One of the key decisions to make when purchasing a health insurance plan is the choice of the appropriate sum insured. A carefully selected amount of insurance will make sure that you and your family will have the financial security that you need in case of medical emergencies without emptying your savings. But it is not always easy to determine the extent of coverage that you really require. The cost of healthcare differs per city, lifestyle diseases are on the increase, and medical inflation keeps growing year after year.
This detailed guide breaks the decision into three simple, practical steps. Evaluating your health risks, determining the existing medical expenses in your city, and comparing the available sum insured alternatives, one will be sure of choosing the right sum that will cover your family and bring you peace of mind.
Step 1: Assess Your Healthcare Needs and Risks
When deciding on the perfect amount of sum insured, the first step is to know your personal and family health profile. This is done to allow you to estimate the possibility of incurring medical costs and to know whether you should have a basic cover, moderate cover, or high-value health insurance plan.
Identify Lifestyle, Age, and Family Health History
Your lifestyle, age, and genetic predispositions play a major role in the type of medical risks you may face. These factors should be the foundation for calculating your sum insured requirement.
Age Matters More Than You Think
The age factor is a critical determinant of healthcare requirements.
- The youthful adults (18- 35 years) might need less coverage because they normally have fewer chronic health issues and are less likely to be hospitalised. Nevertheless, unexpected medical costs can also be caused by lifestyle-related problems like stress, sleep deprivation, or an unhealthy diet.
- The middle-aged people (36–50 years) start to develop diseases such as diabetes, hypertension, or cardiac threats. At this age, a larger amount insured- 10 lakh to 20 lakh or even more- is recommended.
- Elderly citizens (50+ years) are at higher risk of hospitalisation and repeated medical examinations. To them, an insured amount that has a high value, as much as ₹25 lakh or even one crore, would be necessary to provide financial security.
Lifestyle Choices Influence Medical Costs
How you live your day-to-day life influences your health:
- Sedentary jobs
- Stressful work environment.
- Inadequate sleep
- Smoking or alcohol consumption
- Irregular eating patterns
These contribute to the risk of developing unexpected health complications. When your lifestyle is either moderate or high-risk, then a larger coverage amount will be very important, even when you are young.
Family Health History Determines Future Risks
A history of the following in your family increases your chances of developing similar conditions:
- Diabetes
- Hypertension
- Cardiac diseases
- Kidney disorders
- Cancer
- Autoimmune diseases
These treatments can be expensive, often involving long-term medication and periodic hospitalisation. A higher sum insured ensures preparedness for both minor and major medical events.
Consider the Number of Family Members and Dependents
The size of your family determines the kind of coverage you need. Medical expenses multiply when multiple individuals rely on one policy.
Individual vs Family Needs
Ask yourself:
- Do you want insurance only for yourself, or your spouse as well?
- Are your parents dependent on you?
- Do you have young children or plan to expand your family soon?
Each additional member increases the potential hospitalisation risk.
Children and Maternity Requirements
If you plan to start a family or already have young children, you must consider:
- Maternity coverage
- Newborn and infant care
- Vaccination costs
- Paediatric consultations
These expenses can add up significantly, and a moderate to high sum insured ensures sufficient protection.
Including Parents Requires Higher Coverage
Parents, especially those above the age of 55, have a higher probability of hospitalisation. Treatment of chronic illnesses, joint replacements, cardiac procedures, and frequent diagnostics requires extensive coverage. Adding parents to your health insurance policy or buying a separate plan for them usually demands higher sum insured limits.
Step 2: Evaluate the Healthcare Costs in Your Area
One of the biggest mistakes policyholders make is choosing a sum insured without considering location-based medical costs. Healthcare expenses differ widely across India, especially between metro and non-metro regions.
Understand Average Treatment Costs in Metro vs Non-Metro Cities
Medical costs are significantly higher in metro cities due to advanced hospital infrastructure, specialised doctors, and a higher cost of living. Here’s a typical comparison:
Metro Cities (Mumbai, Delhi, Bengaluru, Chennai, Hyderabad)
- Heart surgery: ₹3–₹5 lakh
- Cancer treatment: ₹6–₹15 lakh
- Joint replacement: ₹2–₹3 lakh
- ICU admission per day: ₹25,000–₹40,000
- Basic hospitalization: ₹50,000–₹1.25 lakh
In metros, opting for a sum insured of ₹10–₹20 lakh minimum is practical. Families may require ₹25 lakh to ₹50 lakh for broader protection.
Non-Metro Cities and Tier II/Tier III Regions
While medical costs are relatively lower, quality private healthcare can still be expensive:
- Heart surgery: ₹1.5–₹3 lakh
- ICU per day: ₹12,000–₹20,000
- Basic hospitalization: ₹30,000–₹60,000
Here, an individual may manage with ₹5–₹10 lakh coverage, but for families, especially with parents, a higher sum insured is more secure.
Choice of Hospital Impacts Coverage Needs
If your preference is private, multi-speciality, or network hospitals with cashless facilities, you should aim for a higher sum insured, as these hospitals have higher treatment charges.
Factor in Inflation and Future Medical Expenses
Medical costs are rising at a faster pace than average inflation in India. This trend makes it essential to plan for future healthcare needs rather than current costs alone.
Healthcare Inflation in India is Rising Rapidly
India’s medical inflation has consistently been between 12% and 14% annually. This means a treatment costing ₹2 lakh today may cost ₹4–₹5 lakh within a few years.
If you buy a health insurance policy with a low sum insured today, it may not be adequate in the next 5–10 years.
Age-Related Future Needs
As you age:
- You require frequent health check-ups.
