Ideal health insurance coverage: how much health insurance do i need?

While searching for a health insurance plan, the first question that comes to mind is ‘how much medical insurance do I need?’

Even though human life expectancy has increased significantly in the last few centuries, today’s world has its own challenges. Increase in pollution, inactive lifestyle, and increased consumption of junk food are some of the factors that contribute to the decline in people’s overall health.

In addition, the rise of medical expenses in India has enforced the need of health insurance plans for individuals and their families.

Every family is different and so is their need for health insurance plans. Hence, it becomes important to figure out the right amount of insurance coverage as per needs. Read on to find out about the satisfactory coverage required for medical insurance.

Optimum health insurance coverage

At times, one may wonder—how much mediclaim do I need for my family and me?

• How much insurance do I need for myself?

When opting for an individual plan, the individual should aim for a medical insurance cover equivalent to 50% of their annual income. For example, Rs. 4 lac is an appropriate insurance sum for a person who is earning 8 lac annually.

• How much health insurance coverage do I need for my family?

Medical insurance cover for a family of four should be 50%–100% of the annual income of the family. Multiple health insurance policies with a family cover of upto 10 lac are available in the market.

• How much Mediclaim should I have for my parents (senior citizen)?

Rising inflation rates for medical expenses can add to the financial distress that comes with old age. As they get older, senior citizens require high coverage for medical treatments while their income could be substantially reduced even to nil sometimes.

These factors make it important to plan for parent’s retirement in advance. For example, if annual medical expenses for both the parents of an individual are around 1–2 lac, it is best to look for a cover that covers at least 7–8 lac.

• How much health insurance coverage do I need if I have a disability?

Depending on the type of the disability, the appropriate cover can be determined for a person with disability (PwD). A minimum coverage of 4–5 lac should be considered for an individual who has more than 40% disability, and that of 8–10 lac should be opted for people who have more than 80% disability.

Cover for the medical treatment of some disabilities (such as congenital diseases) is a common exclusion in health insurance plans. By going through the policy details, a person can learn about the inclusions and exclusions of a plan, which helps in decision making.

• How much medical insurance do I need if I have diabetes, cancer, or a cardiovascular disease?

People who have ailments such as diabetes or cancer are considered high-risk individuals. Health insurance companies offer dedicated plans for such individuals with a higher premium amount than the premium of a generic policy.

To get an estimate of assured cover needed, analyse annual medical expenses for the last 3–5 years and factor in the inflation rate.

What is a rider? Should I add it to my cover?

In simple words, a health insurance rider is an add-on plan that people purchase along with their basic plan to enjoy additional benefits. It is quite similar to a data pack top-up done for a mobile network.

A basic medical insurance usually does not cover miscellaneous expenses or medical expenses for common exclusions. Hence, the need for a rider arises. Following is a list of the most common riders chosen by a majority of people:

• Room rent waiver

Most health insurance companies put a cap on room rent expenses. To avoid paying for standard upgrades to a single room or an air-conditioned room, people can opt for a room rent waiver on top of their basic plan.

• Maternity cover

This is a common medical insurance exclusion in most policies. One can consider adding this rider while family planning.

• Hospital cash

The total expenses incurred during a person’s treatment are significantly higher than hospital bills that are covered by the insurer. Adding a rider for hospital cash is extremely beneficial.

• Critical illness cover

This rider provides a lump sum amount to the insured in case they get affected by a terminal illness such as cancer, heart attacks, and organ transplants. The assured sum is shared immediately with the insured person irrespective of medical expenses.

• Personal accidental rider

The compensation of medical expenses due to injuries and any temporary/permanent disability caused due to all kinds of accidents are covered under this add-on.

People should consider adding a rider to their health insurance plan such as the ones mentioned above to overcome an unexpected financial burden. These riders provide substantial benefits at a minimal cost.

Risks of being uninsured

If the medical insurance plan does not provide adequate coverage for medical expenses, the plan makes little to no difference.

Multiple clauses determine the approval of any claim; incomplete knowledge about the terms and conditions can lead to disappointment and distress during a medical emergency.

To avoid the risk of underinsurance, do the following:

1. Make a list of all hospital expenses and other medical expenses of the past few years. Factor in the inflation rate and assess the future needs according to current health status.
2. After careful consideration, one can get a rough idea about the sum required for a medical treatment in the upcoming years. Shortlist insurance policies that provide adequate coverage.
3. Go through the terms and conditions of every policy option to compare inclusions and exclusions against the policy premium.
4. Finalise the optimum plan after analysing the insurance company’s claim settlement ratio. Seek additional coverage in terms of policy riders (few suggestions are mentioned above) to create a suitable package.

Choosing a health insurance plan is an important decision that ends in long term commitment. It is best to seek professional help if a coherent decision can’t be made.

Experts suggest that one should invest in a health insurance plan when they are young and healthy. Chances are good coverage can be accessed at low premium rates when a young person purchases health insurance. Keep the following things in mind while buying a medical insurance policy:

1. General-physician consultation can reveal one’s current health status; this information can then be used to assess policy needs.
2. The answer to ‘how much health insurance do I need’ can be revealed by pondering over medical expenses for hospitalisation in the past 3–5 years.
3. As mentioned above, consider inflation rates in the economy as well as health care industry to make a smart decision.
4. Invest in a health insurance early in the age of 20s.
5. Look out for policies that offer no claim bonus and other additional benefits.