Picking the right sum insured for your health policy

Understanding all the different health insurance terms can seem overwhelming. One phrase you may come across frequently is sum insured. It refers to the maximum amount your insurance company will pay for valid claims. You have to pick an amount that you think is enough to cover potential medical bills for the entire year. The sum insured also impacts your premium, so you don’t want to pick a very high amount if you don’t require it. Let’s take a look at crucial factors you should consider before making a decision:

Young and healthy individuals do not need a high sum insured. A policy that offers INR 5 lakhs might be enough when you’re in your early 20s. You can enjoy low premiums as well at this stage. If you’re older, you may want a higher sum insured to help you deal with potential age-related issues. If you wait until you’re older to get health insurance, you must opt for a higher sum insured and pay higher premiums. You also have to wait a while to get coverage for pre-existing illnesses. So, purchasing insurance when you’re young is best. When the time comes to renew your policy, you can always opt to increase the sum insured as required.

The sum insured you choose impacts your health insurance premium. So, you need to find a sum insured amount that does not affect your budget. Experts recommend spending 2% of your annual income on your health insurance premium. Assume you earn INR 10,00,000 per year. Your health insurance should not cost more than INR 20,000 per year. Remember, a lower premium doesn’t always mean less coverage. Check what different insurance companies offer within your premium limit.

Think about whether your family has a history of medical illness. For example, if your parents or grandparents have high blood pressure, you might develop the condition later. With this in mind, you must pick a sum insured that helps you deal with the issues and their treatment. Somebody in your family may have previously suffered from heart disease, cancer or other life-threatening illness. These issues are called critical illnesses and may not get covered by your chosen policy. If you're at risk of developing such an issue, you need to get a policy with critical illness cover. You may also have to opt for a higher sum insured than peers who do not have a similar family medical history.

Do you spend several hours a day sitting and working on a computer or laptop? Do you often consume alcohol or tobacco products? If you answered yes to either question, you must opt for a high sum insured amount. A sedentary lifestyle puts you at risk of developing issues like hypertension and diabetes, which require life-long management. The consumption of alcohol and tobacco puts you in the at-risk category for your insurance company. It could make you susceptible to developing health issues. So, choosing a high sum insured to help deal with future medical bills works best.

India's rate of inflation was 5.59% in December 2021. At the same time, the rate of medical inflation was roughly 18%. Healthcare costs increase rapidly every year, which impacts your sum insured amount. You should pick a sum insured that allows you to cope with future healthcare costs. If a procedure costs only INR 5,000 today, it could cost almost INR 6,000 next year. In five years, it could go up to INR 11,000. You should opt for a slightly higher sum insured amount to help you cope with rising healthcare costs.

There’s no single answer to the question, “How much health insurance coverage do I need?” You must evaluate your situation and think about potential costs in the future. Once you understand your lifestyle and income restrictions, you can decide on the best course of action.

ARN: Zuno/Blog/0323/08