What is Sum Insured In Health Insurance

Sum insured in health insurance is the maximum amount that a health insurance company pays the insured during the policy term for the healthcare expenses he/she is covered for under a particular health insurance policy.For example, if an individual has purchased a health insurance policy with sum insured of Rs. 1 lakh and he/she gets hospitalised for an illness. Let us suppose that the hospital bill comes out to be of Rs, 75,000. In this case, the insurance company will bear the entire cost as the amount falls within the sum insured limit. Whereas, if the hospitalisation bill comes out to be of Rs. 1.25 lakh, then the insurance company will only pay Rs. 1 lakh and the rest Rs. 25,000 will be borne by the insured.

The rising cost of healthcare in India can easily deplete the savings of the uninsured in case of a medical emergency. While purchasing health insurance is important, equally important it is to choose the right sum insured amount.

Let us understand this with an example. Suppose you have timely bought health insurance and are happy with it. When a health emergency arises, you make a claim under the policy. But you are shocked to know that even after the sum insured amount borne by the insurance company, you have to pay the rest of the amount from your own pocket. Seems stressful, right? It is then when you realise that you were wise in timely buying a health insurance plan but not wise enough in choosing the right sum insured amount. Therefore, it is very important to choose the right sum insured amount so as to avoid such situations and to let the insurance company pay the maximum amount in case a claim arises. Choosing the right sum insured offers the insured peace of mind and keeps their savings intact for the future. Several other benefits of choosing the right sum insured amount are as follows:

• Right sum insured amount protects the insured completely in case of a health emergency.
• Saves the insured in case of a family floater health insurance plan. This is because in the case of a family floater policy, the family shares the sum insured of the health insurance policy and therefore lower sum insured may not be enough. Higher sum insured in this case keeps all the family members sufficiently covered.

What is the Ideal Sum Insured in Health Insurance?

Choosing the right sum insured amount under health insurance is easier said than done. Although there is no quick formula or a step-by-step guide to calculating the ideal sum insured amount that one requires, here are some points that can be followed in order to get it easily:

1. Choose Health Insurance According to Age

It is recommended to purchase a health insurance policy when young. Not only because it is more affordable then, but also because lesser coverage features would be required. As per the experts, for someone aged in their 20s, sum insured options ranging between Rs. 2-3 lakh are enough. However, the sum insured can be increased at the time of renewal in the subsequent years.

2. Choose the Sum Insured as Per the Income

It is recommended to purchase a health insurance policy with sufficient sum insured yet the one that is affordable. Experts suggest that health insurance policy buyers should go for a policy, the premium of which is not more than 2% of their annual income. For instance, a person whose annual income is Rs. 5 lakh, he/she should opt for a health insurance policy with a premium of maximum Rs. 10,000.

3. Choose the Sum Insured as Per the Lifestyle

Health insurance policy buyers must choose a sum insured on the basis of the lifestyle they live. In case someone deals with high stress levels, or has a job that does not allow them to exercise, or does not follow a healthy diet, or consumes alcohol regularly, then they must go for a health insurance policy that covers them for various lifestyle diseases.

4. Consider the Medical History of Family

The policy buyers should go for a higher sum insured option if their family has a history of medical issues. This will help the policy buyer to get enough coverage for the said illnesses. In case any of these illnesses is a critical illness policy, then it is recommended to purchase a separate critical illness insurance policy apart from the base health insurance policy. This is because standard health insurance policies do not always offer sufficient cover against critical illnesses.

Difference Between Sum Insured and Sum Assured

Sum insured is the value applied to non-life insurance, whereas sum assured is the value applied to life insurance policies. The concept of sum insured works on the principle of indemnity and provides reimbursement or compensation to the insured in case of hospitalisation. Whereas sum assured is the fixed amount that the health insurance company pays the policyholder in case of an event. Unlike sum insured, sum assured is a monetary benefit given to the insured when the insurance term ends.

Should You Buy Health Insurance With Higher Sum Insured or Add Top-Up Policy?

Buying a health insurance policy with a higher sum insured or adding a top-up policy both have their own sets of pros and cons. Following are the comparisons that will help you decide which is a better option for you.

1. Opting for a Health Insurance Policy with a Higher Sum Insured: Health insurance plans with higher sum insured come at higher premiums. But these plans provide hassle-free claim settlement as you do not have to worry about limited coverage under these plans. For instance, an individual has been diagnosed with a critical illness, for which he requires to undergo an expensive treatment, but he/she has a health insurance policy with a sum insured of Rs. 1 crore. Then, he might not stress out as much as he would have in case he had a health insurance policy of lesser sum insured, of let’s say, Rs. 10 Lakh. Also, if you buy a top-up policy, then it might be comparatively difficult to manage two different policies. Hence, a health insurance policy with a higher sum insured keeps you stress-free even though it comes at a higher premium.

2. Going for a Top-Up Health Insurance Policy: A top-up health insurance policy is an affordable option to increase health insurance coverage. Like regular health insurance plans, these plans also cover you for hospitalisation expenses. People prefer buying top-up health insurance plans as they are more affordable than health insurance plans with higher sum insured. But a top-up health insurance plans come with a deductible amount, which is why they can be purchased at a lesser premium. A deductible is that amount which the insured has to pay for the treatment availed before the insurance company starts paying for the same. So, it is important to consider the deductible amount before choosing a top-up health insurance policy as a higher deductible will mean a lower premium and vice versa.

Top-up health insurance plans are recommended for those who already have a base health insurance policy but do not have sufficient sum insured under them. Whereas choosing a higher sum insured option is beneficial for those who are planning to buy a new health insurance policy with a higher budget.

What is the Best Time to Increase Health Insurance Cover?

If you find that your health insurance coverage is insufficient, then the right time to upgrade it is now. It is recommended to upgrade your health insurance coverage when young because of two main reasons. Firstly, if you upgrade your health insurance policy in the later years of life, then it will be a costly affair as you will be required to pay a higher premium. Secondly, due to the weaker immune system in the later years of life, you might catch some illness and hence, the insurance company may deny you health insurance cover.

When Can I Increase My Sum Insured in Health Insurance?

The health insurance companies allow you to increase your sum insured in case you are not satisfied with it. You can do the same at the time of health insurance renewal. But, you should also note that with an increase in sum insured amount, your coverage will increase thereby increasing the insurer’s liability. This will require you to pay a higher premium. Not only increase but the companies also allow you to decrease the sum insured amount in case of change of requirements.