Check sub limit conditions before you buy health insurance

Ever Since Pankaj Shastri (39) moved out of his parental house in Thane seven years ago, he has been virtually living on rent along with his wife (33) and daughter (4). For several years now he has been contemplating buying a 1BHK flat in Thane but kept postponing thinking that the property market was overdue for a correction, only to find that rates have been going up. Affordability has also been an issue for him since he is the only earning member. For thousands of families living on rent in the urban areas, it’s their most cherished dream to own a house which they can call their own. Buying real estate is a very emotional decision and involves life’s biggest investment. Care should be taken to think through the entire process in detail before you take that big decision.

Following are some of the aspects which you need to consider in detail in order to take an informed decision.

  1. Budget: 

It’s an old saying that “Cut the cloth according to your suit”. Majority of the flats today are purchased with the help of a home loan. The banks may provide  you funding of upto 85% of the flat cost, but keep in mind that your EMI payments should not cross maximum of  40- 45% of your take home salary and can be further less  if you are a single income family with kids. For eg. If you are earning a net income of Rs. 75000 per month with monthly expenses of Rs. 30000, then considering present floating home loan interest rate at 11%, the EMI per lakh would be Rs. 1136 for 15 year tenure and you can take a loan upto Rs. 26 lakhs for an EMI of Rs. 29551.

If you are falling short of the down – payment component, then it’s better to postpone your goal and start saving to bridge that gap. Lot of first time buyers, go for a personal loan (which are offered at between 14-18% interest) to meet the shortfall and then they realize later that it’s difficult to service two loans. Eventually they juggle between trying to maintain adequate balance in their bank account to meet their EMI liabilities and the shortfall in monthly expenses is then made good by the use of credit cards, which further pushes them in a vicious circle. Ideally if you can get a soft loan from your family members then too it is advisable to go ahead.

  1. Factor in Other costs: 

In an under – construction / ready flat purchased from builder, you will get the breakup of the total payment to be done which includes not only the flat cost but also charges for stamp duty and registration, electricity meter, club house corpus, one year maintenance and VAT.   But in a resale flat, you will also have to figure out if there are any unpaid dues owed to society, monthly maintenance cost, cost for painting, repairs, furniture, etc and not forgetting the brokerage to be paid to your broker.  Take a realistic view on all the costs involved before finalizing the budget.

  1. Location:

Once your budget is decided, you can then get an idea of the choice of flats available within that budget and the areas where it’s available. Sometimes it’s a reverse calculation. You fancy yourself as staying in a particular area / complex and accordingly you can set your budget. Location is important as you will be able to figure out whether all facilities such as public / private transport, Schools, Shopping malls, nearest railway stations are within accessible distance or not. The poorer the connectivity the higher will be your monthly outgo towards commuting and shopping for essential services. If your budget is low then you have to make a choice between a bigger house in a far locality and a smaller house in a well connected locality.

  1. Ready flat / Resale / Under construction  property

Typically this depends on your budget. If given a choice, people most likely would want to buy either a ready to move in new flat or a resale flat of a new construction where all the facilities and connectivity has been provided. These flats of course come at premium over market rates. But if budget is a constraint here, then you can chose under – construction property as it is available typically at a discount over ready flats and you get an opportunity to pay according to the stage wise construction. A word of caution here. You need to check the past track record of the builder and the prevailing market situation before booking an under-construction flat as the possession date might get postponed like it has happened in many projects launched in the year 2008, thereby increasing your cost of staying in a rented house till then.

  1. Get your credit score

 Today all financial institutions access the applicant’s credit report from CIBIL, which is the prominent credit bureau, created for assessing the individual’s credit worthiness. In short, a higher credit score indicates that the applicant has a very good credit history while a lower score can indicate vice versa. You need to get your credit score to check if you have been fairly rated by the bureau. If your rating is unfortunately lower due to your previous bank not reporting your timely payments done, then you can always ask that bank to rectify the error and resend the same to CIBIL, which might improve your score and you are then better placed to get your desired home loan as per your eligibility.

It is always better to take an informed decision since it involves your life’s biggest investment. Always involve your spouse or senior family members (if you are not married), including your financial planner in the discussion and take that confident step towards your dream house.

Steven Fernandes, Certified Financial Planner

Chief Planner, Proficient Financial Planners.



General ward (Rs)

Twin sharing (Rs)

Single room (Rs)

Room rent




Hernia operation  package




For policy cover of 2 lakhs with 1% limit



Not Applicable

2. Sub limits on specific treatment:  One needs to check the list of ailments which come under the sub limits clause and the amounts specified against each of them. Even though your sum assured may be high, but the sub limit clause will ensure that you won’t be able to claim your entire hospitalization expenses. For example, if there is a sub limit clause of 50% of sum assured for cardiac ailments or cancer, then even if your sum assured is Rs. 5 lakhs, you cannot claim more than Rs. 2.5 lakhs due to the 50% sublimit clause. 

3. Post hospitalization clause : Some of the policies specifically mention that after discharge from hospital, any additional costs related to that ailment will be paid subject to a ceiling. This ceiling can be in terms of 5% of sum assured or Rs. 5000 in some cases. 

If you don’t want any nasty surprises at the time of claim, it makes sense to go through the above mentioned sub limit clause and select only those policies which does not contain those clauses. Ideally the premium for policies without sub limits may be slightly higher than those which contain those limits, but the benefits far outweigh the costs. Also do not forget to review your insurance cover and increase it if required to take care of increasing healthcare costs. 

Steven Fernandes, Certified Financial Planner

Chief Planner, Proficient Financial Planners.

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