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Do you really need a Rs 1-crore health insurance cover?

Don’t just get attracted to an optically large figure of Rs 1 crore for a health insurance cover. Before purchasing such a policy, make sure you have understood its limitations well.

September 06, 2022 / 08:42 AM IST

Gone are the days when it was good enough to buy a Rs 3-5-lakh health insurance cover for your family. While the right health insurance amount is still a matter of debate, insurers are aggressively pushing Rs 1-crore health insurance plans these days.

Till a few years back, Rs 1 crore was better associated with term life insurance policies. It still is. However now, health insurance too, is riding the Rs 1-crore bandwagon. But is it actually required?

Is a Rs 1-crore health insurance cover really needed?

While a Rs 3-5-lakh cover is clearly inadequate now, the practicality of a Rs 1-crore cover is debatable. You can always argue that hospital bills can get very large as you might have seen in social media occasionally.

But if you work out the probabilities, then things look a bit different.

It is extremely rare for hospital bills to go that high. In fact, total hospitalisation costs in India above Rs 20 lakh are rare. Though you will read about these high-cost bills now and then and feel it’s common, the fact is that you also don’t hear about the much more common smaller bills.

Don’t get me wrong. I am not saying that it’s not possible to end up with a huge medical bill. Let’s hope it doesn’t come to that for anyone, but it is possible. But chances of it happening are rare.

Also read | Moneycontrol-SecureNow Health Insurance Ratings: Picking the health insurance that really matters

How much health insurance is needed?

There is no right answer here, and to be fair, it’s better to be overinsured than underinsured. Isn’t it?

But practically speaking, for a family of 2 adults and 2 children, cover of Rs 20-25 lakh is sufficient in most cases. You can take such a cover in two ways:

The second option will be lighter on the pocket as top-ups are far cheaper. You can even go for a higher base plan and higher top-up to further increase your cover beyond the suggested Rs 25 lakh. But then, the basis of your coverage size should be affordability of premium, quality of treatment that you seek, and health history of the insured members.

Having a bigger cover is good but it comes at a cost which not everyone will be willing and capable to pay. So, rather than being influenced by what advertisements tell you and if the premium of Rs 1 crore cover is beyond your affordable zone, then stick to a basic cover for your family and top it up with a Super Top Up plan for an amount that you can comfortably afford.

These days, interestingly some insurers are coming up with surprisingly cheap Rs 95-lakh/Rs 1-crore coverages. Mostly these are combo plans where the insurer combines a base plan of Rs 5 lakh with a Rs 95-lakh top-up.

To be fair, if you get a health insurance plan of Rs 1 crore at affordable rates compared to your income and budget, then there is no harm in taking it.

But all is not rosy if you look under the hood of these Rs 1-crore plans. You need to be a bit careful:

Things to consider before buying a Rs 1-crore health cover

·         You might be getting it very cheap now but once competition in the insurance sector stabilises, the premiums will increase. And at times, substantially. So, do consider premium affordability in future as well for a Rs 1-crore cover. You never know, after a few years, insurers may just find that these Rs 1-crore health insurance policies are financially unviable for them and hike premiums sharply.

·         Sometimes, the products may be discontinued after a few years. When that happens, the insurer will offer you alternatives to migrate, which generally are costlier.

·         A large sum assured isn’t enough. You also need to check the sub-limits, etc. that the cover has for various diseases, room rent limits, medical expenses, exclusions, etc. Once you understand these, the Rs 1-crore cover may not actually seem like a Rs 1-crore cover at all. For example, if a particular disease has an upper cap of Rs 5 lakh within a Rs 1-crore policy and your hospital bill is Rs 12 lakh, then you will have to pay the difference of Rs 7 lakh from your pocket in spite of having a large cover.

So, don’t just get attracted to an optically large figure of Rs 1 crore. Before purchasing this or any health insurance cover, make sure you have understood the policy and its limitations well.

As highlighted earlier, a cover of Rs 25 lakh (base or a combination of base + top-up) will be enough in most cases. But is this the right cover for you? It not only depends on your unique health requirements but also on what amount of cover can make you feel comfortably secure. So, act accordingly. Also, do review your health cover for adequacy once every two to three years.
Dev Ashish is a SEBI Registered Investment Advisor (RIA) and Founder, StableInvestor
first published: Sep 6, 2022 08:42 am