The healthcare cost inflation in India, based on some estimates, is in the range of 20 – 25%. A serious illness in the family can cause severe financial distress. Health or medical insurance in India is an essential need to safeguard our health and financial well being. Many people do not buy health insurance because they are covered under the under the group health insurance plan of their employers. This may be a costly mistake because the group health insurance plan of your employer may not provide comprehensive coverage for all your healthcare need. You should check if your employer's health insurance plan covers all your dependents. You should also check the nature of illnesses your employer's health insurance plan, particularly if you or your family members are suffering from any known medical conditions or if you have a family history of such conditions. If your company's group insurance is not adequate for your needs, then you should buy additional health insurance to protect your family's healthcare needs. There several things that you should be aware of when buying a health insurance or Mediclaim policy, which we will discuss in today's blog.

1. If you have a family or dependents to take care of, you should always ensure that your entire family has health insurance cover. When planning for your family's health insurance, you should factor in the ages of your family members, if anyone is suffering from chronic ailments and the family medical history (e.g. history of cancer, heart ailments, diabetes etc). You should note that most health insurance or Mediclaim plans will have a waiting period for pre-existing medical conditions. If you are planning to start a family, you should estimate the cost of maternity and make sure that it is covered in your Mediclaim plan.


2. Your lifestyle and that of your family members will have a big impact on your health insurance. Lifestyle related issues like smoking, drinking, obesity etc will definitely increase your health insurance costs.


3. You should choose the right amount of health insurance cover or sum insured. Sum insured is the maximum amount of cover for medical expenses in one policy year. Your premium is directly linked to the sum insured. A hospitalization for a serious illness can cost र 5 lacs or above. You may have to face a financially stressful situation if your sum insured falls short of the costs you incur in a medical emergency. You always err on the side of caution in determining how much cover you need. You should determine your sum insured based on a number of factors like where you live (usually medical expenses are higher in metro cities), your family situation including known medical conditions and your past experience with medical expenses. As a thumb rule, the cost of bed per night should usually be 1% of the sum insured. You can find out how much is the cost of bed per night in a hospital of your choice and estimate how much sum insured you need. This is just directional. You should ensure that the sum insured is adequate to cover your needs in a medical emergency, based on the factors discussed above.


4. Make sure the empanelled hospitals in your Mediclaim policy, are the ones that you will be comfortable with, both from a quality and convenience perspective. Insurance companies have tie ups with empanelled hospitals to settle the claims of patient cashless for the insured. You should do your own due diligence on the empanelled hospitals, with regards to their reputation, specialties, doctors on payroll, equipment and facilities, distance from your home, etc. While cashless is a great benefit for the insured, you should understand that emergency hospitalization under a Mediclaim or health insurance plan is not always cashless. Cashless admission in many hospitals only works during fixed hours when the insurance desk is open. Further, authorization for cashless claims depends on the policy terms and conditions and processing time taken by the third party administrator or the health insurance company. You should do your homework and consult an experienced health insurance advisor if required.


5. Depending on your family situation, you should determine whether you need individual Mediclaim or a family floater plan. An individual plan will only cover only the insured, while a family floater plan will cover the entire. Some family floater plans cover parents also. The cover for the entire family will be limited to the sum insured in a family floater plan. If you have a healthy family, the probability of many of your family members getting hospitalized in the same year is low. Therefore, if you have a family, it makes more sense to buy a family floater plan because the per person premium will be lower compared to what it would be if you buy multiple individual Mediclaim policies. However, if a family member has a pre-existing medical condition that puts him or her at a higher risk of hospitalization, then that family member can consume a significant portion of the sum insured of a family floater policy every year, putting the other family members at risk from a health insurance perspective. Therefore, if a family member has pre-existing medical conditions then you should buy an individual Mediclaim policy for him or her and a family floater plan for the rest of the family.


