How Does Health Insurance Help In Planning Personal Finances Better?

What is personal finance: Save, spend and grow! Now, medical emergencies and other healthcare expenses create a dent in overall financial planning. For example, Indians have spent ₹120 billion on healthcare expenses in FY2022 (CMIE-CPHS report). Also, every year, 63 million people in India slide into poverty due to medical costs. Hence, health insurance becomes an integral part of your financial planning. 

How does a health insurance policy affect your financial planning ?

A health insurance policy is an investment towards your personal finances. Here’s how:

Do not pay medical bills from pocket during emergency 

A medical emergency can be a significant financial burden without a health insurance plan. Most health insurance plans in India cover all medical expenses, such as hospitalisation, diagnostics, and other medical bills you may incur during your treatment. 

No need to break your piggy bank or savings for medical treatments

Health insurance helps you manage your personal finances more efficiently. If you have an insurance policy, you don’t have to worry about your savings. You can get treatment in your desired hospital, and the insurer will cover the medical bills.  

Save taxes

You can claim tax deductions for your health insurance plans under the section 80D of the IT Act. The tax benefits of health insurance can be up to 1 lakh on the premiums you pay from your taxable income, thereby saving your personal finances.

Old age planning- Building a corpus for retirement without worrying about healthcare expenses

Buying health insurance with good coverage and lifelong renewability will ensure considerable coverage. This corpus will sufficiently cover all your medical expenses and protect your retirement savings from unnecessary burdens. 

Better responsibility management for yourself and dependent family members

Family health insurance plans are the best way to cater to your family’s needs. They cover the medical expenses of your children, parents, and spouses under a single plan.  

Thumb rule to include health insurance in your financial planning

The thumb rule indicates the minimum health coverage that you should have. A popular thumb rule indicates that you should have health coverage worth at least 50% of your annual income. For example, if your annual income is ₹15 lakhs, you should take a health insurance coverage of at least ₹7.5 lakhs.

How to plan health insurance smartly ?

While including health insurance in your financial planning, you should consider specific tips that help you plan your health insurance smartly. 

Prefer minimising risks over a premium for a long-term financial win

Health insurance is an investment since it mitigates financial risks against unforeseen medical incidents. A health insurance policy will prevent you from shelling out money from your pocket or breaking other investments during medical emergencies like accidents or surgeries.

Don’t rely only on company-provided health insurance plans 

Company-provided health insurance has limited coverage and contains exclusions such as consumables and specific surgeries. Also, it lapses after you leave the organisation and any new plan will come with a waiting period of 2-3 years for pre-existing health conditions. Unlike company health insurance, personal health insurance plans are tailored to your needs. 

Buy health insurance at an early age for a better premium

Getting a health insurance plan at a young age can help you get a good coverage amount with lower premiums. It ensures that you have sufficient money to cover the expenses of all kinds of healthcare services. 

Do not ignore ‘cumulative bonus’ and ‘restoration’ benefits for better financial security

Numerous health insurance plans in India offer cumulative bonuses or no-claim bonuses. These can be discounts on your upcoming premiums or a top-up in your cover amount for every claim-free year. The restoration benefit means an additional amount will be provided to the policyholder if the sum insured is exhausted in a policy year. 

Leverage ‘deductibles’ and ‘super top-up’ options to extend coverage by paying a lower premium

While buying health insurance plans, you can also use the concept of deductibles and super top-upto widen the coverage. A deductible is the medical bill an insured member declares to bear from his/her pocket. If your claim exceeds your deductible (the amount you pay for covered health care services before your insurance plan starts to pay), the super top-up plans pay the rest of the claim amount. Higher deductibles in health insurance plans provide you coverage at low premiums. Hence, unlike regular health insurance plans, super top-up plans are useful as you can select the deductibles as per your affordability and get a higher coverage amount for yourself.

Increase the cover amount with your age to ensure better financial security

As we grow older, our health expenses may rise. Thus, to ensure you don’t have to spend money from your emergency funds, increase your cover amount as you age. 

Key Takeaways

Health insurance helps you get proper medical care without straining your savings or budget. Considering your financial planning importance, it is essential to invest in a plan that matches your needs.

Consult PhonePe for guidance on choosing the best health insurance plan. We aim to redefine insurance simplicity by making it InsuranceYourWay!