First the caveat - I do not sell any insurance - medical or life. This article has been triggered by a young friend who has recently been handed over a Rs 76-lakh bill and has no clue who is going to pay for it.
Yes, you are right, Rs 76-lakh cover is NOT what you and me will ever have, but this person had 3-lakh - which is anyway too low!
He is an entrepreneur in the Social media business. He does not want to go to the SM asking for money - it will destroy his image, right?
What I suggest to everybody (especially for entrepreneurs with a start-up) is to take (say) a Rs 5-7 lakh of base cover, a critical illness cover, a top-up insurance and a super-top up - all together totalling Rs 50 lakh. The term insurance cover, of course, has to cover all the loans, spouse’s retirement, and children’s education, marriage, and other lifestyle needs. Lifestyle needs could mean tennis lessons, swimming classes, etc.
Medical insurance is a complicated business - with top-up, super top-up, renewable policy, critical illness, etc. - so please engage with an agent. The agent will help you with the documentation, claims, medical examination, etc. In the case of Term Life Insurance, I strongly advise you to go directly online.
Remember whatever you do with cancer insurance - remember it will not cover diagnostic tests, travel, conveyance, loss of pay for the caretaker, lifestyle changes etc. So for covering all this, I suggest that you start with a separate SIP of Rs 7500 per month. You should name it the “Medical SIP fund”. What it does is that it mentally prepares you for spending this money in case of an emergency.
Say a family member is impacted with Cancer (or liver failure or kidney failure) - it sets you back mentally, and emotionally. Let us say you have a Rs 25-lakh medical cover - base cover, floater, and a Super Top-up. You also have a corporate cover from your company which covers “exceptional trauma” to the extent of Rs 10 lakh.
None of this will cover the diagnostic tests, and the loss of income. Say this shortfall is Rs 3 lakh. If this has to come from ‘generic’ fund, you will feel the hurt far more! However if your “Medical SIP fund” has say Rs 9 lakh - you will feel less bad. Of course, it is psychological, but so what. Your discussion with your family will be like “I have kept aside some money for such emergencies.and you know what.I have Rs 9 lakh in that fund, and we need only `3 lakh to be funded out of it, so we are not so badly off!”
If you have never removed money in distress, you will not appreciate this - but preparing the mind is just as important. I am sure you know somebody who has been impacted by cancer (or liver illness) - talk to them. Ask them how they prepared mentally, physically, and financially. You will hear horror stories of dramatic change in lifestyle. That cannot be avoided, let us just try to be better prepared. Let us hope that it never happens to us. Never.
Insurance is good, but it does not cover anything. What you can do is Save. Invest. Insure and, of course, Pray that you don’t need to call on the policy, ever.
PV Subramanyam writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’.