Can you put a value to your health?

5 MinsSep 01, 2020

Rajan Modak and his family are covered by a health insurance cover of Rs 5 lakh sum assured. When Rajan had purchased the cover two years back, it was enough for his three-member family, or so he thought. Last month, Rajan tested positive for Coronavirus. Thankfully, his insurance covered his hospitalization and treatment. But the final bill was Rs 7 lakh, and Rajan had to pay Rs 2 lakh out of his pocket. For this, he was forced to dip into his savings.

health insurance

Till recently, a health insurance cover of between Rs. 3 lakh and Rs. 5 lakh was considered sufficient for a family. However, given the rising healthcare costs, this amount is now falling short. The recent Covid-19 pandemic has further reinforced this. So, is there an ideal health cover? And if so, how much is it?

Broad pointers for calculating the sum assured

For a family of four, in a tier-I city, a family floater health insurance with cover of Rs. 10 lakh is a must, to start with. And ideally, you should increase the cover as your earnings increase. For instance, if you are earning between Rs. 20 lakh and Rs. 50 lakh, your insurance cover should ideally be around Rs. 20 lakh. If you make more than Rs. 50 lakh, an insurance cover of Rs. 25 lakh should suffice. The general thumb rule that experts suggest is that your insurance cover should ideally be at least 50% of your annual income.

Till recently, the thumb rule was that a resident of a tier-II or tier-III city could have half the health insurance cover of a tier-I city resident. The logic was that medical services are generally cheaper outside of the metros. However, after the Covid-19 pandemic, the thinking now is that even those living in tier-II and tier-III cities should have a base health cover of at least Rs 10 lakh. And enhance your coverage if you earn more.

Factors you need to consider while deciding on coverage

1. Medical Inflation: Medical inflation in India is at a whopping 15% every year. You can never be sure when you may need hospitalisation or surgery, and this can cause major upheavals to your family’s budget. Hence, take into account the likely cost of treatment a few years down the line, when you are deciding on your health cover today. You would be able to get a higher sum assured at lower premium rates, today than say three or four years later. 

2. Senior citizens: If you have senior citizens in your family, you should always opt for higher health insurance coverage. A bypass surgery can easily set you back by Rs 4-5 lakh, in a city like Mumbai. If you have a family floater policy of Rs. 5 lakh for a family of four, and a family member has to undergo bypass surgery, it leaves only Rs. 2 lakh on the table for the rest of the members.

Add inflation to this, and an adequate sum assured today may prove insufficient in a couple of years. The same surgery may cost Rs. 10 lakh in just five years.

3. Type of hospital you want: If you prefer to get treated in a private hospital, it will cost you more than a government-run hospital. And if the hospital is a high-end one, known for providing top-class treatment, then the rates will be even more. 

4. Pre-existing conditions: If you or any of the family members have pre-existing conditions or have a family history of certain diseases, you will need a higher cover.

5. Lifestyle choices: Today, most people work in stressful jobs. This gives rise to lifestyle conditions that may require regular treatment. Diseases like cancer may need the patient to be hospitalised multiple times. For such situations, it is advisable to choose a large enough health cover that you can afford.

[Also Read: Six benefits of a family floater health insurance policy]

Individual Insurance or Family Floater

If you can afford it, say if both the husband and wife are earning decent incomes, it might make sense to buy individual plans instead of a family floater plan. This way, if one member is hospitalised, the sum insured for the other family member remains untouched. A family floater plan is useful when the likelihood of multiple family members falling ill in the same year is minimal.

You could even look at buying top-up insurance covers, which are cheaper than base insurance plans. These are useful when treatment costs escalate due to unforeseen reasons. But you can utilise them only after your base plan is exhausted.

When it comes to health insurance, it is better to err on the side of caution. After all, your health is invaluable.

Axis Bank has tie-ups with multiple health insurance companies including Aditya Birla, Digit, Tata AIG and HDFC Ergo.

Disclaimer: The Source, a Mumbai-based content creation, and curation firm have authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.