Few weeks back, I posted an interesting question on our Facebook Page asking – “Given limited money – which is more important product to buy from security point of view – Term Insurance or Health Insurance ?” .
Lets say there is a guy – who wants both a term plan and a health insurance for his family and he only has Rs 10,000 per annum left with him, now he can either buy a 1 crore term plan for his family or buy a 5 lacs cover for his family. But he will be able to get only one of them from this Rs 10,000 left with him, then which out of term plan and health insurance is makes sense for family and is more useful? Lets see some points, raised by our facebook fans, which will help us to think about it.
1. Death is less probable compared to hospitalization
One of the argument is that, there are far greater chances of getting hospitalized because of some reason then dying. So if you look at this problem from probability point of view, you can be almost sure that in next 5-10 yrs, you or one of your family member will be hospitalized for some or the other reason – big or small. But meeting death is very less likely in comparison. So a lot of people argued that Health insurance is much more important than term plan, if you have limited money.
2. Premiums are increasing fast in Health Insurance and its can be claim every year
Another argument in favor of health insurance over a term plan was that, its a product where you can claim every year and protects your financial life from regular attacks of money sucking illnesses and accidents and anyways premiums are increasing very fast for health insurance (or would increase in future) because of the health care inflation. However for term plan the premiums are coming down over the years (now we might be close to saturation) .
3. Hospitalization Costs can be arranged in worst case
Now some people said that term plan is more important than health insurance and the biggest reason for it was that health insurance expenses are somehow manageable in worst case. You can take a loan, swipe a credit card, ask your friends and relatives or in worst case, sell some of your home stuff.
Life will again be on track somehow. But if you ignore term plan, its a very big risk for your family future, because the amount required by your family cant be arranged by asking it from someone (just imagine you die and now your family would need their monthly expenses for lifetime , your children expenses for current and future, their whole life is at stake now). It would generally run into several lacs or few crores.
High Probability – Low Impact
So its very clear that term plan has a very high impact on your financial life, but less probability of its occurrence , however health insurance has low impact on your financial life (compared to term plan) , but is high on probability and its has potential to occur multiple times in your lifetime.
Balancing both Health and Life Insurance Costs
Another workable option is to divide the money into premiums for both term plan and health insurance, but in this case you will compromise with the cover amount of both the things however small it is. This way you will have both the things in your financial life, even if its small . Do you think its a workable solution ?
What is your opinion about this question ?