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What is Sum Insured (SI) in Health Insurance & How it Works?
When it comes to health insurance, understanding the term sum insured is key to making informed decisions about your coverage. Often abbreviated as SI, the full form represents the maximum amount your insurer will pay for medical expenses during the policy term.
But how much is enough? And how do you select the right sum insured for your needs? Don’t worry! We are here to guide you.
Table of Contents
What is Sum Insured (SI) in Health Insurance?
Sum Insured (SI) is the maximum amount that is provided to you (the insured) in case you make a claim due to a medical emergency, treatment for illness, etc. It is directly based on the concept of indemnity.
So, when you make a claim, you will get a reimbursement for the costs spent on the medical treatment. If the cost of the treatment is less than or equal to the sum insured, the insurance company will cover the entire bill amount. However, if the costs of treatment or hospitalization exceed the sum insured, you will have to bear the extra cost beyond the SI yourself.
In short, the sum insured is an indemnity-based reimbursement you can get in case you make a claim with your health insurer.
All non-life insurance, like health insurance, home insurance, motor insurance, etc. offers this sum insured.
How Does Sum Insured (SI) Work in Health Insurance?
The Sum Insured (SI) in a health insurance plan is the maximum amount the insurer will reimburse for medical expenses during the policy period.
Let’s understand it with an example:
Mr. Akash is 24 years old and was admitted to the hospital for treatment of a neuro problem. He had a health insurance policy with a sum insured of INR 5 lakh, and the cost of hospital bills generated for a week of hospitalisation was INR 3 Lakh.
The insurance company paid most of the expenses. Later in the year, he again had an accident and was admitted to the hospital, which raised a total bill of INR 5 Lakh.
Here is how the sum insured worked for Mr. Akash:
Disclaimer: The above cost is for representation purposes only. The cost and claim may vary depending on deductible, copay and type of policy.
In the second incident, Mr. Akash has to pay INR 3 Lakh out of his pocket. Hence, it is important for you to have a higher coverage to cover you thoroughly during an emergency.
Sum Insured in Health Insurance Simplified
Imagine you're shopping for groceries and deciding on a budget for the week. This budget ensures you can buy everything you need without overspending. Similarly, health insurance's "sum insured" acts as your financial safety net during medical emergencies.
The sum insured is the maximum amount your insurer will cover for your medical expenses in a policy year. Watch this video to understand the sum insured and tips to choose the sufficient sum insured in your health insurance policy.
Importance of Choosing the Right Sum Insured in Health Insurance
Selecting the appropriate sum insured is essential to guarantee that your health insurance policy is infallible and capable of providing you and your family with financial security in the event of a medical emergency. Here are some reasons to select the right sum insured in health insurance:
Can You Increase Your Sum Insured in Health Insurance?
Yes! There are many ways that you can increase your sum insured:
- At the Time of Renewal – When you renew your health insurance policy, just ask your insurer to increase the sum insured to the desired amount. (Remember that this will also increase your premium slightly)
- Through Cumulative Bonus – For every claim-free year, some insurers will increase your sum insured by a certain amount, known as a Cumulative Bonus. With Digit’s Infinity Wallet Plan, on every claim-free year, your SI will increase by 50% (up to a maximum of 100%)!
- Get a Top-Up Plan – You can also opt to buy a top-up or a super top-up plan from your insurer to get coverage over and beyond your original SI.
Factors to Choose the Right Sum Insured in Health Insurance Policy
It is very important to use the right sum insured for your policy. Want to know why? Here is an example:
You just bought a health insurance policy that covers a lot of illnesses and treatments, and you are happy with your coverage. Then comes a situation when you are in a medical crisis and you make a claim, but then you are shocked to find out that the sum insured paid by the insurer doesn’t cover all of your medical expenses! Stressful, right?
Yes, you did right in buying a health insurance, but were you really careful in selecting the right sum insured? The answer is no. It is very important to choose the right sum insured to avoid such situations and to let your insurer pay the maximum amount in case of a claim. This way you get some peace of mind, and your savings are intact for the future.
Here are Some Factors You must Consider for Choosing Right Sum Insured:
Age and Life Stage
You can easily obtain a big sum insured at reasonable rates if you are young. However, you should purchase a larger sum insured if you purchase health insurance later in life because your medical costs will rise as you age.
Health Condition
Suppose you have certain health conditions, such as diabetes, heart problems, blood pressure problems, kidney problems, etc.. In that case, it is best to choose a bigger sum insured, as you may need to utilize your health insurance policy more frequently than others.
Lifestyle Choices
The sedentary lifestyle, poor eating habits, and other aspects of modern life have increased health risks. You must invest in a bigger sum insured to ensure sufficient protection in the event of an unforeseen circumstance.
Policyholder Income
When selecting the insured sum, it is important to take the premium cost into account if you have an average income. It is also important to select a premium amount that fits within your budget.
City of Residence
Your city of residence should also be considered when determining your sum insured. As healthcare facilities are more expensive in metropolitan areas, you must choose a bigger sum insured if you live there.
Number of Family Members
Health plans like group medical plans and family floater policies need a larger sum secured as they cover more people under one insurance. However, because the risk is shared among numerous individuals, the premium paid for such policies is less than that of other insurance plans.
What is Sum Assured in Insurance?
A second important term often used is Sum Assured. This is a fixed amount you will receive at the end of term insurance. It is often used in Life Insurance policies.
In other words, the sum assured is the amount you initially signed up for, this is the original amount that’s guaranteed to come to you or your beneficiary. The sum assured amount remains unchanged at the end of your policy tenure, it is a pre-determined benefit that the insured will receive.
For example, a life insurance policy may have the Sum Assured limit as ₹15 lakhs in case of death, which means that in case of a such an event, the person’s nominees will be given an assured sum of ₹15 Lakhs.
Difference Between Sum Insured and Sum Assured
Understanding the difference between the Sum Insured and the Sum Assured is crucial when choosing the right insurance plan. While both terms define monetary coverage, they serve different purposes. For clarity, the chart below breaks down the differences:
The sum insured (SI) is the cornerstone of any health insurance policy, determining the financial protection you receive during medical emergencies. Choosing the right sum insured requires careful consideration of factors like your healthcare needs, age, lifestyle, and family medical history.
So, plan wisely and secure a healthier, stress-free future.