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Choosing the right sum insured is not a one-size-fits-all solution. However, at least Rs 10 lakh as a minimum sum insured, especially in metro cities where treatment costs are much higher, is recommended.
For individuals who find a high sum insured financially burdensome, top-up and super top-up plans offer cost-effective alternatives.
Authored By Ramit Goyal:
In the wake of rising healthcare costs and rapid lifestyle changes, securing adequate health insurance coverage has become a vital financial decision. A key aspect of any health insurance policy is the sum insured — the maximum amount your insurer will cover for medical expenses in a given policy year. It serves as a crucial financial buffer, absorbing unforeseen medical costs and protecting your savings.
Choosing the right sum insured is not a one-size-fits-all solution. It requires thoughtful evaluation of factors such as age, lifestyle, family medical history, and healthcare costs in your city or region. Healthcare inflation is a significant consideration, as the cost of treatments and hospitalisation continues to climb. Major surgeries or critical illnesses can run into lakhs of rupees, and an inadequate sum insured may leave you paying out-of-pocket expenses, even with a health insurance policy.
Lifestyle changes are another factor. Today, we see a growing incidence of lifestyle diseases such as diabetes, hypertension, and heart ailments, which often require long-term medical care. There is also the aspect of your geographical location. Healthcare costs vary significantly from city to city, with metro areas generally having much higher expenses than smaller towns. For those living in cities like Mumbai, Delhi, or Bengaluru, where hospitalisation can be expensive, a higher sum insured becomes vital to ensure adequate coverage.
The Importance of an Adequate Sum Insured
Medical emergencies are unpredictable, and healthcare expenses are steadily rising. India, like many other countries, is witnessing a sharp increase in medical inflation. In 2022, the medical inflation rate in India stood at 14%, much higher than the global average of 6-7%. This means that a surgery costing Rs 3 lakhs today could cost Rs 3.5 lakhs or more in just a few years.
Health insurance premiums are expected to rise by 10-15% in 2025, driven by escalating medical costs, higher claims frequency, and regulatory changes. Currently, 10-12% medical inflation is pushing healthcare costs even higher. Hospitals have increased tariffs for room rents, procedures, and doctor fees, leaving insurers struggling to negotiate rates. Given this upward trend, having an insufficient sum insured could lead to out-of-pocket expenses, defeating the purpose of insurance. Therefore, when buying health insurance, it is essential to consider both current and future healthcare costs to choose a sum insured that offers adequate protection.
Key Factors That Determine the Sum Insured
Medical Inflation: The rapid increase in healthcare costs is a crucial factor. Experts recommend opting for at least Rs 10 lakh as a minimum sum insured, especially in metro cities where treatment costs are much higher.
Lifestyle Patterns: Sedentary lifestyles and unhealthy habits have led to a rise in lifestyle diseases like diabetes, hypertension, and heart disease. According to the Indian Council of Medical Research (ICMR), around 77 million Indians are diabetic, with millions more prone to hypertension and obesity. Such conditions require regular medical attention, which must be considered when deciding the sum insured.
Existing Health Conditions: If you or a family member has pre-existing health conditions, a higher sum insured is advisable. Chronic conditions often involve frequent hospital visits, medications, and surgical interventions, making a higher sum insured necessary to manage these costs.
Geographical Location: Healthcare costs vary across India. Treatment in metros like Mumbai, Delhi, and Bengaluru is more expensive than in Tier II or Tier III cities. Residents of metro areas should consider a sum insured of at least Rs 10-15 lakhs to cover high medical expenses.
Family Size and Number of Dependents: A family floater plan, which covers all members under one sum insured, should have a higher coverage amount than an individual plan. For instance, a family of four should ideally have a minimum sum insured of Rs 15-20 lakhs to ensure adequate coverage for everyone.
Exploring Enhanced Coverage Options
For individuals who find a high sum insured financially burdensome, top-up and super top-up plans offer cost-effective alternatives. These plans come into effect after the base sum insured is exhausted. A top-up plan covers costs beyond a specific threshold, while a super top-up plan covers costs across multiple claims during the policy year. Opting for these plans can provide enhanced coverage without significantly increasing your premium.
Another consideration is future-proofing your policy. With advancements in medical technology and treatments, along with longer life expectancies, it’s wise to anticipate higher healthcare needs as you age. Choosing a sum insured that accommodates both current and future medical expenses ensures long-term peace of mind. The right sum insured can make all the difference in ensuring that you and your loved ones are financially protected from the rising costs of healthcare. When selecting your sum insured, consider factors such as medical inflation, lifestyle diseases, your family’s needs, and your location.
Top-up and super top-up plans can also help you expand your coverage without straining your budget. Ultimately, choosing a sufficient sum insured is about balancing affordability with comprehensive protection. Opting for an appropriate sum today will safeguard your financial wellbeing tomorrow.
(The author is chief distribution officer, Future Generali India Insurance Company Ltd)