Jagoinvestor
January 10, 2022
Is Health Insurance Premium a waste of Money?
A lot of people think that paying health insurance premiums is a waste of money.
After all, why pay the premiums for years and years, and what if nothing happens? After all, our grandparents never had any health insurance and they are in perfect health. Why pay for something which is an imaginary risk? These health insurance companies are here to just make money, fool customers with their fancy presentations and brochures, and reject claims finally.
Why not just save that money or enjoy life!.. Some people also give a nice example of how they can save up the premiums each year and if after 10 yrs, there is some hospitalization, they can use the money to pay the bills.
This is exactly how millions of investors feel and that’s one reason why insurance penetration is so low in our country. I am sure you must have met someone in your office or in your family who just reject the idea of taking the health insurance, because “Company ka cover to hai na” types of remarks
I see two big reasons why many people think this way!
Reason #1 – Transactional Benefit Mentality
A lot of people have a transactional benefit mentality, where they want to get some tangible benefit the moment they pay.
- Like you pay for a movie, and you watch it.
- You pay for apples, and you get it.
- You buy a TV on Amazon, and it gets delivered!
What do you get when you pay your health insurance premium? What do you get?
A PROMISE!!
That’s all, a promise that your medical bills will be taken care of in the future, only if it arises?
It’s very hard for these people to see benefits in terms of probabilities and future possibilities. It’s all about a short-term mindset and no ability to visualize the future.
This is even true for many investors who buy health insurance premiums, but eventually, they let expire the policy because they feel frustrated looking at their premiums go waste!
Reason #2 – Fake confidence of “Nothing will happen to me”
I don’t know how some people have this super confidence in themselves that “nothing will happen to me”
People don’t say it, but many people truly believe that there are fewer chances of anything bad happening to THEM.. It all happens to others.
I have lost one of my close friends and one more known person to COVID in the last 12 months, both below 40 yrs!. I was also admitted to the hospital in Nov 2020 as I was having cough and breathing issues. Both the people who died in Covid got admitted the same way with minor issues at first, and then it got worse and finally, they died.
I survived.
Remember that a person who dies in an accident or gets cancer has the same “Nothing will happen to me” kind of confidence 5 min before the event happens. We are all like that.
I feel it’s nothing but a lack of maturity and a bit idiotic to think that nothing will happen to me or my family because “we are careful”.
If you are careful, it’s just that the chances of something bad happening to you reduces a bit. That’s all, it does not get eliminated. Don’t live in the imaginary world.
Premiums are wasted if nothing happens?
It’s foolish to think that premiums get wasted if nothing happens to you.
- When you wear a mask, is it a waste if you didn’t catch COVID?
- Was the helmet a waste if you didn’t meet the accident?
What about the protection it provided you and you had that peace of mind?
In fact, the best thing is that your health insurance goes WASTE!.. I have tweeted the same some time back
Health insurance is so funny
You get the best out of your #healthinsurance is when your health insurance premium totally goes waste!!!
?️?️?️?️ pic.twitter.com/abBMPJThRL
— Manish Chauhan (@jagoinvestor_) January 10, 2022
3 levels of risks
In any area of life, you have various levels of risk.
You either accept the risk, reduce the risk or transfer the risk!
Health insurance is all about transferring the risk of very big hospital bills to insurers by choosing to pay a premium each year. If someone does not want to pay the premium, it means that they are accepting the risk that someday they may have to shell out a big sum of money for medical reasons.
And sometimes it can run into such a big amount that it can wipe out your years of effort. Sometimes you may get a disease that may require multiple or regular hospitalizations and it can really be crippling to your financial life.
So it’s up to you to decide if you want to accept these big risks or transfer them to the insurer (The cost part)
Is company cover enough?
I have already said this multiple times.
A company cover many times is not a full replacement for full-fledged health insurance which you buy yourself. At best you shall see the employer cover as a complimentary benefit because it can go away anytime. You also don’t know if it’s sufficient for you or not? And the worst, you cant depend on it after retirement, when you will need it the most!
