Medical science has advanced by leaps and bounds in the last few decades. It has also brought along with it, an increase in the average life expectancy. According to a leading life insurer, 'life expectancy is likely to rise from 77 years to 85 years over the next decade.'

In such a scenario, there's a definite need to cover for unforeseen medical expenses during the individual's working years.

This in turn, will ensure that his long-term finances will not take a hit in case of major medical expenses in his latter years.

Also with a greater number of individuals moving out of the joint family system, this will ensure that retirees are better equipped to fend for themselves when faced with medical expenses. This is where medical insurance comes to the rescue.

Simply put, medical insurance -- or 'Mediclaim' -- helps an individual cover the unforeseen expenses incurred due to injury/hospitalisation.

In addition to providing for the expenses, it also covers expenses sustained before as well as after hospitalisation. All this, it does at a very small cost to the individual. An illustration will help in understanding this better.

Medical insurance: A must for retirement planning

The premium quotes given above are inclusive of service tax and education cess.

The premium quotes are as given on the websites of the respective companies and only indicative. Individuals are advised to contact the insurance company for further details.

Let us take an individual aged 30 years, wants to cover himself with medical insurance for a sum of Rs 300,000. The annual premium he will have to pay in case he decides to opt for New India Assurance Company is Rs 3,796. Conversely, if he decides to buy 'Mediclaim' from ICICI Lombard, then the premium amount he will have to shell out is Rs 3,100.

In case of hospitalisation, the expenses that are incurred will be taken care of by this policy subject to the limit of the cover. The cover will be to the extent of the sum assured of the policy.

This cover will also take care of pre as well as post-hospitalisation expenses like money spent on buying medicines and conducting medical tests. Of course, the reimbursements of expenses are subject to conditions.

While planning for retirement, individuals don't want to be in a situation where they have to face a huge medical bill and haven't planned for it. Unplanned medical expenditure could compel an individual to dip into his retirement savings thereby disturbing his financial plans.

Medical cover is also available by way of opting for the 'Critical Illness Rider (CI)' alongwith a life insurance policy. Life insurance companies cover a specific number of illnesses. If an individual suffers from the specified illness, then he stands to benefit from the CI cover.

Both the CI riders as well as medical insurance are entitled for tax benefits under Section 80D for premium payments of upto Rs 10,000 per annum. This limit stands enhanced to Rs 15,000 in case of senior citizens.

Tax benefits are also available in case of dependents. Section 80D benefits are in addition to Section 80C benefits.

However, individuals need to note that there is one basic difference between Medical insurance and the CI rider. In case of medical insurance, the individual is covered only to the extent of the actual expenses incurred on medicine/hospitalisation (up to a maximum limit of the sum assured).

This is unlike the CI rider where the entire amount of CI cover is paid to the individual. This payment is irrespective of the actual expenses incurred by the individual.

From a retirement planning viewpoint, it is therefore important that individuals take into consideration unforeseen expenses. Especially when the costs are low and the benefits high!

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