World Health Day: How to estimate the right health insurance cover amount

Age, health status, city and choice of hospitals key to determining the suitable health cover amount

April 7 is observed as World Health Day.

For many middle-class families living in metropolitan cities, given the rising healthcare costs over the years, particularly during the COVID-19 period, it is now clear that an individual or family floater cover of Rs 5 lakh is not adequate anymore.

Most financial advisors and health insurance experts now recommend a minimum cover of Rs 10 lakh, to start with. This has to be reviewed at least once in five years, as also after key milestones in your lives, such as marriage or having kids, and enhanced in line with healthcare inflation. According to industry estimates, health inflation in India is in the 12-15 percent range, at present.

A large enough cover can ensure that you do not have to cut corners while accessing treatment at hospitals and rooms of your choice. For an average Indian, a personal health insurance policy is the key to availing quality healthcare services.

While the minimum cover amount recommended by experts is Rs 10 lakh, there is no one-size-fits-all answer. You have to take into account multiple factors while calculating the ideal sum insured.

Age, health history matter

A 35-year-old individual should start with a minimum cover of Rs 10 lakh. Those in older age brackets could require even larger health cover due to the higher chances and frequency of their requiring treatment for chronic illnesses.

Senior citizens and their children should make sure they are protected through as large a cover as they can afford. Children should avoid including parents in family floater cover as the likely frequent claims could exhaust the total sum insured, leaving others vulnerable.

You should look to buy a separate policy for your parents. If regular health covers are not available at affordable premiums due to pre-existing ailments, evaluate senior citizen policies. Their sum insured can be as large as what your budget permits.

If your employer allows you to cover parents for an extra premium or offers voluntary top-ups, it makes sense to opt for these plans, affordability permitting. Coverage of pre-existing diseases and smoother claim settlement processes will make up for any additional premium outgo.

Live in a metro city? You need a larger cover

The place of your residence is one of the key determinants of the size of your cover. This is because the cost of treatment can vary hugely between a megapolis like Mumbai, and, say, a tier-II town like Indore. So, ensure that you factor in the healthcare expenses in your city into account while determining the coverage amount.

Even if you do not live in a metropolitan city, it is best to buy a cover after taking into account hospitalisation expenses in your state’s capital. This is because you may have to travel to that city for advanced treatment, should the need arise.

Also read: Ayushman Bharat scheme: Why senior citizens over 70 need separate health insurance covers despite PM-JAY

Prefer corporate hospitals? Buy higher coverage

You need a higher sum assured if you expect certain quality of facilities in a hospital. For example, if you are not comfortable sharing a room with other patients, you need a comprehensive, no-room-rent-capping policy.

Then, there will be surgeon’s fees, operation theatre charges and other costs of surgeries and procedures, which are bound to be higher. A Rs 5-lakh cover could get exhausted in no time.

Base cover of Rs 10 lakh

Buying a large, comprehensive base cover will take care of your requirements, besides circumventing restrictions such as room rent sub-limits and proportionate deduction. To start with, you can buy an individual cover of Rs 10 lakh per person in your family. Likewise, if you are buying a family floater policy, look to start with a cover of at least Rs 20 lakh.

If affordability is a constraint, buy a Rs 10-lakh cover for yourself and family (spouse and kids), initially. However, ensure that you review this cover every five years to account for lifestyle changes, health status and other circumstances.

How valuable are high-value covers?

A Rs 10-lakh cover can protect you from basic healthcare emergencies. Next, look for options to safeguard yourselves from critical illnesses.

You can either buy critical illness products that offer a lump sum, upon diagnosis of the illnesses specified in the policy or enhance your base health insurance policy by adding a top-up or buying a full-fledged high-value plan.

A Rs 1-crore base policy may seem affordable now, but as they are renewable annually, premiums will be hiked from time to time. In future, health insurers may hike the premiums for these covers, which could then be beyond your budget. Take a look at the premium grid, depicting age-wise premium hikes that will come into force in future before picking a policy.

A large cover of Rs 1 crore might be needed only for expensive treatment procedures, which are not an everyday occurrence. Yet, if you are convinced about the value of a Rs 1-crore cover, but affordability is a concern, you can look at a combination of a base policy of, say, Rs 10 lakh, and a top-up cover for the balance, instead of buying a single, large sum insured.

In case of a combination option, the aggregate premium outgo will be lower, which is the key advantage.

On the other hand, if you are looking at premium features, a single large cover will offer those benefits. For instance, you might need a high-value policy, if you want international coverage. Most regular policies do not offer this feature, and only some premium products allow their customers to seek treatment abroad.

Also read: Faced with health insurance premium hikes and claim disputes? Here’s what policyholders can do

Regular review a must

Do not buy a cover, considering only your current life-stage, lifestyle, responsibilities and requirements in mind. If you are in the age bracket of 35-40 years, start with a Rs 10-lakh cover. You can review and enhance it every five years to account for healthcare inflation and changes in your lifestyle and other requirements.