I have also thinking health insurance waste of money. After read your article I have decided to take health insurance policy for me and my family. Can you please suggest which one is best for middle class family.
Hi Manish,
Is there any Health Insurer in india who can provide claim for cochlear implant and surgery (ENT) for my daughter 8 years?
Are you talking about a case when that issue is already there? If yes, then no insurance will cover it, because insurance is for UNKNOWN AND UNEXPECTED.
If someone does not have any illness and that issue comes, then its covered!
Manish
I think that it is difficult to comment on this, since most people who don’t like insurance are strongly against it and it is difficult to change something like that. There is good reason why a lot of people are against it too. I would say that most of the times a basic cover should be taken along with the one that companily is offering. Apart from it, taking an insurance is based on your perception of risk.
There are multiple things here.
Take my case for example.
I am a middle class, middle-aged person, with aged parents. While I was employed, I always used the company’s Health Insurance for my family and a separate health insurance for my parents that covered pre-existing diseases.
(1) My father had a pacemaker replacement in 2015 and a fracture in 2018. Both expenses were covered by the Insurer as long as it was covered under the Health Insurance provided by the employer.
(2) I had an accident last year that necessitated surgery, that was covered by the company’s HI.
(3) However, outside the company provided HI, the experience has been extremely negative. My parents were covered under continued extended coverage provided by the same public-sector health insurance company that had covered them while I was in service, but with very high premium (around Rs 70000 p.a).
Yet, when my mother had a stroke and was hospitalized last year, the insurer and its TPA is making me do a monkey dance trying every trick in the book to deny me the claim. Six months have passed, and the company is continually asking for more and more documents that were not listed in the first place as being required.
I have not yet received any payment, despite the patient being in continuous coverage at the insurer since 2016. The moral of the story is, if you are insured through the employer it’s easier to get the claim settled, but if you are paying on your own, then God help you.
And yet, insurance is a necessary evil – with insurance there is a slim chance that you may get reimbursed, without insurance there is ZERO chance of getting reimbursed. Your mileage may vary.
@Jagoinvestor, despite my bad experience, I am convinced that it’s absolutely necessary to have health insurance separate from that provided by the employer, particularly because every single person will be out of employment at some point (such as retirement). In fact, at this moment I am looking for a top-up policy to cover my existing HI plans.
Would welcome some articles from you that help us decide what policies (base policy and top-up) to buy, what to look for, what to avoid, the misleading jargon, avoiding the prtfalls etc. That would be really helpful.
Thanks for sharing that experience Gaurav.. Will write an article on that topic of super top up soon.
Manish
Nice article to encourage people to take health insurance but there are certain problems with health insurance as can be seen in developed countries with high penetrations which countries like ours should avoid and should be mentioned in all such articles.
In the US high dependence on health insurance has led to price gouging. The hospitals increase their rates, there is total opaqueness of pricing for the patients, there is no possibility of shopping for best value, patients don’t complain because they don’t pay directly and the insurance companies simply increase the premiums next year so ultimately the healthy pay for the unhealthy without a choice. The health insurance rates have become exorbitant even from a PPP perspective.
In UK, NHS is so overloaded that it takes months to get an appointment and there is no other choice.
In the Denmark, people pay 60% taxes to get health benefits “free”.
I believe India should have both systems even amongst the middle calss the pay as you go who will keep the hospitals honest by bargaining and having a healthy price discovery and health insurance for those who are risk averse. Fear mongering or guilt tripping people into buying health insurance is not the way forward.
Why I say fear mongering – if falling seriously sick has a high probability (more than 40%) no insurer will touch it with a barge pole so ofcourse the probability is low, after that it has to be fear. As a whole, 80% of the medical spend happens in the last 2 months of most people’s life where greedy hospitals mint money. A living will is the way out. I know it is not politically correct but it is the least wasteful way in a world with scarce resources.