- Chronic diseases may develop.
- The chances of hospitalisation increase.
Choosing a higher sum insured today helps avoid coverage insufficiency later when premiums could be significantly higher.
Long-Term Planning for Family Expansion
If you expect life changes like:
- Marriage
- Parenthood
- Adding parents to coverage
- Relocation to a metro city
Plan your sum insured accordingly and choose a plan that gives room for expansion.
Step 3: Compare and Choose the Right Sum Insured
When you know your personal healthcare needs and the cost of medical care in your vicinity, the second thing is to compare available plans. The aim is to identify a health insurance policy that is balanced in terms of coverage, benefits, and cost-effectiveness.
Compare Plans Based on Coverage and Premiums
Low premiums can be tempting, but they can mostly be accompanied by coverage restrictions. These factors are to be compared rather than selecting the lowest price plan:
What does the plan cover?
- Hospitalization
- Daycare treatments
- ICU charges
- Pre and post-hospitalisation costs.
- Medical examinations, doctor visits, and medications.
- Ambulance charges
- AYUSH treatments
- Organ donor expenses
A comprehensive coverage plan makes certain that you do not encounter any unexpected out-of-pocket costs.
Check limits and sub-limits
- Room rent capping
- ICU limits
- Cap on maternity claims
- Limits on cataract or joint replacement surgeries
Plans that have restrictive sub-limits should be avoided except when you have a very tight premium budget.
Assess the premium to coverage ratio.
A good plan offers:
- High coverage
- Reasonable premiums
- Flexibility to hike the sum insured.
- Helpful add-on options
Find value, and not low cost.
Look for Plans with No-Claim Bonus and Restoration Benefits
Two of these features substantially increase the amount of real sum insured without proportionately hiking your premium:
No-Claim Bonus (NCB)
Unless you make a claim during a policy year, insurers tend to charge you a higher sum insured- in some cases up to 100 per cent or more- without any extra charge.
This will assist in combating medical inflation and will provide you with more coverage in the long run.
Restoration Benefit
When your initial amount insured is depleted during treatment in one year, the amount is restored by the insurer to enable you to go on with the plan in subsequent hospitalisations.
This attribute comes in particularly handy in:
- Family floater plans
- Critical illness cases
- More than one hospitalisation per year.
A moderate amount of insurance combined with these benefits can provide you with effective coverage that is far better than the amount you are paying.
Opt for Family Floater Plans for Broader Coverage
A family floater policy is a family policy that is assigned a common sum insured across several members of the family. It is ideal for families with:
- Young parents
- Children
- Spouses with decent health
- Lower probability of multiple simultaneous hospitalisations
Benefits of Family Floater Plans
- Less expensive than separate plans.
- There is one plan that encompasses all family members.
- The benefits of restoration and NCB are increased.
- Increased amount covered by affordable premiums.
Separate individual plans might, however, be more appropriate for senior parents or individuals with chronic diseases.
Conclusion
It is essential to reassess your healthcare needs and sum insured regularly. As your health and lifestyle change, so will your healthcare expenses and coverage needs. Regular reassessment can ensure adequate coverage and protection for your changing healthcare needs. By evaluating your healthcare expenses and coverage needs on a regular basis, you may be able to adjust your plan to better suit your current needs and reduce unnecessary expenses.
When looking to buy health insurance, it is necessary to research and compare your options to find the best plan for your needs. You can buy health insurance online or through an insurance agent to find a plan that fits your budget and coverage needs, such as pre-existing diseases, coverage for elderly parents, OPD expenses and more.
ManipalCigna, a prominent player in the health insurance industry, provides a diverse range of health insurance plans that cater to all your healthcare needs.
FAQs:
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How do I choose a sum insured for health insurance?
The steps for determining the correct sum insured for health insurance are:
Step 1: Assess Your Healthcare Needs and Risks
Step 2: Evaluate the Healthcare Costs in Your Area
Step 3: Compare and Choose the Right Sum Insured
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What are the steps when choosing health insurance?
Choosing a health insurance plan can be overwhelming, but it's an important decision that requires careful consideration. The first step is to assess your healthcare needs and budget. In the second step, you should research and compare different plans, while considering factors such as deductibles, provider networks, and coverage for prescription drugs and pre-existing conditions. For the third and final step, it is important to read the fine print, check the insurer's reputation, and make an informed decision.
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What are the three most important types of insurance?
The three most important types of insurance are health insurance, life insurance, and auto insurance.
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What is the sum insured in health insurance?
The sum insured in health insurance is the maximum amount the insurance company will pay for medical expenses in case of a claim. It is the total coverage available to the insured for a specific period.
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How does the age of the insured impact the sum insured selection?
The insured's age impacts the sum insured selection, as older individuals may have higher healthcare expenses and may need a higher sum insured to cover potential medical costs.
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Can I change the sum insured amount later?
Yes, you can usually change the sum insured amount later by requesting a modification to your health insurance policy . However, it is essential to note that when the sum insured increases, it is likely that there will also be an increase in the premium amount. However, this may be subject to certain terms and periods or a limit on the number of changes you can make.
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How does the location impact the sum insured selection?
The location can impact the sum insured selection as healthcare costs may vary across regions or cities. Therefore, it is important to evaluate the healthcare costs in your area to determine the appropriate sum insured that would cover your potential medical expenses.
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Can I choose a higher sum insured than my healthcare needs?
Yes, you can choose a higher sum insured than your healthcare needs, which may result in higher premiums. Hence, it is important to balance adequate coverage and affordability to ensure that you pay only what you need for your health insurance policy.
