The Cost of Waiting: Understanding the Risks of Not Having Personal Health Insurance


Personal health insurance was seen as a product that should be purchased at the time of illness, and people used to wait for a certain period of time before taking a personal health insurance policy. It is detrimental to wait before taking the personal health insurance policy as it can have many mental and financial consequences.

Personal health insurance is one of the most important things that should be considered while having financial planning in place, as one wrong step can lead to disaster. Personal health insurance will cost you many if you keep waiting or postponing taking the policy.

The costs include a lack of mental peace and being in constant tension about the hospitalization in the future, falling into a debt trap, rejection of claims or inability to claim due to the PED condition in the policy, and pre-policy check-ups which might be mandated in future, higher restrictions if health conditions are not favorable for the insurance company, loss of tax benefits that can be availed under Section 80D of the income tax act and medical inflation which would eat into your savings.

7 Risks That You Are Taking by Not Having Personal Health Insurance

1) Lack of Mental Peace:

The major cost that a person could incur without a personal health insurance plan is the lack of mental peace. If you do not have a personal health insurance plan, you would be under stress whenever you hear your family member being hospitalized or your colleagues requesting money donations for treatment purposes.

This could not have happened had they taken the personal health insurance policy in the first place. Lack of mental peace would lead to other health issues well-established in the research literature. Mental peace is the ultimate aim of all human beings, but losing it over a personal health insurance plan is not desirable. People also postpone personal health insurance purchases, which could also lead to a lack of mental peace.

Personal health insurance plans are those that should be taken well before the occurrence of an unfortunate event. Still, people realize the importance of insurance only after having a bad hospitalization experience, resulting in financial adversity. Health insurance should be planned for a rainy day, just like ants plan and store their food for a rainy day so they do not suffer. In the same way, one should take a health insurance plan to save themselves from rainy days in the future.

2) Falling Into Debt Trap:

The other risk of not buying a health insurance plan is that one could fall into the debt trap in case of hospitalization. People must understand that one hospitalization is enough to turn their condition from middle class to poor. People are one hospitalization away from becoming poor if they do not have adequate personal health insurance coverage.

For instance, let us assume that Mr.A is an average middle-class employee with a Rs.10 lakh package and has a house in the city without a personal health insurance plan. One bad day, he met with an accident and was admitted to a hospital for treatment.

The staff had asked for a health insurance policy, which the family didn’t have, so Mr. A’s family had to arrange funds immediately for his treatment. The family decided to mortgage their house for a lower rate without any other option. Since Mr.A was the family’s only breadwinner, working is necessary for the family, and this has forced the family to borrow more money.

This situation has blown up, so the family has fallen into the debt trap, making Mr.A work hard to settle the debt without wealth accumulation. The situation could have been much worse if the expenses were much higher. It is important to realize the importance of personal health insurance policies much before the occurrence of an unfavorable event. We advise you to purchase the personal health insurance plan today without postponing it further.

3) Rejection of Claims Due to PEDs:

The other risks of waiting for the correct time to take a personal health insurance policy could be that the policy might be rejected later when you apply for it, stating that you had pre-existing diseases. Insurance companies usually avoid risky proposals that could result in immediate claims.

People suffering from chronic diseases such as heart risks, diabetes, hypertension, etc., would generally find it difficult to get a personal health insurance plan. Even if they manage to get one, it will come with many conditions such as restricted sum insured, co-payments etc.

If one tries to hide their pre-existing conditions when taking the policy, then any claims made further would not be entertained by the insurance company, leading to the cancellation of a policy. Taking a personal health insurance policy is fine once you start earning. Few people wait till marriage, whereas few people wait till childbirth. One should understand that waiting leads to more waiting. Waiting to take a policy leads to more waiting periods for claiming.

4) Pre Policy Medical Checkups:

The other cost of waiting before taking the personal health insurance plan is that insurance companies would make it mandatory to undergo pre-policy medical tests after a certain age or based on the health conditions mentioned in the proposal form of the insured. When you are young, insurance companies would not ask for any medical tests, but once you cross 40 years, there would be a demand to undergo medical tests to avail of the health insurance policy.

Medical tests would reveal much information about your health condition to the insurance company, leading to either an increase in premium, imposing conditions, or rejecting your application for insurance. To prevent these things from happening, one should take a personal health insurance policy at a young age. Pre-policy medical check-ups are not necessitated if you are young but are mandatory if you are above a certain age.

5) More Restrictions:

The insurance companies would impose many restrictions when the proposal is unfavorable. More restrictions would follow once the pre-policy check-up report is available with the insurance company. Hence, it is better to take the personal health insurance policy rather than get the policy when you are young.

For example, if you are aged and have certain pre-existing diseases, insurance companies might impose certain restrictions such as:

  • Increasing the premium amount payable is known as loading. The amount of loading depends on the underwriter. The higher the risk, the higher would be the loading.
  • Imposing higher waiting time before making a claim. Insurance companies impose extra waiting time on certain illnesses they think might bring a claim soon.
  • Co-payments and sub-limits would be added for certain illnesses that could arise soon. Co-payments could differ from one insurance company to another, but higher co-payments could also be imposed to reduce the risk.

6) Loss of Tax Benefits:

Personal health insurance is one of the best ways to avail income tax deductions. Health insurance premiums are exempted from tax under Section 80D of the Income Tax Act. One can claim up to Rs.1 Lakh in exemption under the Income Tax Act.

If you wait longer, you can take advantage of the income tax benefits derived from personal health insurance. Income tax benefits for health insurance are attractive, and it is important to purchase personal health insurance.

Tax benefits can be extended to the add-ons under personal health insurance plans, such as critical illness cover, which are exempted under the Income Tax Act. The premium paid by the insured under the group health insurance plan can also be claimed for exemption, but the premium paid by the employer cannot be claimed for exemption by the employee. An exemption can only be availed when an employee pays the group health insurance plan premium.

For more information on the income tax benefits for personal health insurance, please book a call with our health insurance experts at Ethika Insurance Broking.

7) Medical Inflation:

As per certain reports, India is in the top place for medical inflation. Medical inflation is the cost in rise for the medical expenses incurred by a person this year compared to the previous year. Medical inflation in India is at 14%, the highest among Asian countries. So your Rs.1 Lakh saved last year for any medical emergencies would be Rs.86k now and would further reduce every year.

So it is not advisable to keep the amount in savings for medical emergencies; rather, invest it in a personal health insurance plan along with a top-up health insurance plan that could cover all your health insurance needs in the future. Medical inflation should also be considered while deciding the sum insured under the personal health insurance plans. With increasing inflation, more than your coverage would be required. Therefore, one should revise their coverage or take the top-up health insurance plan with a deductible amount equal to the base policy sum insured.

For more information on the risks of not having a personal health insurance policy, please visit our website and have a call with our insurance experts at Ethika Insurance Broking.

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Susheel Agarwal