenses, about 95% are financed by pocket expenses and 5% by health insurance. As a result, an additional 7% of people are pushed into poverty each year.
Personal health expenses eat away at your savings and can derail your financial planning journey. If you want to avoid these expenses, there is only one solution: invest in a health insurance plan. You cannot change the OOPE in India, but you can surely increase the insurance share!
Health insurance plans have become a necessity these days. Medical costs are rising, it’s no secret. Along with this, diseases are also on the increase. Today the world is grappling with the COVID pandemic, who knows what disease would come in ordinary years. Plus, if you’re covered by a health insurance plan, you can protect yourself against lifestyle-related illnesses, hereditary illnesses, and even accidental injuries.
Here are some common ways health insurance keeps your financial planning on track –
1. It prevents a financial crisis
If you check the coverage benefits of health insurance plans, you will find that the plan covers almost all types of medical expenses that you might incur. So when there is a medical emergency that results in hospitalization, you can get coverage for most of the medical expenses you incur. When your medical expenses are covered, you can avoid strain on your finances.
Bottom Line: So health insurance plans help you prevent a financial crisis. They cover your costs and keep your savings from running out. So you can plan your financial goals without worrying about a medical crisis wiping out your savings. Your financial goals are therefore protected.
2. It helps you plan for rainy days
Do emergencies announce when they are going to strike?
They don’t. However, if you plan correctly, you can run into them every time they strike. Most emergencies require you to be financially prepared, and therefore one of the pillars of financial planning is contingency planning.
Bottom Line: Health insurance plans help you plan for medical emergencies. They help you make sure that in the event of an unfortunate medical emergency, you’ll be prepared to deal with it, without derailing your financial plan.
3. They provide coverage for the whole family
Health insurance plans are available as floating family plans that cover all of your family members. Plus, if your parents are old enough, you can even invest in senior policies that cover their medical needs.
Remember: When everyone in your family is covered by a health insurance plan, no member’s medical needs will affect your financial planning. You would be able to cover medical expenses easily without breaking a sweat.
4. There are different types of health insurance plans
Did you know that health insurance plans go beyond normal hospitalization?
There are different types of health insurance plans that give you comprehensive protection against any medical emergency, whether it involves hospitalization or not. For example, critical illness plans cover major dreaded illnesses and medical procedures. They pay a lump sum benefit so that you can meet your financial obligations if you have a covered illness. So, if you have a debt that becomes a burden to repay due to critical illness, the benefit you receive can be used to pay it off. Likewise, there are specific COVID health plans that help you tackle the financial implications of the current pandemic.
Bottom Line: You can opt for these different types of health insurance plans for a full financial arsenal at your disposal. Whatever medical attack you face, you can use a health plan and protect your finances.
5. Let’s not forget the tax angle
Okay, so this one isn’t so much about preventing a derailment, but more about increasing the mileage of your financial plan. Health insurance plans help save taxes. The premium you pay earns you a section 80D deduction. You can claim deductions of up to INR 1 lakh and save up to INR 45,000 in taxes (assuming you are in the 30% bracket). Imagine what you can do with these savings!
Bottom Line: You can invest this savings in different ways and complement your investments. This tax saving would strengthen your financial plan and help you accumulate a larger body of work for your goals.
In your quest for financial independence, make health insurance your travel companion. The plan would protect your finances and ensure that your trip isn’t hijacked or you don’t have to take any detours along the way.
(By Dhirendra Mahyavanshi, co-founder, Turtlemint (an InsurTech company)