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Buying a health insurance cover? Factor in medical inflation before deciding the amount

It is a good idea to buy higher-value covers – the younger the applicant, the higher should be the cover

September 02, 2021 / 10:01 AM IST

Many delay buying insurance covers for several reasons, only to regret the move when a crisis hits closer home.

There is a tendency to assume that health insurance can be purchased and sum insured increased whenever required, but it’s a big myth. You cannot buy policies or enhance the coverage whenever you want to.

Can’t buy off the shelf

Insurance is not a product that is available on the shelf for sale, but a proposal that is sent to insurance companies along with details of your health history. These insurance companies have the right to accept or refuse the proposal after assessing your health conditions.

Many a time, people raise disputes with companies over rejection of proposals, stating that they are fit and fine. However, the company’s view of your ‘fit and fine’ status could be different from yours. Also, insurers don't look at only the current risks, but also the future impact of your present health conditions. They extend insurance covers when you are absolutely healthy and, therefore, you need to plan accordingly and buy the right amount of coverage.


So, what exactly is the right amount of cover? People tend to calculate the ideal amount on the basis of the current healthcare costs. The maximum sum insured many opt for is between Rs 5 lakh and Rs 10 lakh, taking into account, say, bypass surgery claims that hover around Rs 5 lakh at present. However, these costs will go up in future, but companies will not increase your cover even by a rupee.

Factor in inflation

Let's first understand the impact of inflation on hospitalisation cost, assuming a rate of 15 percent. A treatment procedure that costs Rs 10 lakh today, will cost Rs 40 lakh after 10 years. It will go up to Rs 1.6 crore in 20 years. Therefore, buy health insurance cover after factoring in the likely cost and inflation 20-30 years down the line. It is a good idea to buy higher covers – the younger the applicant, the higher should be the cover as she has greater number of years to take care of. In fact, health insurance companies have also started offering higher covers of up to Rs 3 crore.

So, how much will a health cover of Rs 1 crore cost? Several covers on offer are highly cost-effective. You can also opt for a combination of a base cover of Rs 10 lakh and buy a top-up of Rs 90 lakh, to bring down the overall premiums down further. For instance, the annual premium for a 35-year-old who chooses to buy a Rs 10-lakh base policy and Rs 90-lakh top-up cover works out to just Rs 13,062.

Given the affordability, you must look at enhancing your cover right away instead of waiting for a later time.
Puneet Oberoi is CFP and Founder Finwise Services
first published: Sep 2, 2021 10:01 am
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