Health expenses generally increase after retirement. If you are retiring in a few years, here are some ways to plan for them.
Get a comprehensive health cover
If you still don’t have a health cover, just get started. Have a comprehensive and adequate health cover in place so that insurers don’t limit the sum assured or demand higher co-payment later in life.
Health premiums increase with age – typically every five years. If one contracts an illness like Type 1 diabetes, Parkinson’s disease, stroke or cancer without a cover, it’s highly likely that the fresh application for seeking insurance cover might be rejected.
Moreover, you stand to gain by way of a non-claim bonus by starting early. Usually, health insurers increase the cover by 5-10% every year for not making a claim. Over a period of time, it can go up to 50-100% of the original cover depending upon the insurer and result in considerable savings.
Pare your health insurance policies
If you have a family floater policy for yourself, your spouse and your children, consider moving towards a separate cover later in life. It will help reduce overall premiums.
Usually, the premiums for health policies are determined based on the age of the eldest family member and the higher the age, the higher is the premium.
Also, with age, one might need a high cover, while the younger lot could do with a low cover. Keeping covers separate also helps in tax deductions under Sec 80D of IT Act. Health Premiums for self, spouse and children are tax-deductible to the extent of Rs 25,000 in a year. However, premiums paid towards parents who are senior citizens get an additional deduction of Rs 50,000. And when you turn sixty, the deduction goes up to Rs 1 lakh.
Modify existing health insurance policies as needed
It is prudent to customize health policies based on one’s age and healthcare needs. For instance, if you had taken cover early in life, you need to top it up to provide for medical inflation.
If you have a family floater plan, ensure it has a 100% restoration benefit, so that family members can make multiple claims in a year.
Senior citizens in turn require the cover for cataract surgery, knee replacement and related covers based on one’s health condition.
If diagnosed with any disease, disclose it to the insurer to avoid rejection of claims later.
If your insurer does not allow the necessary modifications, port to another. However, go through the fine print by looking at sub-limits and waiting periods before switching to a new policy. The planning process for porting should begin at least 45 days before the policy renewal date.
Move to an individual cover
If you have a group cover, provided by your employer, thanks to the regulation, you can move to an individual cover without losing on the continuity benefits. On moving to a new policy, your waiting period reduces to about one year (as against 3-4 years for a new policy).
Get a letter from the employer regarding years of coverage under the group policy as soon as you resign. Then, apply for porting to an individual policy by providing relevant details. The new insurer might ask you for a medical check-up before underwriting the policy and fix the premium accordingly.
Also know that while moving from a group to an individual cover, sub-limits usually become applicable for room rent while some diseases get excluded. Moreover, if you are going for a higher sum assured the waiting period increases for the incremental cover.
Create a dedicated health fund
Insurance cover pays for hospital bills. Pre and post hospitalization expenses are reimbursed only for up to 60-90 days. If someone has a life-long illness that requires ongoing medical expenses, insurers do not cover the entire cost of treatment.
In such circumstances, float a separate healthcare fund (besides the cover). By committing money every month, and parking it in a mix of equity and debt, you can build the necessary medical corpus.
One could arrive at the target amount by looking at average expenses during the year and grow it by 15% every year to provide for inflation.
Those on the verge of retirement, should pad up their health cover, pare off from family floaters and modify policy based on existing health conditions and needs.