Health I surance in the US has been come a joke. It doesn’t seem to matter if I have it or not, either way, I am paying thru the nose. My premiums, deductibles and Co-insurance has gotten so bad, I pay thousands every year for basic coverage. I have bills piling up over years. I’ll be paying off my healthcare bills for years. It’s like having a second mortgage. I may drop coverage next year. Sad other cou tries have it figured out. It’s why there are less and less doctors every year and more are going overseas to escape Healthcare hell in the US.
Thanks for sharing that Mr. Rich!
Another great article.
I understand the reluctance in getting health insurance. Most of my friends have absolutely no interest in it because it seems “too Western” and not really something for middle income people in a developing country. They reason that even if you look at health insurance as an investment, any other investment is better than it because they can yield real returns.
I, myself don’t really have health insurance. I just have a fund I contribute to once in a while.
Your analysis was great. Thanks for sharing this article.
there is one more school of thought – although the numbers may not add up. why not invest the premium amount in a investment – which gives you returns and it will take care of your medical exps as and when it arises. i know we may need to invest higher amounts – but atleast you get yoru money back with returns – and if not used for medical exps – can be useful for anything
This can work out if things fall in place.. I mean if you save lets say Rs 5 lacs in 10 yrs and exactly after 10 yrs only there is hospitalization which will require exactly or less than 5 lacs, you will feel you made the right decision.
But what happens if after 10 yrs, the bill is 50 lacs or in 2nd yrs itself its 12 lacs? What about that case?
Manish
“what if the bill is 50 lakh” is not a valid question. I am a reasonably rich person and have similar friends’ circle. not one has so much insurance coverage. Middle class people cannot afford the permium for that and rich people dont care about it. It is just a lure to tell people that they get that much money. Most of the coverage is for Rs 5 lakh or less and it hardly justifies the pain one has to go through to claim money later.
I completely agree.. middle class (which is target for this article) can not afford anything beyond 7 lakhs of sum insured if the person insured is more than 45 years of age.. and just adding all family members it goes for around 1.5 lakhs in premium each year.. that is huge amount for normal midlle class which will try to avoid it anyhow..
ok, I think one shall take decision which will serve them in long term
One can also try Super Top Up where the premiums are quite low. So have a base of say 5 Lakhs and then a Super Top Up from the same company for another 20 Lakhs. I have this and my additional premium is 4k for Super Top Up.
Very informative article. First, I have been paying premium for the last 10 years in addition to my company coverage.
Couple of things noted in your article.
1. The insurance company is 100% looking into ROI
2. They keep increasing premium in spite of zero claims. They are giving NCB but that stops at certain level.
3. They bluntly reject claims without giving any reasons. I have couple of examples here as well. The affected person went to insurance ombudsman and got the money. This is an additional pain for the already affected person.
This are few reasons many people are not opting for health insurance in addition to the company covered one.
In addition to the above, in my opinion insurance is more of a charitable donation. By paying premium and not claiming, you are basically helping someone who has paid his premium and in need of money during his hospitalization.
Hi Dominic
1. Yes, its a business at the end of the day. We will do the same if we open a health insurance company
2. Because the premium is for a POOL of people not case to case basis.
3. Well the claim settlement ratios are in range of 95-98% .. means out of 100 claims only 2-5 are not paid or rejected and there can be multiple reasons for that. I have seen cases where there has been confusion among parties, there has been miscommunication also, ITs not a generalized thing that companies just reject claims like that
What you said in last line is very true.. its a charity for one part of system nad other part is on recieveing end !
Manish
Nice Article. Also to add that generally Health insurance has a waiting period of 24 – 48 months of big diseases when you buy a health insurance. People generally dont give much attention as their Company insurance covers those mostly from Day 1. But when you to switch to a company which do not have proper health insurance policy, you are exposed to the vacuum risk of those diseases which could suck out all your financial savings. If you are confident that company insurance is sufficient, still you should take a personal health insurance of small value just to overcome the waiting period.
