INSURANCE
How Much Health Insurance Cover a Family Needs
The sum insured has to pay for the worst year, not an average one. That means sizing it from what a serious hospital stay costs, how fast that cost is rising, and how many people could need care in the same year.
Start from a serious hospital stay
A routine illness does not test a policy. A cancer diagnosis, heart surgery or a major accident does. Find out what one of those costs at the kind of hospital you would choose in your city, counting the room, surgery, medicines and tests. Hospitals will usually estimate common procedures, and recent bills from friends or relatives are useful evidence.
That figure, rather than the premium you would like to pay, is where the sum insured should start.
Allow for medical inflation
Treatment costs have tended to rise faster than prices in general, and a policy you buy today has to be enough for years to come. If a major stay costs ₹5 lakh now and costs rise 10% a year, the same treatment will cost ₹8,05,255 in five years and ₹12,96,871 in ten.
Review the cover every few years. A sum insured that looked generous when you bought it can become thin without a single word of the policy changing.
Floater cover and two claims in one year
A family floater gives everyone one shared sum insured, which costs less than separate policies. The catch is that two claims in the same year draw on the same amount. If two members could plausibly need hospital care in one year, size the cover for both. In the example above that means ₹16,10,510 for five years from now instead of ₹8,05,255.
Elderly parents are usually better on a separate policy. Their premiums are higher and they are more likely to claim, so on a floater with the rest of the family they can use up cover the younger members might need.
Employer cover is not a base
Group cover from an employer is useful, but it ends when the job does, whether you resign, are laid off or retire, and that is often when you most need insurance. Buying your own policy later can mean medical tests, exclusions for conditions you have developed and fresh waiting periods. Treat employer cover as a top-up to a policy you own.
In the ₹5 lakh example, a family with ₹3 lakh of employer cover would still need ₹5,05,255 more to cover one major stay five years from now.
Terms that matter as much as the sum insured
- A room rent limit can cost far more than the room. If you choose a room above the limit, many policies reduce your other charges in the same proportion, so the shortfall ends up much bigger than the rent difference.
- A co-payment clause makes you pay a fixed share of every claim. It lowers the premium and raises what you pay when you are ill.
- Waiting periods apply to conditions you already have and to some named treatments, and claims for those are not paid until the period ends.
- A restoration benefit refills the sum insured after a claim during the year, usually for a different illness or a different family member.
- The hospital network decides where you can be treated without paying first and claiming back later.
Raising cover without doubling the premium
A super top-up policy starts paying once your medical bills in a year cross a deductible, say ₹5 lakh, and then covers up to a much larger amount. Paired with a base policy that covers the deductible, it gives high total cover for less than one large policy would cost, because the insurer only pays out in the rare expensive years.
Check that the top-up adds up all the bills in a year towards the deductible, rather than each claim on its own. That is the difference between a super top-up and an ordinary top-up.
Where health cover fits
Health insurance protects your savings from a medical bill. Term insurance protects your family's income if you die, and an emergency fund covers the costs a policy does not, such as co-payments, deductibles and the wait before a claim is settled. Health premiums also qualify for a deduction under the old tax regime, within limits that are higher for senior citizens.
The health insurance calculator works out a cover figure from your hospital cost, inflation and family size. The term insurance calculator and emergency fund calculator handle the other two.