A Financial Plan To Provide For Ageing Parents

Caring for elders should be treated as a financial goal. Good planning can make their lives stress free.

A elderly couple holds hands while walking on a path. (Photographer: David Paul Morris/Bloomberg)
A elderly couple holds hands while walking on a path. (Photographer: David Paul Morris/Bloomberg)

Shabad and Ruchi are the only children of their parents. Between one couple they have the responsibility of taking care of four senior citizens. Fortunately, both sets of parents are not dependent on them for day-to-day expenses. But, the high cost and uncertainty around their medical expenses prompted them to turn to us for guidance.

While improved medical care has improved the quality of life in old age, it also means longer time spent in medical care. Subsequently, the cost of old age care has gone up.

A holistic solution to such a situation includes providing for:

  • Medical care,
  • Non-medical care,
  • Palliative decisions and care, if needed.

Medical Care

Medical care costs are often the highest share of expenses incurred on care of the elderly. This includes:

  1. Surgeries and hospitalisation
  2. Preventive check-ups and doctor’s visits
  3. Alternative therapies
  4. Regular medicines

While surgeries, hospitalisations and some pre- and post-operative care can be covered through an adequate insurance policy, the costs of alternative therapies, daily medicine and preventive check-ups are not covered. There are many insurance products for the elderly and they come with several variations. Some tax benefits offered by the government can also be availed to manage the cost.

Tax Benefits For Senior Citizens’ Health Expenses

  • Under Section 80D of the Income Tax Act, the deduction available for insurance premium is Rs 50,000 for senior citizens.
  • Preventive health check expenses of Rs 7,000 is deductible for senior citizens under Section 80D.
  • An individual can claim up to Rs 1,00,000 of expenses as deductible expenses under Section 80DDB for the treatment of specified diseases of senior citizen parents.
  • Medical bill reimbursement up to Rs 15,000 per annum by the employer was allowed as tax-free income under Section 17(2) till 2018. This has been replaced by standard deduction since the 2018 Budget.

Insurance Options To Manage Hospitalisation Costs

Group health insurance is the most reasonably-priced insurance option. Employers offer to include parents as the beneficiaries of health insurance policies for an additional premium. We recommend all youngsters to take it and relieve themselves of the worry of sudden hospitalisation expenses for their parents.

The only drawback is that these policies are attached to the children’s jobs. In case of job loss or change in employment, the insurance may be lost as well. We suggest supplementing the group insurance plan with an individual plan as well. In such a case, the sum assured of the individual policy can be just a portion of the total sum. Over the years accumulation of bonuses in individual policy can make it cost-effective.

Health insurance policies usually cover individuals up to the age of 65. There are senior citizen insurance policies for the later years.

Each person needs to take a policy that will suit him or her. The following factors need to be looked at while buying an insurance policy for a senior citizen:

  • Premium to be paid
  • Sum assured
  • Age limit
  • Pre-existing conditions
  • Co-payments and exclusions
  • Pre and post hospitalisation cover
  • Medical test requirement
  • Gestation period after which the cover will start
  • Sub-limit within the overall sum assured
  • Cashless facility

It is important to remember that there is a cost to every inclusion and additional benefit. Ideally, a corpus should be accumulated to take care of all expenses beyond hospitalisation and co-payments.

Being over-insured is never a good idea. There should be a cost-benefit analysis which includes monetary as well as non-monetary considerations.

A fiduciary advisor can investigate all these factors and help choose an appropriate policy.

Medical contingency funds need to be created for the co-payments and exclusions from insurance policies, alternative therapies and preventive check-ups. Regular medicine bills need to be provided for. Ideally speaking, the regular medicine cost should be covered by regular income for the elderly.

Non-Medical Care

Non-medical cost, often ignored, is significant in elderly care. It is usually not covered by insurance policies (private or public) but the absence of this care means a deteriorating quality of life for the elderly as well as the caretaker. With both partners working outside the house and shrinking family sizes, non-medical care is a challenge. We recommend planning for non-medical care irrespective of health history. Everyone gets old one day, and creating an environment which makes life for the elderly easier can have exceptional benefit of well-being for the family.

Among other things, this includes:

  1. Age-proofing the house
  2. Non-nursing attendant
  3. At home nursing care

Age-proofing is a common practice for when there infants in a house, but it make sense to undertake a similar process for the aged as well.

We recommend investing some money in making the house ‘old-age proof’. This would include refurbishing the bathroom, removing multilevel flooring, removing other obstacles etc.

A non-nursing attendant can become an essentiality for feeble and disabled elders. An attendant’s cost should be considered while creating a corpus for elderly care.

Nursing care at home is becoming a common need with increasing longevity. Most of the elderly need it at least for some time in their lives. Being able to afford nursing care at home can save time for the caretaker and provide a lot of comfort to the elderly.

Palliative Care And Decisions

Decisions around palliative care aren’t discussed in adequate detail. With life longevity increasing every year, this becomes the most important factor to be planned while elders are still in good health. While theoretically available in India since the 1980s, palliative care is at an early stage of development.

Palliative care can be arranged at the hospital, in-home, or a combination of in-home hospice care and nursing homes. In-home care will require a full-time qualified nurse, basic medical equipment, space and extra help. While the first option is very costly, it’s the choice most families end up making because of the lack of quality in-home hospice care.

Palliative care costs are unpredictable, but some estimates can be worked out by looking at family history, personal health and living habits. An experienced fiduciary financial advisor will be able to help with these numbers. A corpus should be created to take care of these expenses if the situation arises.

We also recommend creating ‘living wills’ as a written directive if the aging person is incapacitated due to any reason. A ‘power of attorney’, trust deed and or health care directives can be used for this purpose.

Although living wills are not legal in India yet, a written directive can avoid confusion and help make decision making easier for caretakers.

While care for the elderly is becoming more expensive, the options available are also getting better. Today, caring for elders should be treated as a financial goal. Holistic planning along with smart product selection can keep their lives and their family’s financial planning stress free.

Renu Maheshwari is a SEBI-registered investment advisor and the founder and director of Finscholarz Wealth Managers LLP.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.