Dheeraj, the father of 6-year-old Arohi, was in for a financial shock a few months ago. Arohi was diagnosed with cancer and needed Rs 25 lakh for her treatment.
While he had a family floater and a critical illness cover, it was much less than he needed. His emergency fund came in handy, but all went into meeting regular household expenses, as he had resigned from work to attend to personal matters.
With no options left, he approached a crowdfunding fund to raise money for treating his daughter. But, unfortunately, we come across such cases every day on the internet.
To begin with, a health cover of Rs 5-10 lakh or more might be good. However, it’s not enough.
Here are some reasons for building a robust health emergency fund as well:
Retiree’s caution
One of the significant fears of retirees is unexpected medical expenses. While one might have comprehensive health insurance in place, it is often available only until the age of 65 years. After that, one might have to fend for themselves or shell out a hefty insurance premium to get limited cover and on copay terms.
Often, the group cover provided by the employer has limited coverage. In such cases, if a retiree is solely covered under it (by his son or daughter), then there is a need to have an additional medical emergency fund.
Double whammy situation
Imagine a situation in which the sole earning member of a family is hospitalised. In addition to paying hospitalisation expenses, one has to support the family financially.
As a youngster, you might have thought it unimportant to have a dedicated medical emergency fund. Nevertheless, responsibilities increase when you have a family to support.
Dipping into a savings kitty built for either child’s education or one’s retirement to meet these expenses is not the smart way out.
Having a health emergency fund in addition to your regular emergency fund helps you tackle unforeseen financial challenges and gives you peace of mind.
Lumpsum payout
In case of a critical illness cover, insurers make a lumpsum payout on detecting a critical illness. These are called fixed-benefit plans. For instance, if someone is diagnosed with renal failure, he is paid the entire sum assured regardless of the amount needed for its treatment. It may or may not be enough.
Payment is made once, after which the policy ends. Besides, such policies exclude cases of HIV, pregnancy or childbirth issues, miscarriage or congenital disease death within 30 days of diagnosis.
Rent caps and co-pay
Room rent capping refers to the maximum cost borne by the insurer for daily hospital rent. It is mentioned in the policy document either as an absolute amount or as a percentage of the sum assured.
For instance, a health policy can have a rent capping of 1% of the sum assured, which works out to Rs 5,000 a day for a policy of Rs 5 lakh sum assured. Therefore, depending on the situation, a day in ICU can easily be upwards of Rs 25,000 depending on the room type (economy, deluxe etc.).
Many senior policies come at a lower premium than standard policies but with the requirement of co-payment. Under co-payment, you pay a part of the bill each time there is a claim – say 20 or 30% of it.
Since the chances of senior citizens requiring long-term care are higher, it is better to have a dedicated health emergency fund.
Network hospitals
In an emergency, the patient is usually admitted to a not-so-far hospital. These hospitals may or may not be part of the hospital network of your insurer.
While network hospitals give you cashless facilities, in the case of others, the family might initially need to shell out the costs or resort to debt to pay the expenses and later get reimbursed from the insurer.
Takeaway
Health insurance often only partially covers the cost of medical care. However, a dedicated health emergency fund can help you tackle unforeseen financial challenges and give you peace of mind.