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Best Ways to Select the Right Sum Insured for Your Health Insurance Plan

You have always been careful about selecting only what is best for you. Taking up the right job, following the right diet plan or buying a car that suits your needs. But is it the same when it comes to health insurance? We feel that we have a health insurance, so we are sorted. However, choosing the right sum insured is as important as choosing health insurance itself.

Having a lesser sum insured than required is similar to having no insurance at all. So, even if we think we can afford the 20 lac in times of medical emergency, is it really worth exhausting our lifetime savings? Obviously No!! 😐

Taking a health insurance policy with an adequate Sum Insured is the solution to SAVE YOUR SAVINGS? Read out to know the best ways to select the right sum insured for your health insurance.

What is Sum Insured in Health Insurance?
Importance of Choosing the Right Sum Insured
How to Choose the Right Sum Insured in Health Insurance?
Key Factors That Determine Your Sum Insured
Frequently Asked Questions

What is the Sum Insured in Health Insurance?

The Sum Insured in health insurance is the maximum amount that the insurance company will pay you in a medical emergency if you are hospitalized within a certain year.

You are responsible for paying out of pocket any excess over the insured amount. However, the insurance company will cover the full cost if the hospitalization or medical expenses are less than or equal to the covered amount. The indemnity principle, which states that the insurance company pays for loss or damage, is the foundation of the sum insured idea.

Why is Choosing the Right Sum Insured Important?

Mr. Agnihotri, who is 30 years old, earns 50,000 per month and saves 10,000 every month. By the age of 40, he saves around 17 lacs. Mr Agnihotri was diagnosed with cancer when he was 36. Apart from the unimaginable mental and physical stress, Mr. Agnihotri also has to arrange for treatment and medication costs.

Here are 3 things that can happen to Mr. Agnihotri:

Scenario 1

Scenario 2

Scenario 3

He doesn’t have a Health Insurance Policy

In this case, Mr. Agnihotri’s savings must cover the entire expense. If the savings are not sufficient to cover the expenses, alternate arrangements like loans or help from family and friends must be made.

He has a health insurance policy but with an inadequate Sum Insured

In this case, Mr. Agnihotri has to bear a majority of the expense from his savings, as his health insurance can only cover the amount of his Sum Insured. So, even with a health insurance policy, Mr. Agnihotri is vulnerable when he needs to claim for it.

He has a health insurance policy with an adequate Sum Insured

In this case, the health insurer will cover the majority of the expenses, and even if Mr. Agnihotri requires paying a small part of the claim (or co-payment, as some insurers have this condition), his savings will not be exhausted as much as in the other 2 scenarios.

So, we see that a health insurance policy with the right Sum Insured is an investment that can protect your Savings over a lifetime, as in the case of Mr. Agnihotri! 🙂

How to Choose the Right Sum Insured in Health Insurance?

Healthcare expenses may severely strain your funds, particularly in an emergency. For this reason, it's critical to ensure sufficient protection and coverage in case the unforeseen occurs.

To select the right sum insured in health insurance, follow these three easy steps:

Step 1: Evaluate Your Risks and Healthcare Needs

Assessing your healthcare demands and risks is the first step in determining the sum insured:

To determine possible health risks and costs, take into account your age, lifestyle, and medical history.
For instance, people with a family history of comparable health issues might be more susceptible to them.
Your lifestyle choices, such as smoking or not exercising, can also raise your risk of developing diseases, including cancer, diabetes, and heart disease.

It's also critical to anticipate medical costs for you and your family. This can cover the price of hospital stays, diagnostic testing, prescription drugs, and doctor visits.

Step 2: Assess Local Health Care Expenses

Assessing the cost of healthcare in your area is the next stage. Find out the typical healthcare cost in your state or city to get an idea of what you could have to pay. This may cover the price of hospital stays, operations, and therapies. Additionally, you would have to account for the price of consultations, prescription drugs, and diagnostic testing.

By being aware of the prices of healthcare in your location, you can make an informed choice regarding the amount insured you would require for your health insurance plan. This will prevent unforeseen out-of-pocket spending.

Step 3: Consider Medical Inflation

Medical inflation in India is rising at an alarming rate, often higher than general inflation. Healthcare costs, including hospitalization, doctor consultations, diagnostic tests, and medicines, are increasing every year. A treatment that costs ₹5 lakh today might cost ₹10-12 lakh in the next 10 years.

Hence, it is important to choose a sum insured considering the medical inflation. Here are some ways of how you can:

If you need ₹5-7 lakh coverage today, opt for at least ₹10-15 lakh to stay covered for the future.
Look for super top-up plans to enhance your coverage without a massive increase in premium.
Choose insurance policies with a no-claim bonus. Some insurance companies may increase your sum insured for every non-claim-free year.

