How Much Health Insurance Cover Do I Really Need?

The COVID-19 pandemic made many of us aware of the importance of health insurance. With more than one person in the family falling ill at the same time, those who did not have insurance or were not adequately covered, had to dip into their savings to pay their medical bills. 

Medical inflation is much higher than normal inflation at 15 per cent and if one is not insured, a health emergency can wipe off one's savings. 

There are several things one needs to consider before deciding the amount of one's health insurance cover. 

Age and Number of Dependents: Younger individuals generally require less coverage due to fewer health issues, but as family members age, the likelihood of needing medical services increases, necessitating higher coverage. 

"Keeping the medical inflation in mind which is rising at 15 per cent year on year, it is only advisable for the Gen Z to invest in health plans with a minimum cover of 10 lakh rupees," says Rupinderjit Singh, Vice President - Retail Health, ACKO, a general insurance company. 

"Additionally, the more dependents relying on your health insurance, the higher the coverage needed to ensure adequate protection for everyone," says Neel Chheda, Senior EVP and Head, TATA AIG, a general insurance company. 

If one has a family, one can opt for family floater plans; these policies cover your entire family, including kids under one plan. Dependent children under the age of 25 can be added to family floater policies. "These plans are often cheaper as all family members share the same sum insured," says Siddharth Singhal, Business Head - Health Insurance, Policybazaar.com, an insurance portal. 

However, when it is a family floater, one should increase the coverage amount, in the incidence that more than one member of the family makes a claim during the one-year policy period. "A basic rule of thumb is to buy a plan with a sum insured of at least Rs 10 lakh per person," says Singhal. What this means is that a Rs 10 lakh policy is not enough for a family of three and you should opt for a coverage of at least Rs 20 lakh or more." 

If you are covering your parents, you would need a higher coverage. However, if your parents are senior citizens, it makes sense to take a separate policy for them with a higher coverage, rather than include them in the family floater plan. 

Local Healthcare Costs: Healthcare costs can vary significantly depending on your location. For example, if you are living in a metro, healthcare costs will be higher than if you are living in a small town. Hence, your health insurance premiums will also vary. 

Financial Situation: You also need to assess your financial situation and assess how much you can afford to pay for health insurance premiums. In fact, if affordability is a concern, you may opt for deductibles or co-pay to reduce your health insurance premium. 

Super Top Up Insurance 
"Medical inflation is at an all-time high. To combat that, it's important to have sufficient sum insured. You have two options, either you buy a policy with a high sum insured, or you buy a basic plan with limited coverage and add a super top-up to it," says Singhal. 

These insurance plans come with a deductible, which you need to pay from your own pocket. Let us assume you have a Rs 5 lakh health insurance plan with a Rs 2 lakh deductible and a super top of of Rs 5 lakh. In case of super top up insurance, the insurance company will pay your claims over Rs 2 lakh as long as your total medical expenses in a year cross Rs 2 lakh. In case of a top up plan, each individual claim needs to be above the deductible limit for the insurance company to pay for the claim. 

Thus, for super top up plans, the deductible applies to the total medical expenses in a policy year, not each individual claim. Super top-up plans provide coverage once the cumulative medical expenses in a policy year exceed the deductible amount.

"They can be added to any existing health insurance policy, regardless of the insurer, providing flexibility in managing your healthcare coverage," says Chheda. If you have a base insurance policy for the deductible amount, you can thus get covered without paying anything from your own pocket.