Very true Kuldeep
All this article does is blame the people who are happy not to take health insurance. It says nothing about insurance companies who find ways to reject claims of people when in need. It has happened n number of times. I am sure everyone is aware of that. Seems to me like a paid article from one of the health insurance companies. Stop brainwashing people. Let them be at peace.
Hi Manoj, thanks of your comment. What I have done is put my perspective with logic for all the points. IT would be nice to discuss with you on which point you find wrong . Saying that it did not cover something is childish, because if first it was not the agenda of the article, second, if I cover that in this article, How do you gurantee that someone else will not come up with 3rd point which I didnt cover and when I cover that too, then 4th point. You can only fillup the space upto a limit. An article of 2000 words cant have unlimited things.
The article was about investor behaviour and thats all. I will be happy to also take up this same topic you shared in a podcast, video discussion or article sometime.
One more point is that you shall look at claim settlement ratio and the amount paid against claimed, and you will realise that its 98% , 95% , 91% kind of numbers.. Which means money is getting paid for claims..
Not saying that companies dont reject claims sometimes, but its often because terms are not fulfilling or claim is not valid. Sometimes claims are debatable and with proper communication claims get paid too ..
I will be happy to hear out which part of article you dont agree with and I will be happy to correct it.
Manish
claim settlement ratio is for those claims that finally gets recognized as claim and then rejected due to wrong info provided or if claim is within ‘initial no claim’ period. But it does not consider those claims which get pushed back for want of more documentation from patients. This is a major part and most of the issues that readers have pointed out in the comments come under this. Insurance companies do not consider this as claim as they did not receive final set of docs from patients. If they provide all queries for claim also in the denominator, I am pretty sure it falls well below pass marks (35%) !!
Hi,
All is good. But most of Insurance company stop giving insurance after age of 75 where it is most required.
If people can make habit of keeping some money equivalent to premium, then there is no need of buying medical insurance.
Another factor, as the age increases the premium also increases but the benefits offered by insurance company remains same. For eg. many insurance company provide facility of medical checkup up to certain amount & this amount remains same and not change even if you pay premium for continuous ten years.
3. When setting amount of bill in hospital, most of insurance company approach is give less money to insuraned person.
4. When person get admitted, hospital first ask about insurance and non-insurance and there are many example found for same treatment the bill for insurance person and non-insurance person are different. This create a room of doubt in billing which is right.
In current situation, the insurance company should increase the age limit for providing benefit [say till 85 years] & also they provide benefit proportional to age limit. [for eg. free medical check up facility after 2 years once person cross age of 50]
Dear Upendra .. Insurance is a business, you need to explore more on how health insurance works.. Most of your points are more of emptional outburst and “What you want to get” kind of wishes.. The business does not work that way ..
I will try to cover this in some video and explain!
I am 75 years. worked for a good IT company with Insurance cover for me and family with two kids. In my working life I had appendix operation & wife surgery for gynecological problem. both is good hospital paid by employer’s group life iinsrance. Kids had only minor illness except one dog bite and other dragged by a speeding scooter but not very serious injury. I took Mediclaim policy from GIC for family almost 10 years before retirement, cover of Rs. 3 lakhs thinking that after retirement , I will get no claim bonus. Within 3-4 years children flew out of nest( had their own insurances). At my age 65 years, GIC declared that no more continuation of policy , new rule which was not there 15 years ago when I took first time insurance !! Hence literally waste of money for 15 years.Took new policy for me and wife almost paying 3,5 times premium from GIC. After that after 4 years minor shoulder operation , then prostate gland operation. Both done in not fancy but hospitals. Almost 80% reimbursement. I do not go for cashless and keep strict check on treatment. The shock came at the time of my wife’s hospitalization for rapid detoriation of health. Insurance company disallowed and deducted almost 80 % of hospitalization oftwo fortnights in succession. I still have the cover with premium mounting every year. Waste or Vasuli readers only decide.
