Recently, I met a young gentleman in his early 20s who had just started earning. As a do-it-yourself (DIY) investor, he often relied on Instagram and YouTube videos for financial advice. One video, in particular, caught his attention—it suggested skipping health insurance to increase his Systematic Investment Plan (SIP) contributions and build a larger retirement corpus.
While this advice might seem appealing on the surface, following such influencer-driven tips without proper financial understanding can lead to costly mistakes. Let’s explore why balancing SIP investments with health insurance is essential for long-term financial stability.
Scenario 1: Investing Without Health Insurance
Consider a 25-year-old DIY investor who follows this social media advice:
|
For a 25 year old individual without health insurance (DIY Investor) |
|||
|
Year |
Monthly SIP |
Yearly Investment |
Estimated MF value @12% |
|
1 |
5000 |
60000 |
63900 |
|
2 |
5000 |
60000 |
135400 |
|
3 |
5000 |
60000 |
215600 |
|
4 |
5000 |
60000 |
305300 |
|
5 |
5000 |
60000 |
405900 |
|
6 |
5000 |
60000 |
518500 |
|
7 |
5000 |
60000 |
644600 |
|
8 |
5000 |
60000 |
785900 |
|
9 |
5000 |
60000 |
944100 |
|
10 |
5000 |
60000 |
1121300 |
At first glance, this looks like a strong investment strategy. However, let’s consider an unfortunate scenario: by age 35, this individual faces a sudden medical emergency costing INR 5,00,000. After accounting for long-term capital gains tax (approximately INR 50,000), the available funds reduce to INR 5,71,500. A significant chunk of his savings is wiped out in one unexpected event.
Scenario 2: Investing With Health Insurance
Now, let’s compare this to an investor who balances SIPs and health insurance. Instead of investing the full INR 5,000, he allocates INR 4,160 toward SIPs and the rest toward a Care Supreme Health Insurance plan:
|
For a 25 year old individual with health insurance “CARE Supreme”(Relies on advisor) |
|||||
|
Year |
Monthly SIP |
Yearly Investment |
Estimated MF value @12% |
Care Supreme 700000+∞ |
Bonus Rate |
|
1 |
4160 |
49,920.00 |
53,100.00 |
7,00,000+∞ |
|
|
2 |
4160 |
49,920.00 |
1,12,700.00 |
17,50,000-∞ |
150% Bonus |
|
3 |
4160 |
49,920.00 |
1,79,400.00 |
28,00,000-∞ |
150% Bonus |
|
4 |
4160 |
49,920.00 |
2,54,000.00 |
35,00,000-∞ |
100% Bonus |
|
5 |
4160 |
49,920.00 |
3,37,700.00 |
42,00,000-∞ |
100% Bonus |
|
6 |
4160 |
49,920.00 |
4,31,400.00 |
49,00,000-∞ |
100% Bonus |
|
7 |
4160 |
49,920.00 |
5,36,300.00 |
49,00,000-∞ |
|
|
8 |
4160 |
49,920.00 |
6,53,900.00 |
49,00,000-∞ |
|
|
9 |
4160 |
49,920.00 |
7,85,500.00 |
49,00,000-∞ |
|
|
10 |
4160 |
49,920.00 |
9,32,900.00 |
49,00,000-∞ |
|
Premium for age band 18-35 is same under this plan remains constant
In this case, even if the investor incurs a medical expense of INR 5,00,000 at age 35, the health insurance covers the full amount. After minor deductions for taxes, his investments continue to grow uninterrupted, leaving him with around INR 9,07,000.
The Key Takeaway: Balance Is Crucial
This comparison highlights why investing in health insurance is not a waste but a safeguard for your financial goals. Here’s why:
Protection Against Unpredictable Events: Medical emergencies are expensive and can derail your savings goals.
Continued Growth: Insurance allows your investments to grow uninterrupted, ensuring long-term wealth.
Peace of Mind: You can focus on growing your corpus without worrying about sudden financial hits.
Final Thoughts
While SIPs are excellent for wealth creation, health insurance ensures that unexpected medical expenses don’t sabotage your progress. Instead of following every piece of advice from influencers, consult qualified financial advisors who understand the nuances of insurance and investment planning.
Your financial future deserves informed decisions—invest wisely and protect what you build.