KEEPING INSURANCE HUMAN
back arrow Back

Is building health fund realistically possible?

reply Share
29 Sep, 2021 by  Kautilya Bhardwaj
Health insurance premiums are getting unaffordable even for masses who decided early in their lives to get themselves insured.

This is the biggest argument settling the debate of health insurance vs health fund. Sounds reasonable.


But even if we look at the other end of the debate, the health fund, at max, can also grow only 12-15% (with 100% exposure to equity, which shouldn't be the case provided liquidity) as against a medical inflation of 15-20%.


Now, if we are targeting to build such a fund, here are the stats that needs to be added to list of arguments -

  1. One'll need 2-3 years of contributions to build a 1 time usable corpus of 5-10L considering savings of 50%, all going towards this goal.
  2. One'll need to fund this goal every year with ~20% of their savings just to make it relevant for medical inflation.
  3. There is no way to refill this corpus once used without compromising on other goals.


The situation is worrying & overwhelming!

What can be a reliable & realistic solution to the above problem.


PS: Argument for super top-up is very well taken & looks good for now. However, I'm skeptic about it as well; coz with time if avg bill amount passes the threshold I expect it's premiums to shoot sky as well.

like like
0
Health Insurance

2 Answer

Post
30 Sep, 2021

Dear Kautilya


Cost of premoum need to evaluated post tax benefits under section 80 D .

Ideally , you should have


1. An emergency fund

2. Health insurance of Rs 5 lalh

3. Super Top up of Rs 50 lakh with deductible of Rs 5 lakh .

4. Critical illness of Rs 10 lakh .


This package is good enough for 90 % of risks . Increase duductible to reduct cost of super top up .

Build emergency fund for all exigencies .

Hope this clarifies


Shailesh

Insurance Samadhan


like like
0
icon-comment 0 Comments
icon-reply Reply

Quite an interesting question. In other markets like the US, there is a concept of Health Savings Account (HSA). This account has tax benefits so contributions to the HSA are tax deductible. Withdrawals from the HSA are not taxed provided the end use is for medical reasons.


HSA is a convenient tool for which can be used in combination with high deductible health insurance policies or top up plans.


One can dispense with the low deductible/nil deductible base policy and fund the lower intensity hospitalisation needs from the HSA. Severe and high cost hospitalisation events can be funded by the top ups. This becomes very cost efficient, particularly when you advance in age and your base policy becomes costly.


In the Indian context however, there are no HSA’s. In the absence of tax benefit, motivation and discipline to save in a separate corpus for emergency medical needs would be missing and a few people would be able to do it. It’s easier said than done.

like like
0
icon-comment 0 Comments
icon-reply Reply
Discover the best tips for insurance every week!

Beshak is not regulated by the Insurance Regulatory and Development Authority of India (IRDAI) and does not have any alliance or association with any Insurance business.
© Copyright 2021 Beshak Solutions Pvt. Ltd. All Rights Reserved.

Disclaimer: The content on the website is purely for information purposes for the public at large, and does not constitute personal financial advice for a specific individual reader.
If you are reading this, it means you love reading the fine print. Why not get paid for what you love doing - Join us by writing to info@beshak.org now 🙂