When Mercedes announced that SIP (systematic portfolio) was their competitor, it rang an alarm bell. Active on social media, I have seen a lot of financially savvy young people actively discussing setting up their own fund as an alternative to buying health insurance.
Yes, SIPs can be a threat to health insurance, even before they become competitors to luxury cars. When you analyze the conversations, there are two specific reasons why people are starting to see their own money as an option for health insurance.
Firstly, there is growing negative publicity about insurance, especially insurance claims. Most people have heard negative reviews about the difficult and time consuming claims process, which can be frustrating and stressful.
From my nearly two decades of experience, I know for a fact that health insurance claims are not as good as what the insurance salesperson wants you to know, and not as bad as what you read or hear online. society. Unfortunately, that’s not what everyone knows, and honestly, this would soon spiral out of control without a collective effort from the industry to regain customer trust.
Two, and this is more serious, people have had to experience huge and unpredictable spikes in health insurance premiums. In fact, more and more people, especially the elderly, talk about dropping plans. Since the whole purpose and idea of purchasing health insurance for young people is to provide financial protection for families in old age when the risk of hospitalization is at its peak, it is not uncommon for people to walk away when they need it. it most makes the whole investment seem uncertain. When you’re young.
Since people wanted clear information on prices and claims, they began to explore having their own funds that they could monitor and have complete control over, instead of living in the shadows.
But understand if having an alternative fund for the risk of hospitalization is a viable option.
A simple way to look at this is to create a fund equal to the amount of insurance you are buying. However, it’s important to understand that regular health insurance provides annual recurring coverage for hospital stays during a lifetime. Health insurance does not pay for a one-time risk or claim that occurs like term insurance. Therefore, before considering an alternative fund, it is important to calculate in detail the lifetime hospitalization costs a family will require, including an appropriate allowance for healthcare inflation. —which, in my opinion, is a complicated task.
A more practical alternative to protecting from hospital admissions, while tracking unpredictable prices, is to combine the idea of a “private fund” with traditional health insurance.
For example, consider purchasing two insurance plans: a basic plan with coverage of $10 lakh and a super recharge plan with coverage of $40 thousand (over $Threshold 10 lakh). Firmware will now cover health care costs of up to $10 lakh, while the super recharge plan can cover the cost on that amount until $50 thousand.
In case when you get older and the cost of the base plan becomes unbearable, you can simply drop the basic plan and continue with the super add-on plan to cover the larger expenses.
Along with this, you also build a fund to cover the costs of smaller surgeries. This allows you to maintain some degree of control over your health care costs while still having a safety net for unsustainable health premiums.
But won’t the cost of a super recharge plan also go up? Super top-up plans are usually a fraction of the cost of the basic plans, because they are an extension of the basic plans. The reason for this is that they only start doing it when you exceed a certain health care cost threshold—the frequency of which is significantly low, keeping premiums low.
To better understand this, you should compare the prices of the base plans with the super add-ons. For example, a 30-year-old might pay about $20,000 for one $Base plan 40 lakh, but only $800-1,000 for a super recharge plan with the same coverage, but with a deductible of $10 thousand. This clearly proves that the basic plans will always be relatively more expensive than the super extras.
In a nutshell, the idea is to have an alternative fund that acts as a stop-loss arrangement to cover annual healthcare costs up to $10 lakh, with extra super pack to cover cost above that amount.
Mahavir Chopra is the Founder & CEO at Beshak.org.
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