Step 4: Balance Premium and Coverage

While choosing the right sum insured, it’s important to find a balance between affordability (premium) and adequate coverage. A higher sum insured offers better protection but comes with a higher premium.

Here are some factors you must consider to strike the right balance between premium & coverage:

Assess Your Budget
Opt for a Top-Up Plan
Look for No-Claim Bonuses (NCB)
Compare Policies from Different Insurers
Consider Co-Payment & Deductibles

Step 5: Evaluate and Select the Appropriate Sum Insured

The last step is Comparing and selecting the sum insured for your health insurance plan. To pick a plan that suits your demands and budget, compare the possible costs and expenses of healthcare with several alternatives for the sum insured.

Lastly, consider each plan's coverage features and exclusions to ensure sufficient coverage for your medical needs.

Key Factors That Determine Your Sum Insured

Your Age: The earlier you start the higher should be your Sum Insured as the number of years left would require a greater safety net.

Your Life stage: Based on the life stage you are in, for instance, if you are going to get married or start a family etc, your Sum Insured should factor in the healthcare expenses associated with it.

Health Conditions: If you have a history of medical conditions in your family, your Sum Insured should factor in the possibility of an unforeseen health condition in the future

Dependents in the Family: If you are planning to take a family floater policy with your family members, the sum insured should consider each member's needs and future healthcare expenses for them.

Lifestyle and Personal Habits: An individual's job type, eating habits, stress levels, and other personal habits can affect their future healthcare needs. These should also be considered when choosing a sum insured.

FAQs on Choosing the Right Sum Insured for Health Insurance

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How do I pick the sum insured for my health insurance?

To find the accurate sum insured for health insurance, follow these steps:

Step 1: Evaluate Your Risks and Healthcare Needs
Step 2: Assess Local Health Care Expenses
Step 3: Evaluate and select the appropriate sum insured

What does health insurance's sum insured mean?

A health insurance policy's sum insured is the highest amount the insurer will cover for medical costs in the event of a claim. It is the entire amount of coverage that the policyholder can obtain for a given time frame.

What steps are involved in selecting the best health insurance plan?

Although selecting a health insurance plan can be difficult, it's a crucial choice that requires careful consideration.

Evaluating your healthcare needs and financial situation is the first step.
The second stage is to investigate and contrast various plans, taking into account elements like provider networks, deductibles, and coverage for pre-existing diseases and prescription medications.
Researching the insurer's reputation, and making an informed choice are crucial for the third and last step.

What effect does the insured's age have on the choice of the sum insured?

The amount insured selection is influenced by the insured's age because older people may require a bigger sum insured to cover prospective medical bills due to their higher healthcare expenses.

Is it possible to modify the sum insured amount at a later time?

By asking for a change to your health insurance policy, you can typically change the sum insured amount at a later time. It is important to remember, though, that if the sum insured rises, the premium amount will also probably rise. However, there can be restrictions on how many modifications you can make or specific conditions and times that apply.

What effect does the location have on the choice of the sum insured?

Because healthcare expenses might differ between cities or regions, the location can affect the choice of sum covered. To ascertain the proper sum insured that would cover your possible medical bills, it is crucial to assess the healthcare prices in your location.

Is it possible for me to select a sum insured that exceeds my medical needs?

It is possible to select a sum insured that exceeds your medical requirements, which could lead to higher premiums. To make sure you only spend what you need for your health insurance policy, it is crucial to strike a balance between cost and sufficient coverage.

What role does medical history play in selecting the right sum insured?

Medical history is critical in choosing the sum insured. Individuals with a history of chronic illnesses or a family history of certain diseases should consider a higher sum insured to cover potential future medical expenses. This ensures adequate coverage for treatments and hospitalizations.

Why is it essential to consider the cost of living and inflation when choosing the sum insured?

The cost of living and inflation can determine the value of the sum insured over time. Medical costs, in particular, tend to rise faster than general inflation. Therefore, choosing a sum insured that accounts for future increases in medical expenses is essential to ensure continued adequate coverage.

How do family size and composition influence the sum insured?

Family size and composition are crucial in determining the sum insured. A larger family or one with dependents (e.g., children, elderly parents) requires a higher sum insured to cover potential medical expenses for all members.

What are the common mistakes people make when choosing the sum insured?

Common mistakes include underestimating medical costs, not accounting for inflation, choosing a sum insured based solely on premium affordability, and not considering personal health risks. These mistakes can lead to inadequate coverage and financial strain during emergencies.

What is the difference between the sum insured and the sum assured, and how does it affect choosing the right coverage?

The Sum insured applies to general insurance (e.g., health, home) and represents the maximum reimbursement for a claim. Sum assured is used in life insurance and is the guaranteed amount paid to beneficiaries upon the policyholder's death.