How to Plan Health Insurance Premiums Well in Advance to Renew the Policy?
Published On Nov 13, 2019, Updated On Oct 29, 2020
Health insurance is a must.
But some people in India don’t own a health insurance policy. So, they get deprived of the benefits.
On the other hand, many buy health insurance but fail to renew it on the due date. One of the most common reasons they don’t renew the policy is higher premium rates.
The annual premium of a health insurance policy covering self, spouse, kids for a sufficient sum assured maybe somewhere between Rs. 10,000 and Rs. 20,000 every year.
Since many health insurance policies come with lifetime renewability, you have to keep paying the premium every year for the future. Also, health insurance does not come with fixed premiums. Premium increases as you grow old. So, considering the burden of paying insurance premium as a lifetime commitment is important.
Let’s discuss in this draft article post how to plan to keep paying health insurance premiums in the future.
Think About Your Budget
When purchasing a health insurance plan, consider the following points:
- Keep your budget in mind.
- Assess the health insurance requirement for your family.
- Look for a policy that caters to those requirements.
- Consider the capping and sub-limits in the policy.
- Check the premium amount you have to pay every year.
- Remember, premiums increase for any special features.
- Search for options such as a basic and straightforward policy with bare minimum features.
- Go for some deductible also to reduce the premium amount.
The underlying point is that when you buy a policy, you should make sure that you’ll be comfortable in paying premiums. It should not be an unnecessary burden on you.
Consider Premiums Your Annual Expenses
In case you prepare a budget at the start of the year, include the premium costs of health insurance in the budget. It’s very important and requires some careful cash flow planning so that you cannot remain short of funds when it comes to paying the premiums to renew the policy.
Start saving some money in advance every month. If the expense goes around Rs. 20,000 for the year, try to save Rs. 2,500 every month. This will let you have funds to pay the premiums. Thus, you can continue to be covered and enjoy health insurance benefits.
Maintain an Emergency Fund
It’s advisable to maintain an emergency fund for a minimum of 6 to 12 months. Have a contingency fund. Go for a fixed deposit or a liquid mutual fund. Since the annual premiums against health insurance is not a small amount, you can draw this amount from the contingency fund and pay when the premium is due. Contingency fund can work as a liquidity cushion in case these expenses can otherwise upset the entire cash flow for the month.
Keep These 3 Basic Things in Mind:
To save on health insurance premiums or plan in advance for a health insurance premium, it is crucial to keep these three things in mind.
- Don’t go for a new fresh policy if you can’t afford. If your annual income is somewhere between Rs.3-5 lakh, then paying a premium of more than 10 thousand annually can carry too much strain on your budget in the long run.
- If you already have a group policy or a kind of policy that covers you and your family, but you are not satisfied with the sum insured limit, don’t buy another health insurance policy. Instead, choose only a super top-up cover. This will help you increase the sum insured at lower premiums.
- Be aware of the premium due date. Assign several alerts, minimum two (one month before the due date and the other a week ago). This will let you have enough time to arrange for funds.
Keep Credit Card the Last Option
If you can’t follow the above practices, and the due date for renewal of the policy falls the next day, explore paying the premium using your credit card. However, before this, make sure you have enough spare funds set aside. Otherwise, being unable to pay the credit card bill may let you pay additional interests and some penal charges. It can affect your credit score.
Over to You!
Health Insurance is a powerful tool to save your hard-earned money in case of a medical emergency. But it doesn’t mean you should choose a policy without doing proper research and considering your financial stability. Always, pick a policy for which you can keep paying the premiums in foreseeable future. Follow an organised approach. This will not just let you get the right cover, but also enable you to renew the policy from time to time.