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News & Views

Wednesday, Jun 8, 2011

Gearing for worse: Are you prepared for Cancer costs?

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In just a few years, Cancer will overtake heart diseases as the world’s number one killer. In India, 1 in 4 people will get cancer, while in the ‘developed’ western world, 1 in 3 people already get it. The ratio will only get worse as our population lives longer, becomes more affluent and adopts an unhealthy lifestyle.

The question remains ‘how many of those 250 million Indians (who will get cancer) are prepared for it?’ The answer is very few, and there is the ‘cost’ aspect to consider, which most people are even less prepared for.

Cancer is an expensive disease!

And it is becoming more so. Typical Cancer treatment (diagnostics, surgery, chemotherapy, radiotherapy, ongoing medications and associated expenses) can cost between Rs 5 and 8 lakhs (at the low end), if you are lucky enough to recover quickly Rs 25 and 30 lakhs (at the high end), if you have a long-drawn treatment.

These huge sums can drain the resources (in some cases, life-savings) of most middle-class and even some affluent families, particularly if they are unanticipated. In one stroke, many well-laid plans – a retirement home, a daughter’s marriage, a son’s overseas education – can go out of the window, adding to the emotional strain the family is already going through.

Being prepared

Of course, prevention is the best form of cure and Cancer Awakens already gives you lots of excellent advice on the steps you can take, to keep yourself in good health. But since I am a Financial Planner, my focus is on helping you prepare yourself financially. Let’s say that you generally keep good health and you have no personal history of major illness, but there have been a few stray cases of cancer in the family … perhaps your dad’s elder brother had prostate cancer or an elderly aunt died years ago from ovarian cancer.

Here are four broad areas of financial planning, that you might want to consider, as a first step:

1. Life insurance cover ensures that your loved ones are protected irrespective of whether you are around or not. In simple terms The ‘sum assured’ of your policy is paid out soon after your death to your nominee.

The amount of cover depends on your income, expenses and what your future goals are. Being adequately insured is very important; it is said that being under-insured like having no insurance at all. (In our experience, a majority of even healthy people are actually under-insured.)

Many people tend to “diversify” by taking insurance policies from many companies; however, this creates extra paperwork and procedures. (In our experience, it is better to take fewer policies with a higher sum assured; you also get better ‘service’ from your agent/insurance company)

It is very important to fill in the correct information in your proposal forms. (In our experience, this speeds up claim-processing)

2. Critical Illness rider is normally taken with a life insurance policy: however it can also be a stand-alone product. This means in case you are diagnosed with a serious disease (like cancer, heart attack, kidney failure, major organ transplant, stroke, etc.), an amount equal to the ‘sum assured’ will be paid to you, in addition to the underlying life insurance cover.

Remember, the list of conditions/ exclusions varies from company to company and hence you should read the fine print very carefully, before you take this rider.

This rider can be used to cover the loss of income during the illness/ treatment/ recovery period as well as the sudden surge of expenses. (In our experience, the ideal level of cover should be 6-12 months of your post-tax income.)

3. Medical insurance cover: If you are employed with a large, well-established company, you will most likely be covered by your employer’s Group Medical insurance scheme.

Please talk to your HR Dept and understand what exactly is covered and what isn’t. (In our experience, many people do not know this in specific terms)

Even if you are already covered by your company, it is good to have a separate cover for yourself and your family. (In our experience, the earlier you take this, the lower your premium and the better it is for you.)

While it is difficult to put a specific number, we believe that a medical insurance cover of Rs. 5-10 lakhs is a must today, considering that The cost of healthcare is increasing day-by-day. The rate of inflation is high. You may make your claim many years later.

4. When crisis strikes: The last thought I’d leave you with is this. If you are fortunate enough to have a reasonable financial cushion and/ or if you are a regular investor, it is a good idea to keep the equivalent of

About 3 months’ regular expenses in a ‘liquid’ fund for any kind of short-term emergency About 9 months’ regular expenses in a ‘contingency’ fund (In our experience you can build this up over the 12 months, with a certain amount of discipline.)

This will ensure peace of mind … and you won’t have to break your medium to long-term savings or investments.

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