6. You should determine whether you should opt for co-payment. In a co-pay option the insured agrees to pay a percentage of the health insurance claim. The percentage of co-pay is in the range of 10 – 25%. The insured must first pay his or her share of the claim and then the insurance company settles the balance amount up to the limit specified in the sum insured of the Mediclaim policy. If you opt for co-pay, then your Mediclaim premium will be lower. For example, if you opt for 20% co-pay then your Mediclaim premium can be lower by up to 20%. So the insured stands to gain by opting for co-pay if there is no hospitalization in the policy term. However, if there is a hospitalization then the insured has to pay his or her co-pay amount, thereby incurring higher expenses. If you are young and healthy with no medical conditions, you should opt for co-pay because you will save on the cost of Mediclaim premiums. Over a period of time, this cost saving can be quite substantial. However, if you are a senior citizen with known medical conditions, you should not opt for co-pay. The cost of hospitalization for a serious illness can be quite huge, and the co-payment amount will also be quite substantial.


7. You should read very carefully, the exclusions in the health insurance or Mediclaim plans. If you or your family members suffer from a medical condition that is not covered by your Mediclaim policy, your claim will be rejected and you may get hit with a huge bill. Check your family's medical history and make sure that your health insurance policy covers the illnesses in your family's medical history. Some diseases are hereditary and therefore it is prudent to ensure that they are covered in your policy.


8. You should compare different Mediclaim plans before buying. A a large number of health insurance products are available in the market. These plans have a wide range of premiums, limits and features. If you buy your Mediclaim policy without adequate research and comparing with other policies, you may end up buying an expensive policy or worse, a policy that is suited for your needs. Some important plan features that you should compare are:-


1. Treatment wise limits and co-pay policy


2. Day wise Cash limit


3. Maximum renewal age


4. Network of empanelled hospitals


9. If you already have a Mediclaim policy and want to increase your cover, then instead of buying a new Mediclaim policy, buy a top up of the additional cover required by you. This will significantly reduce the cost of your Mediclaim premiums. Such plans get triggered only after you have exhausted your base cover. This will help you save costs while ensuring that you have adequate health insurance. However, if your current Mediclaim policy is not best suited for your needs, then you should buy a policy that addresses all your healthcare related requirements at the lowest cost.


10. Health insurance is a complex financial product. If some of you feel that you do not have the necessary expertise or cannot devote sufficient time in selecting the right health insurance plan, let that not put you off from buying health insurance. You can consult with an experienced health insurance advisor and discuss specific concerns discussed in this blog with your advisor. Your health insurance advisor can work with you to understand your specific health insurance needs and help you select the right Mediclaim plan.

Conclusion

You should educate yourself about Health Insurance in India, whether it is offered by your employer or you buy it yourself. If you have a good health insurance plan that covers a wide variety of your medical needs, you will be free from health related financial concerns.

(Insurance is the subject matter of the solicitation. For more details on the risk factors, term and conditions please read sales brochure of the respective companies carefully before concluding the sale and/or contact an IRDA Licensed Insurance Advisor/ Insurance Broker)

Religare Invesco-Mid Cap fund's exposure to the metals and materials space helped. Its portfolio is geared to benefit from export and consumption-oriented firms.

The scheme picks from among the largest 100 companies by market capitalization.

Reliance Regular Savings Equity is one of the most volatile diversified funds in Mint50. Its performance can swing wildly. Invest in this scheme only if you can stomach the risk.

While investing in Mutual Funds, you go through fund reviews, watch funds performance, track historical performance, find out what experts have to say and based on that decide if you wish to buy the fund. In short, buying a fund is no child's play. It requires a lot of effort but you are willing to put the effort because you have expectations of performance attached to it. So when do you decide is the right time to sell a fund? Most investors sell a fund under these three circumstances:

• Exceptional performance of funds, leading the investor to decide that now it is time to book profits.


• Underperformance of funds pushes an investor to look for a better investment option and selling the current fund.


• Neither profit nor loss is such a scenario where an investor feels the fund is stagnant. Hence, they sell the fund and invest in a better investment option.

The question still stands, is performance the only measuring tool for a fund? In the three circumstances stated above, the decision to sell a fund was solely made on the performance. Experts and advisors are of the opinion that most of the funds are redeemed and/or sold because of the performance. While this could be one of factors that affect the decision for selling. It may not be very wise to make this the only factor for selling.

