Know All About Managing Your Health Insurance Cover

As health expenditures increase, government spending on health care is reducing. This makes health insurance a necessity for the common man, to protect his lifestyle and income from unforeseen medical costs due to illnesses, hospitalisation or accidents. Where before, only people in metro cities went for health insurance to offset the higher cost of healthcare, today mid- and small-town residents are also opting for health insurance.

But are people aware of how much insurance they should buy? Is it just a matter of buying a policy and assuming it’s sufficient, or choosing the right sum insured from the get go? So if you look at the market, you have all types of health insurance in India policies with sum assured ranging from Rs.1 lakh to Rs.50 lakh. Of late, we see that the demand for 1 lakh is reducing, because of its perceived inadequacy to provide a sufficient cover.

How much coverage do you need?

If you live in a metro city, an amount of Rs.3-5 lakh is what you should be looking at for a start, when it comes to buying a health cover. Whatever the initial sum insured you choose, it will need to increase with time, or based on your need. You can look at a higher sum insured if you are averse to risk or want premium facilities at the hospital, like luxurious rooms, etc. One thing good with buying a higher sum insured is that the overall premium per lakh is ultimately lower.

However, to really know how much coverage you need, it is important that you first understand the risks that surround you and how your need may be affected by them:

1. You can fall sick, which may entail huge medical expenditure. We recommend family health insurance plans, because you pay a significantly lower premium, while covering more people. Suppose you have a 3-member family. If each one of you gets a health insurance policy of Rs.3 lakh, with premium for each being about Rs.3000-5000, then you end up paying anything between Rs.9000-15000. On the other hand, if you get a floater cover of Rs.3 lakh, you would pay about half that amount, while covering all three members of your family.
2. Most youngsters buy a car within the first couple of years of their job. Within 5-8 years, a lot of them take a home loan too. Suppose you bought a car and home, with total loan coming to Rs.45 lakh, which is your liability. If you then suffer an accident and become disabled, or fall seriously ill (cancer, kidney failure, or other critical illnesses) and lose your job, you will be left with extensive medical bills, no income AND a huge liability. It is for cases like these that one should have critical illness insurance, which pays in case of such a disease affecting you. Getting a critical illness cover will bridge the gap between your need and your insurance cover. The cover you have should be as much as your liability, at least. It should be enough to wipe out your debt, so that you don’t have to live with debt as well as disability in the absence of a steady flow of income. For a young person, getting a critical illness cover of Rs.40 lakh will be neither difficult nor expensive.

You bought your health insurance. How should you change your cover over a period of time?

Healthcare costs are increasing by 15-20% per annum. So if you bought a cover of Rs.5 lakh initially, next year the real value of the cover will be 20% lower. And in five years’ time, the real value will be half of the current value. In basic terms, your insurance begins to cover less and less as time goes by. For example, if an operation costs Rs.3 lakh today, 1 year later it shall cost Rs.3.6 lakh.

Your sum insured should be revised the moment you have a family – after marriage and after a child. Your cover should also increase with your income and your position. Your expectations of the facilities at hospitals increase with increase in income – at an annual income of Rs.6 lakh, you may be happy with a standard room, but at an annual income of Rs.15 lakh, you will probably want a super deluxe room. Another situation in which your cover needs to be increased is if you move from a small town to a larger city. You will find that medical expenses go higher, and increasing your sum insured in such a case is a good idea.

To keep your cover at an adequate level, your cover should keep pace with inflation. Therefore, it should increase by anywhere between 10-20% every year. Since most insurance companies do not offer such flexibility with the sum insured (the next highest sum insured is usually Rs.50000 or Rs.1 lakh more), you can choose to increase your cover every two years or so.

Know more about how you can supplement your health insurance policy with top-up covers.