Hospitals were spilling over. Intensive Care Unit (ICU) beds were falling short. Those were the headlines for most of 2020 when the Covid-19 pandemic gripped the world. The pandemic, which continues its devastating impact across the globe, was a rude wake-up call for many. It not only wreaked havoc on the health of millions, but it had a catastrophic effect on the personal finances of the legions of people who lost their jobs.
In the US, which was one of the worst affected countries, the unemployment rate surged to one its highest levels in its history. A job loss has its contagion impact. When you lose your job, it is not just your salary that stops. Many attendant benefits come to a halt – it could include your employer’s contribution to your retirement savings, bonuses, and, very importantly, the health insurance coverage that comes as part of the group insurance plan that your employer had purchased.
Health insurance a must
Having adequate health insurance is a must in anyone’s overall financial plan. It ensures that a health emergency does not suddenly ruin your finances. The coverage provides the insurer pays for hospitalization and medical bills. The absence of a health coverage can cost you dearly should you or any of your family members meet with a medical emergency.
In such a situation, you will be left with no option but to foot the medical bills from your savings or by borrowing, leading to financial distress. A health insurance coverage can be purchased in your capacity or as part of the plans that cover your family. It can also be provided by your employer, whether it is a private company or the government.
An umbrella for the entire family
Having a large enough health insurance coverage becomes even more critical if you are married, have children, or have dependent parents. The more numbers dependent on you means the risk of having medical emergencies multiplies that much more. In the case of Covid-19, the most vulnerable sections were the aged, many of whom were frail and could not fight with the virus and had to be hospitalized and sent to intensive care where the costs of a day’s medical treatment could be prohibitive.
Against this backdrop, the question that arises is whether you should rely solely on the health insurance coverage provided by your employer? Your job might be stable, and the health coverage may seem adequate to provide for your dependants’ medical expenditure. But what if you lose your job? What happens after you retire? Most financial planners would advise you to have your own independent health insurance coverage running parallel to the employer coverage.
It is preferable to have a family health insurance plan, often called the family floater plan. Such plans take care of your health insurance needs and cover the members of your entire family by paying a small extra premium amount.
Here are some reasons which make it imperative for you to have your own parallel individual health coverage running alongside your employer’s health insurance.
Rising healthcare costs
Rising medical costs, or what is referred to as health inflation, could mean that your employer’s insurance might not cover your future insurance needs. The employer’s coverage is mostly uniform for a specific category of employees irrespective of their need.
Your coverage needs would depend on your age and the age of dependents, the medical history of all family members, hospitalization and medical costs in your place of residence, or that of your dependants.
The coverage amount is not static
The coverage provided by your employers may not be the same for the following year. For instance, if a company is going through financial hardship, it might reduce the insurance coverage. Moreover, the terms of your employer’s coverage may even change from time to time.
Sometimes, employers can ask the employees to co-pay (bear a part of the burden of medical costs) or pay a part of the premium to get the coverage benefit throughout the year. Besides, employers can also discontinue the plan.
Employer’s coverage has limited scope
Group health insurance plans provided by employers generally have a limited scope of coverage, and often these plans are suitable for meeting routine and ordinary health expenses. Even if the employer offers coverage from the day you join your job, the plans usually do not provide much coverage.
Generally, the employer negotiates all the terms and conditions of the group coverage – the inclusions and exclusions, coverage for dependents, minimum and maximum sum assured— directly with the insurer. Since you are not part of the deliberations, you cannot always ensure that the illnesses or any surgery you are prone to are covered.
Makes gig workforce safe
If you have your own health insurance, you need not worry on this front while switching jobs. Even if your employer does not provide the coverage and the job profile looks good for your career, you can go for it.
The terms of insurance coverage may change with the contractual job instead of permanent employment. The gig economy is growing where one has to take care of one’s needs as employers look for part-time vendors of services. Here, health insurance becomes your responsibility.
Customize your coverage
However, when you buy your own health insurance policy, you would carefully assess your needs. If you plan to expand your family, you might ask for the inclusion of a maternity cover.age But if you are unmarried, this would not be needed. Instead, you may be keen on a critical illness coverage in case of a family history of critical illness like cancer or kidney ailment.
You can also choose to have a feature that offers daily cash allowance benefits to meet out-of-pocket expenses in case of illness and hospitalization. Such add-on benefits can be had only if you purchase a health policy for yourself.
Your next job may not provide health coverage
The assumption that all employers provide health insurance benefits is not correct. Some employers do not offer insurance coverage to their employees.
In case you need to change a job, your next employer may not offer group health insurance. In such a case, you can face some massive financial stress during a medical emergency.
Limits on number of dependants covered
Some employers may also limit the number of dependents covered under their group insurance. Sometimes parents are not covered, and at times it may be limited to two children.
There may be families with special children whose medical needs may not be covered by the employer.
There is no coverage after retirement
Health insurance provided by a private employer would not last beyond your retirement or contracted service period, even if you were covered throughout your working life.
So, what happens if you have to buy health insurance at age 60? Firstly, getting a health coverage at that age itself becomes a challenge, with not many insurers willing to provide the coverage. Even if you get one, the premium will go too high because of the age factor. The earlier you purchase an insurance coverage in your lifetime, your premium amounts are likely to remain low, despite the periodic loading (an increase of premium) that insurers are allowed keeping the age and other variables in mind.
You will not bear the risk of ‘waiting period’
All health insurance coverages have a ‘waiting period.’ This, in simple terms, means your insurance coverage will kick in after a certain amount of time, only after which you can claim the benefits.
The waiting period can range from a few months to as long as a couple of years, depending on the condition or illness to be covered. Thus, if you lose your job or plan to quit or to do something on your own and decide to purchase health insurance after you leave your job, you will have to ride out the waiting period before the insurer pays your medical claims.
What happens if you or any of your family members meet with a medical emergency involving heavy expenditure during that waiting period? You will face significant financial stress. Your own parallel insurance coverage guards against this eventuality.
It is always good to have health insurance coverage in your personal capacity. And it would help if you started the plan early in your career to keep the premiums low with more extensive benefits. It can only help you in the long run.