Are Health Insurance Plans a Short-Term Investment?

A health insurance policy means different things to different individuals. For some it is an investment, for others a protective blanket while many consider it to be a tax-saving instrument. But one sentiment runs as an undercurrent in all these meanings and that is peace of mind. A health insurance policy protects your finances from the effect of any medical emergency and thus secures peace of mind. 

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    So, a health insurance policy is a very important and a very essential part of everyone’s financial planning. Having said this, many of us commit grave mistakes when buying and continuing a health insurance cover.

    Having limited knowledge of the plan’s continued benefits; many of us err when dealing with our health insurance plans. A common mistake is holding the plan for short-term and not renewing it continuously.

     

    Most of you must be agreeing with my statement. Having your heart in the right place, you buy a health insurance plan for yourself and your family. You are happy with the coverage provided and the tax implications that ensue are considered a free meal.

    However, being a short-term plan, renewing it every year is not done zealously and many of us lapse our policies after only continuing it for a couple of years. A financial crunch or a lack of motivation to renew the plan (since health plans do not always provide an immediate benefit) are  some common reasons why a health plan is given up. Is the practice correct? Are health plans a short-term investment?

    No, they are not. A health plan is not for the short-term and should be renewed every year. The reasons are simple to understand –

    • The benefits – Your health plan proves beneficial when you suffer any hospitalization and huge cost implications.. Your plan pays for the bills and you are spared the financial repercussions. When the need would actually strike is uncertain and so holding on to your plan would be wise. You might feel that the premiums paid are not fetching you anything for every claim-free year, but, on the contrary, you accumulate the No Claim Bonus which increases your coverage at the same premium. When you actually face a claim, the coverage provided far outweigh the premiums you have paid.

    • No Claim Bonus – As mentioned above, for every claim-free year, you are entitled to a No-Claim Bonus which is cumulative in nature. If you lapse your policy, your accumulated No Claim Bonus also lapses and you lose out on the benefits

    • The waiting period – When you buy a plan, your pre-existing ailments are excluded from the cover for a specific period called the waiting period. This period usually ranges from 2-4 years. If you ditch your best health insurance plan, the tenure that you have already spent in the waiting period would be lost. If you buy another plan after some years, you would again need to go through the the waiting period of the plan.

    • The coverage – If you are wise enough to buy a plan when you are young, you avail of a comprehensive coverage. If you forego the plan eventually and then try and buy another plan in your older ages when you would actually require the cover, the coverage would be limited. The company would impose multiple restrictive clauses on the diseases you suffer from and you would have to compromise on the coverage. Continuing a plan for a longer tenure is the only way to ensure a continued comprehensive coverage.

    A health insurance plan is not a short-term investment. It should be renewed every year and with the lifelong renewability feature available in all plans today, it becomes easier to continue your coverage in the old age too. So buy a plan and hold on to it.

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