When You Could Not Sell

• Mutual Funds Vs Stocks
  Despite investing in Mutual Funds we are always keeping a hawk eye on the markets. Just when the markets dwindle, the investors tend to rush towards redemption of their mutual funds fearing catastrophic losses. If your decision to sell mutual funds is based on the stock market performances then it could be erroneous. Most mutual fund schemes are not exactly linked to stock markets, unlike stocks. They consist of investment components such as debt, sectoral investments, stocks which are not part of the stock market indices and bonds or fixed income instruments reducing the direct impact of market fluctuations on Mutual funds. Hence, if you are hearing or reading about market fluctuations or certain volatility, it may not affect your investments as badly as you are imagining it to be. Do not hastily sell off your funds because in the long run that very fund could be a stellar performer. Take a decision based on the actual impact of the market fluctuations on the mutual funds.


• Short Term Performances
  Mutual Funds are known to give results over a long period of time. When we invest in mutual funds it is natural to have some expectations regarding performances. It is also important to maintain realistic expectations. If you have invested for a period of 20-25 years and you are already starting to get jittery after a year because the performances are not sky high then you are again making an error. Judging mutual funds on the basis of short term performances could steer you away from the larger picture. Before you decide to sell the fund check the historical performance of the fund, the consistency and the reaction to market changes. If it is positive, then ideally you should stick to the fund and not consider selling it. However, if the performance continues to remain uncertain then you might want to stop the investments and watch the fund for a while.

When You Could Sell

• Change in Financial Goals
  This could be a very important reason for selling funds. The investments should ideally be aligned to your financial goals. Hence, if there has been a change in the goal or some new short term goal has been created which requires funding then it may be ideal to redeem the funds. For example, if you are planning to go an impromptu family holiday then you could sell a fund to finance the trip. You could sell the latest investment because it still has not started picking up pace or has been underperforming for a while.
  
  You also have to make sure you do not lose out on the investments by having to pay for exit loads and taxes. If a fund has a fixed lock in period like Equity Linked Savings Scheme or Fixed Maturity Plans (FMP), then you can not redeem y even by paying a penalty. Change in goals also allows an opportunity to review the entire portfolio. You could sell the underperformers, make some new investments and boost the existing ones.


• Shift to Other Forms of Investment
  Not every investor wants to accumulate all wealth in mutual funds. Hence, if you are planning to invest in other forms, instead of making fresh investments you could also redeem existing mutual funds. A lot of times the portfolio gets crowded because it is not diversified enough. For example you have invested in four balanced funds. So if you are planning to invest in real estate, you could redeem a few similar funds and make the real estate investment.
  
  Other instance could be, you are close to retirement. You are looking for more stable forms of investments which provide steady growth and regular returns. By using the Systematic Withdrawal Plan you can start redeeming your funds while the balance amount not redeemed continues to generate returns. Based on your age and risk taking ability, you could also consider selling the funds and move to options such as fixed deposits or tax free bonds which provides fixed rate of return.


• Subjectively Measuring Performance
  It is often said to not sell solely based on performance. As an investors you could measure performance by analyzing how long you want to stay invested and what is the performance you expect in upcoming years. Hence, if you are planning to stay invested only for ten years and even after two or three years the performance is not up to your expectation. Then you might consider the option of selling. However, in the same fund, if you are planning to stay invested for twenty or twenty five years, then the performance in the first two or three years should not push you to sell the fund. Hence, time acts an important factor in making the decision of selling.
  
  Funds that have a history of good performances will suddenly not start performing badly. So unless you are about to make major losses it is best to buy and hold for a while and see if the tides turn in your favour.

Conclusion

'When to Sell a Fund' is a subjective question, best known to investors who are dealing with it. Our needs and financial goals keep changing, it is natural to sell funds and keep some to ensure that the ultimate aim, that is, the fulfillment of financial goals is met. It is always best to exercise caution and not rush while making a decision to buy and sell. The decision to sell always has to be in favour of profit making. If you redeem a fund due to short term market volatility or have to pay a heavy exit load on the entire amount being redeemed and not just the initial investments then you have to make a call regarding how favourable it is. It is always best to seek professional help of your financial advisors and let their expert opinion guide you in your investment journey.