The Importance of Personal Health Insurance: A Guide for Young Persons


The Importance of Personal Health Insurance A Guide for Young Persons

Personal Health Insurance

Covid -19 has accentuated the need to have health insurance. Health insurance not only gives financial stability to the policyholder by safeguarding their hard-earned money, but also protects the policyholder’s monies, which she would have otherwise had to bear due to hospitalization. Personal health insurance also known as retail health insurance can cover the hospitalization expenses of the individual as well as the family members. Personal health insurance can be taken to cover the individual alone, as well as to cover the entire family (floater cover). Personal health insurance differs from group health insurance in that group health insurance covers a whole group of families, usually employees of an organization.

Individual health insurance plans cover the individual for the entire sum insured under the policy, whereas the floater policies cover the entire family under the single sum insured.

Importance of Personal Health Insurance for Young People

Personal Health insurance should be one of your first considerations as soon as you become independent and start earning. It should form a part of your financial planning process. There are many advantages to purchasing a health insurance policy at a very young age which are mentioned below:

  1. Lower Cost: One of the major factors affecting health insurance premiums is the insured’s age. The younger you are when you buy health insurance, the lesser your premium will be. Health insurance premium increases with an increase in the age of the person. The older a person is, the higher cost of health insurance. The other factor which decides the health insurance premium is the sum insured opted by the young person. A higher sum insured leads to higher health insurance premiums. 
  1. Income tax benefits: Health insurance offers tax-free income benefits as per Section 80D in the Income Tax Act. The health insurance premium paid excluding the service tax would be eligible for the income tax exemption. Health insurance premiums paid towards the dependent parents would also be eligible for the income tax exemption. Income tax allows a maximum exemption of up to Rs.1 Lakh on health insurance premiums. The income tax also exempts for the expenses incurred on preventive health checkups towards self, family and dependent parents.
TypeLimit of exemptionLimit for Preventive Health CheckupTotal Limit
Self + FamilyRs.25,000Rs.5,000Rs.30,000
Self & Family + Parents Rs.25,000 + Rs.25,000Rs.5,000 + Rs.5,000Rs.50,000
Self & Family + Parents (Senior Citizens)Rs.25,000 + Rs.50,000Rs.5,000 + Rs.7,000Rs.75,000
Self & Family (Senior Citizen) + Parents (Senior Citizens)Rs.50,000 + Rs.50,000Rs.7,000 + Rs.7,000Rs.1,00,000
  1. Waiting period: Most Health insurance policies tend to have a waiting period for pre-existing diseases, age-related deteriorative conditions, and for hospitalizations that can be prolonged like cataracts. Most insurers normally cap waiting periods from 1 year to 4 years before the claim can be paid. It is also important to note that health insurance policies cannot be claimed immediately after purchasing them as there would be a 30-day initial waiting period for certain diseases or illnesses other than pre-existing illnesses and specific diseases. The waiting time does not apply to hospitalization following an accident. Since the waiting periods are longer for health insurance plans, it is advisable to take personal health insurance at a very young age so that it can be exhausted when one needs to make a claim.
  1. High Coverage: The other advantage of taking personal health insurance at a very young age is a higher coverage can be opted for without going through pre-policy medical checkups. Insurance companies experience fewer claims from young people and therefore do not stress on the pre-policy medical checkup and would provide even high sum insured plans at affordable rates. Higher coverage can add up to even higher coverage by virtue of no claims bonus that gets added to the policy sum insured for every claim free year. Higher the base sum insured, higher would be the no claim bonus and overall higher sum insured at less premium. 
  1. Complement to Group Health Insurance: Group health insurance would be valid as long as the employee is with the organization; once the employee leaves the organization or loses a job there would be no active health insurance cover. Moreover, group or employer health insurance can neither be tailored to your needs nor include your family members as per your wish creating greater dissatisfaction. On the other hand, personal health insurance can be tailored as per the insured’s needs such as choosing the sum insured, opting for necessary add-ons etc., and can include his/her family members at the insured’s discretion. Group health insurance should complement personal health insurance and not otherwise as the first priority should be given to personal health insurance. 
  1. Lifestyle Changes: According to the World health organization, non-communicable diseases or lifestyle diseases claim 41 million lives annually, contributing to 70% of deaths globally. Lifestyle diseases are a result of lifestyle changes such as sleep patterns, unhealthy food consumption, mental pressure, lack of physical activities etc. Examples of lifestyle diseases include cancer, diabetes, hypertension, heart diseases, strokes, and other chronic diseases. These diseases are not spontaneous but advance over a period of time which would show up only after affecting the body to a certain extent. Due to the advancement of technology, most of the jobs have become immobile where people would work from the desk without any physical work. The lifestyle changes would impact people at a very young age due to the rapid changes in lifestyle. Therefore a personal health insurance policy for young people would help them to safeguard their finances against unexpected hospitalization. 
  1. Medical inflation: Medical inflation is the term used to denote the increase in average or unit cost of the healthcare services over a period of time. For example, the cost of bypass surgery might have been Rs.1 Lakh last year but has increased to Rs.1.2 Lakhs this year which means that the costs have gone up by 20%. This increase in costs over a period of time with respect to the medical field is known as medical inflation. As per certain reports, India has the highest medical inflation rate of 14% among all the Asian countries. This also means that the sum insured selected should be revised often as the medical inflation would eat into your sum insured. Medical inflation would be on the rise every year and the cost of treatments would be increasing every year. Without sufficient health insurance coverage at a young age, lifestyle diseases and other unforeseen conditions may push people into poverty or financial crisis at a very young age. 
  1. Cashless treatment: All the health insurance policies in the market are offering cashless claim settlement facility which is a boon for many insured customers. Under this facility the customer can directly avail treatment without paying for the expenses as his/her insurance company would be paying the hospital bill as per the terms and conditions of the policy. Imagine having a health insurance plan at a very young age which would settle your health insurance claims without paying from your pocket. Personal health insurance should be treated as an investment for the future on yourself as the premium paid would be returned at any point of time in the future. Cashless treatment can be availed in any of the network hospitals that are tied-up with the insurance company to provide cashless claim settlement facility. 
  1. Bonus Sum Insured: No claim bonus is the additional sum insured that is granted to the insured for not making any claims in the previous policy period. No claim bonus would be calculated on the basic sum insured of the personal health insurance policy. There are many health insurance plans in the market which offer no claim bonus ranging from 10% to 100% for each claim free year. Buy personal health insurance plans that offer the highest no claim bonus in the lowest period so that you can even double your sum insured in a shorter period of time.

In addition to the above pointers, personal health insurance can be tailored to the needs of the insured  whereas the group health insurance policy would be tailored based on the needs and recommendations of the employer. Personal health insurance policy would also pay for the hospitalization expenses for alternative treatments such as Ayurveda, Yoga, Unani, Siddha and Homeopathy. Personal health insurance is relatively cheaper and can be availed without pre-policy medical check ups for young people.

For the best health insurance plan for young people please visit Ethika insurance broking and book a call with our insurance matter experts to address your issues and suggest the best personal health insurance plans.

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Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Management.