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You Need to Think of Health Insurance Right From When You Begin Your Financial Planning read

Jul 16 2021

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There comes a time in life when you need to sit down and assess your current financial situation and how you want to work towards creating a better and stable future for yourself and your loved ones. Financial planning is a valuable and important process that provides a structure to your finances and accordingly, you have to decide on the steps you need to take to ensure you have enough money to fall back on in case of a medical emergency or to fund your child’s education, etc. One such vital inclusion in your financial planning is investing in health insurance.

What is the difference between life and health insurance?

Life and health insurance are two things that each individual must have. Unfortunately, many tend to confuse the two and consider them to be one and the same. There is a difference between life and health insurance and it is important you know the same. Each of the insurance plans serve a completely different purpose and offers different coverage. While a health insurance policy covers expenses incurred towards treatment, a life insurance policy provides financial respite (death benefit) in case of your untimely demise. The purpose of the death benefit is to be sufficient to replace future income lost, as well as cover additional expenses such as funeral costs, medical expenses, and other debts. This provides the family with a sense of continuity without pressing a long pause on finances. On the other hand, a health insurance policy is a safety net that pays for medical expenses such as doctor's visits, hospitalisation, medications, tests, procedures, etc. Most health insurance policies cover pre-hospitalisation and post-hospitalisation expenses as well.

Is it good to invest in health insurance?

Yes, absolutely! Investing in life and health insurance is an important step in sound planning for your future. When it comes to health insurance, it can help you deal with medical expenses without causing a strain on your hard-earned savings. Yes, health insurance is expensive but provides good benefits in the long run. But to make the most of your health insurance, it is imperative you invest in health insurance early on in life, preferably in your 20’s. Buying a health insurance policy at a younger age lets you access better health coverage. When you reach your goal of your medical cover being enough to cover different needs, you can start focusing on making other long-term investments. In terms of returns and benefits, almost all insurance companies offer a cumulative bonus for every claim-free year, called the ‘No Claims Bonus’. If you invest in health insurance in your 20’s, you have better chances of getting through a year without claims, and since it’s a cumulative bonus, you can amass a significant increase in the total coverage amount, which is going to be very useful in case you have to deal with the rising costs of medical expenses.

Does health insurance actually save you money?

Yes, you can save money in the form of tax returns when you invest in a health insurance policy.  Health insurance is all about saving money where you can transfer a big financial risk to the insurer in exchange for a (comparatively) small premium. Under Section 80D of the Income Tax Act of 1961, one may claim the premium paid towards individual or family health insurance as a deduction from the total income. This is another reason why buying health insurance when you are young is more beneficial because you can enjoy the tax benefits for a longer period of time. Another way you save money by investing in health insurance is putting your money in something of value and what will come in handy during a medical emergency.

 

Conclusion

Agreed, life and health insurance plans may be costly but you can always start small and build your way up. The idea is start somewhere and it should ideally be in your 20’s so that you are able to accumulate enough by the time the need arises and be financially protected in case of emergencies.

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