I agree that everyone needs Health Insurance.
But what we are offered and buy are incomplete policies thereby affecting us financially at the time of need.
First and foremost even smaller claims like Cataract requires copayment of about 20-30% from our end which is unexpected.
One should get 100% payment without any payment from his end including Local lens,imported lens, special lens etc upto 50K.
If it is hospitalisation for more than a day also we are required to meet upto 50% of the hospital bill which again is an unexpected funds requirement.
Hospitals can be graded as AAA,AA,A etc premium should be charged accordingly instead of the patient or their families undergoing mental torture.
Ambulance expenses should also be covered with premium varying for 10,20,25,50,100 Kms etc
Just like Ola, UBER one should be protected from point to point.
Until such an arrangement comes into reality insured should go in for MF investment to take care of financial emergencies.
Goal can be Rs.2.5,5,7.5 and 10 lakhs as per the insured’s desire for financial protection.
MF investment doesn’t depend upon the age of the person insured.
>These health insurance companies are here to just make money, fool customers with their fancy presentations and brochures, and reject claims finally.<
Kindly elaborate safe guards against – REJECT CLAIMS FINALLY.
Still not convinced on personal cover with company cover. Medical insurance is not like life insurance – premiums keep increasing with age. You buy at 40 or you buy at 60, premium you pay at 60 is pretty much same.
Also, I can port my company policy on retirement to personal policy to cover pre-existing illnesses.
Surprised at the half baked info from someone I admire.
Hi Balaji
Health Insurance premiums cant be fixed because the risk event can happen again and agian unlike life insurance event (1 time) and health insurance is not a very old industry in India. Its quite complicated in pricing.
Which policy are you talking about where premium at 40 and 60 is almost same? What about 5 yrs later? Please share that?
Hey Balaji
Glad to know that you liked the article.
Please share it on your social media profile so that it can reach more and more people !
Vandana
Hi Balaji , thanks for sharing that you admire us ..
All I can say that health insurance premium increases over time because risk event can happen multiple times . If it was a fixed premium product, the premium will be unaffordable for all
Also you can port policy on retirement, but its not a guarantee and its not even going to cover if you catch any serious illness in between.
Below article mention few of the points why Indians are reluctant to buy insurance in India.
https://www.medicaldaily.com/how-healthcare-india-different-healthcare-usa-442132
Regards
Thank you for another nice article as always.
With respect to Medical Insurance, one can debate saying I’ve cover provided by the company and even I shift job the new employer will provide. And I’ll buy cover towards retirement as many health insurance companies provide cover at higher age ( at higher cost may be).
May be debate is which approach is cost effective? I’m saying this because somewhere I feel People still consider cost over peace of mind.(I may be wrong here)
It is a waste of money , save the same premium allocate it to health and use when the need arises.
I have seen company not giving the full insurance and we have to pay from our pockets
my money and insurance company decides whether to pay or not is not acceptable.
Hell with all rules policies and procedured and protocols
real example mty mom got operated and I had to shell out 20k and insurance company paid 90k.
Transaction mentality is a must to survive in this world,
Nice.. What do you do when in first year itself you have a huge bill? HOw will allocating premium help?
Agree very much and i am also in similar lines. This may not work for everyone …
I am also allocation premiums in different basket and never touch them and only use in case of emergency. This funds can be used for any person in your family rather than per person premium.
If you plan properly with all the premiums you may have bigger chunk of Credit available if needed. Also you never know insurance companies change their rules when ever they want.
I have seen insurance company not paying claims and think it’s a waste ,paying premium all these years and iam retired.
Can you share your case please .. was the claim as per policy rules?
Good Article. But can you cover the company cover with more details. What if the company provides adequate cover or has top plans where employee can buy additional cover ?
In that case why not to buy the personal policy when you are closer to the retirement (few years early to avoid waiting periods as the retirement) ? Why to pay premiums till such point for personal policy ? Is there any example which explains this may not work ?