Markets
BSE See NSE See 39,434.94
311.98 (0.8%)
collapse Related Readings collapse

Live Well, Live Insured

By Jay Sampat | 6/6/2011 6:57 PM Monday

We have all been hit by the rise in the prices of essential commodities. While one can combat this rise of commodity prices by cutting down on non-essential spending, one cannot adopt the same approach towards healthcare costs. If you encounter a medical emergency you have to give it the necessary medical attention. This comes with its attached price tag. What’s more, such expenses climb steeply with age. In addition to that, due to rising medical inflation the same surgery will cost you at least 30 to 40 per cent more after five years. Hence, families should build a healthcare corpus (in addition to insurance) to take care of the following:

Senior Citizen Issues: Health covers for senior citizens come with a higher price tag than for others. For example, if you paid 1.5 per cent of the sum assured as premium at the age of 25 years, the premium amount can shoot up to 8 per cent of the sum assured when you are 60 years old. If you don’t have any financial constraint, then you should sign up for an additional medical insurance so that even if you exhaust the limit on one cover you will have a back-up option. Another option is to build a healthcare expenses contingency fund if as a senior citizen you don’t want to depend on children for healthcare expenses.

Co-payment clause is one more issue that senior citizens need to tackle. This refers to the portion of a claim a policyholder agrees to bear, while the insurance company pays the rest. Such a clause is present in most health covers for senior citizens in order to make the insured more responsible while making claims. This clause is also common in group mediclaim covers offered by employers, which cover employees and his/her family members. The co-payment clause is applicable mostly to the family members of the employee.

Certain Expenses Not Covered: Health insurance is of two types. The first are the defined benefit plans offered by life insurers, like critical illness policies which offer lump-sum payment on the diagnosis of any of the critical illnesses in the policy document. If the insurance company is stipulated to pay Rs 1,00,000 for a certain critical illness, the company will pay Rs 1,00,000 irrespective of the size of the claim. The other type of policy is the indemnity policy, which is the traditional policy offered by general insurers.

These are largely reimbursement plans which cover expenses related to hospitalisation. The claims are settled by the insurer either on a cashless basis through a tie-up with hospitals or by reimbursing the bills. There are various expenses like commuting to the hospital, buying medicines post-hospitalisation and so on that fall outside the purview of a traditional reimbursement plan. Hence, it always helps to have a healthcare kitty which can be used as a top-up fund over and above your mediclaim.

Investors often complain that they don’t have money left after taking care of their day-to-day expenses. Hence, creating a separate healthcare corpus is a difficult affair. However, look a little closer and you will realise that it’s not all that difficult. If you save just Rs 1,700 in the form of a SIP for 20 years, you can accumulate a corpus of Rs 10 lakh after 20 years (at 8 per cent). The size of the amount need not be high. One simply needs to ensure that you start early in life to benefit from the effect of compounding. One should save the corpus in fixed deposits (FDs) and liquid funds, which are more stable in nature.

The returns from liquid or liquid-plus-funds which come with a lock-in period of a maximum of three days are in the range of 6-7 per cent and are also redeemable within 24 hours. One of the main differences between liquid and liquid-plus-funds is the dividend distribution tax. DDT of liquid funds is 27 per cent, including the surcharge. Liquid-plus-funds come with lower DDT at 15 per cent, but the lock-in period is almost a week. Hence, if you are parking a sizable sum then liquid-plus-funds should be considered.

Sometimes you may avoid taking any decision because of lethargy or because you are afraid of the outcomes. This isn’t the right approach. Moreover, one needs to remember that the same investment approach cannot suit you across different life stages. When you turn 70, your asset allocation should get more tilted towards debt since your risk appetite will be much lower. For example, you may have a high exposure to equity at an early age, say in your early 30s, so as to meet your goals. The same strategy will not apply to you when you touch 50 when your needs change and your responsibilities are higher.

 

Find More Articles on: DSIJ Magazine, Insurance, Personal Finance, Insurance, General Insurance, Health Insurance, Life Insurance

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Torrent Power shines on the bourses

Vinayak Gangule / Article rating: 5.0

Torrent Power sparked in Tuesday’s trading session as it informed bourses that it has received an approval from Gujarat Electricity Regulatory Commission (GERC) for the power procurement arrangement of 278 MW between the company's UNOSUGEN Power Plant (capacity of 382.5 MW) and its Licensed Distribution Business for cities of Ahmedabad, Gandhinagar and Surat.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.