Is Choosing Low-Premium Health Insurance Really the Right Choice?
Dilip Patil
Chief Life Insurance Advisor at LIC | MDRT Member for 17 Years | Financial Planner in Bengaluru | Health, General & Mutual Fund Advisor | FChFP, MBA
As a financial planner, I understand that everyone wants to make financially prudent decisions, especially when it comes to health insurance. Recently, I ran a LinkedIn poll asking, “When buying health insurance, what do you prioritize?” Unsurprisingly, 60% of respondents chose low premiums.
While affordability is important, making it the primary decision factor can lead to unexpected pitfalls. Let’s dive deeper into why focusing solely on low premiums might not be the best strategy.
The Hidden Costs of Low Premiums
Health insurance plans with lower premiums often come with higher deductibles and co-payment clauses. This means you’ll pay a significant portion of your medical bills out of pocket before the insurance kicks in. For example, a ?3 lakh hospital bill with a 20% co-payment clause requires you to shell out ?60,000—unexpected expenses like this can hurt your finances.
Low-premium plans often come with restricted benefits. They may exclude essential coverage like maternity, daycare procedures, or critical illness benefits. This limitation could mean you’re underinsured when you need it the most.
Many low-premium policies impose room rent caps, such as ?5,000 per day. If your hospital room costs ?8,000 per day, not only do you pay the difference, but certain other associated costs (like doctor’s fees) might also be proportionally reduced, leaving you with a hefty bill.
What You Should Consider Instead
Instead of focusing only on premiums, here are key aspects you should evaluate:
Look for plans offering all-inclusive protection, such as pre- and post-hospitalization expenses, critical illness cover, and maternity benefits.
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Ensure your policy covers inflation-adjusted healthcare costs. Medical inflation in India stands at around 14% per annum (source: NITI Aayog), meaning what is adequate today may fall short in five years.
Opt for policies offering an NCB feature. Insurers often increase the sum insured by 10-50% for every claim-free year, providing more value than a low-premium, static cover policy.
Ensure the insurer has a wide hospital network with cashless treatment options. Narrow networks in cheaper plans can make it difficult to find nearby hospitals covered under your policy.
The story of my client: How Low Premiums Can Backfire
One of my client, chose a low-premium health insurance plan that he had seen in an ad online. He saved ?5,000 annually compared to a comprehensive policy. Unfortunately, when hospitalized for a heart procedure, he realized his policy’s room rent cap of ?4,000 wasn’t sufficient. The actual room cost was ?7,500, which led to not only paying the room difference but also higher out-of-pocket costs for surgery and ICU fees. He ended up paying ?1.2 lakh more than anticipated.
When buying health insurance, don’t just look at low premiums. Think about long-term coverage, benefits, and how they align with your lifestyle and future medical needs. Health insurance is a safeguard against unforeseen expenses, and investing in a robust plan today can protect your financial well-being tomorrow.
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