World Health Day: What is the ideal health insurance cover amount?

Start with a minimum health cover of Rs 10 lakh and review requirements every five years

COVID-19 taught Indians that health insurance of even Rs 5 lakh may not be enough to take care of hospital bills, especially if many members in a family are covered under the same floater policy.

A large enough cover is the key to accessing treatment at hospitals of your choice in rooms of your preference.

According to the World Health Organisation, over 4.5 billion people in the world were not completely covered by essential health services in 2021. It has declared 'My health, my right’ as the theme for World Health Day, which falls on April 7.

“This year’s theme was chosen to champion the right of everyone, everywhere to have access to quality health services,” the WHO said.

And for middle-class Indians, an adequate, self-funded health insurance cover is the only way they can gain access to quality healthcare services. Rising healthcare inflation, especially after COVID-19, has pushed up the minimum recommended health cover to Rs 10 lakh from Rs 5 lakh. However, the ideal cover depends on several factors.

Also read: Moneycontrol-SecureNow Health Insurance Ratings: Your guide to choosing the right policy 

The place of residence is one of the key determinants of the size of your cover. Healthcare expenses vary hugely between Mumbai and, say, Jaipur. So, ensure that you take costs in your city into account while determining the coverage amount.

Even if you do not live in a metropolitan city, you ought to take into account hospitalisation expenses in the state capital. This is because you may have to travel to that city for advanced treatment if the need arises.

You need a higher sum assured if you expect certain 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. And you will need a larger cover too, as a Rs 5 lakh cover, for instance, will get used up in no time.

A 35-year-old individual should start with a minimum cover of Rs 10 lakh. Those in older age brackets need 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. It's best not to include your parents in your family floater cover because the higher number of claims could exhaust the total cover quickly, leaving others vulnerable.

Buy a separate policy for your parents. If they cannot get regular cover at affordable premiums due to pre-existing ailments, consider senior citizen policies for them.

If your employer allows you to cover parents for an extra premium or offers voluntary top-ups, do not let go of the opportunity even if the premium seems higher. Coverage of pre-existing diseases and smoother claim settlement processes will make up for any additional premium outgo.

Also read: Health insurers launch new senior citizen-specific covers: Are they worth your while?

Buying a large cover will take care of your requirements, besides eliminating restrictions such as room rent sub-limits, proportionate deduction and co-pay ratios. Ideally, individual covers of Rs 10 lakh per person are a must.

However, if affordability is a major constraint, buy a Rs 10 lakh cover for yourself and family (spouse and kids) to start with. Review this cover every five years to account for lifestyle changes, health status and other circumstances.

Once you have taken care of basic healthcare emergencies through a Rs 10 lakh cover, step two would be to chalk out a plan to safeguard yourselves against critical illnesses. You can either buy critical illness products that offer a lump-sum upon diagnosis of 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.

It's tempting to buy Rs-1 crore policies as they seem affordable. However, do bear in mind that as annually renewable contracts, health insurance premiums will be hiked from time to time. In the future, health insurers may hike the premiums for these covers, which could then be beyond your budget.

Also, a Rs 1 crore cover is primarily 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 the 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, then 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.

Finally, you need to strike a balance between the features you want and the premium you can afford. Always keep an eye on future requirements too.

To keep things simple, an individual who is in the 35-40 age group can start with a Rs 10 lakh cover. You can review and enhance this cover every five years to account for healthcare inflation and changes in your requirements.