Source: payerfusion.com

How Health Insurance Takes Away your Two Tensions – Health Care Cost and Tax

Aamir Khan’s recently said “Vote kar ya crib kar”, regarding the recent municipal election of Mumbai and it invoked controversy. For me, he is the best Khan of all-time, barring the great Yusuf Khan aka Dilip Kumar and I do support this statement. I opened by lecture (I mean, blog) with this statement because I want to say, “Mumbai-kar, insurance kar or crib kar”. No, seriously, looking at the inflation in the healthcare sector, we can either take proper insurance or crib.

Mumbai is the home of the best private hospitals in India, think of Breach Candy or Lilavati, they can compete with AIIMS and even beat it sometimes. However, you must be aware of the costs there. Let’s forget those; even a decent hospital would cost you Rs 4 lakhs for general surgery. Do you have that amount of money, readily available?

Source: payerfusion.com

The healthcare inflation in India is set at 20%, approximately (This article puts it at a very conservative 15% if you need proof, and for scarier reality, try this article, even if the data is a little old). It means, if surgery is costing you Rs 4 lakhs this year, next year, it will cost you approximately Rs 4.80 lakhs. And the next year, it will cost you Rs 5.76 lakhs. In 4 years, it will cost you, close to Rs 8.3 lakhs. Don’t believe me? OK, do your calculation. You will reach same figures. So basically, the healthcare cost is increasing every year. Except for some dubious investment companies, nothing will give you that type of return. Let’s think of an ideal scenario where your mutual fund investment is giving you 12% annually. Your Rs 4 lakh today will become Rs 6.3 lakhs in 4 years. Which means you need to shell out Rs 2 lakhs extra from your pocket if the illness strikes four years after you prepared for it.

Further, the cost of a normal child delivery in a large hospital has increased to Rs 40,000 from Rs 25,000 in Mumbai. You are free to crib like I said in the opening.

I will not bring my political bias (“someone without a political ideology isn’t fit to be a part of the society” -author) into it, but all I would say that the government did little to control this. Recently, even controlling price of some costly treatments, including that of cancer, was removed.

Moreover, it is pointless to say that we survive more on medicines than on food, nowadays. Everybody has some healthcare complications, and nobody is fully healthy. Blame our diet, lifestyle, urbanisation and pollution, dependency on chemicals for anything and everything or simply the kalyug effect, I am not sure what is the reason. But I am sure; healthcare eats a good chunk of whatever we earn. From Ambanis to you and me, we all pay to our doctors, handsomely. Even the proverbial apple (even the Steve Jobs made one which is more common nowadays) isn’t being effective in keeping the doctor away.

Let’s stop beating around the bush, love it or hate it; we need a health insurance if we are living in Mumbai, or in any other major city in India. Sickness is not your well-mannered rishtedar who will come to pay a visit after informing you over the phone and trust me, you are not ready when it knocks on your door and says ‘surprise!!!’ A health insurance will keep you safe because you will get coverage against these unwanted, unwelcome and exorbitant medical bills.

Moreover, health insurance is a periodic investment which doesn’t cost you a whole lot at one go (OK, I confess, there are those as well, but why take that mode?) and you can treat it as a SIP. Someone told me, “the bills, make me sicker than the ailment ever could”, how true!

Again, there is a catch. Suppose, you opt for a Rs 10 lakh mediclaim policy which looks sufficient in the current times. However, using the maths above, your coverage will become insufficient in the next five years. What then? Instead of buying another policy, opt for super top-ups which will increase the insurance cover of the present policy at affordable rates. These policies offer coverage once the threshold or deductible limit of the main policy is crossed.

Generic health insurance plans are not sufficient either, especially if you face a critical illness. For instance, the cost of cancer treatment increased by 33% at Tata Memorial Hospital in 2015.

You can buy added layer of protection by opting for a critical illness cover which gives you an extra protection (read, more money) against life-threatening critical ailments like cancer or heart diseases. I would suggest that you add these covers. If you can’t do that today, you can do it when you can but try not to ignore it. This will keep you safe.

There is another fringe benefit of buying a health insurance policy. The premium of a health insurance is eligible to get tax benefits under Section 80D of the Income Tax Act. Moreover, the benefit is available on policies bought for self, spouse, and parents. A quick look at the quantum of tax deduction:

Scenarios Self, Spouse, and Kids Parents (whether dependent or not) Total tax deduction
Everyone is below 60 Rs 25,000 Rs 25,000 Rs 50,000
Except parents, everyone is below 60 Rs 25,000 Rs 30,000 Rs 55,000
All family members are above 60 Rs 30,000 Rs 30,000 Rs 60,000

Note, the above tax deductions are available even on super top-up policies.

However, the primary purpose of health insurance is to provide health coverage and not to save you tax. Don’t buy health insurance to save taxes only, buy it because you need it.

I reiterate, Mumbaikar, insurance kar ya crib kar. The smart ones would go for the insurance for the whole family (which is another way of telling you that I am smart as I have got it done) and the remaining ones…. God bless us all!

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