How much health insurance do you need?
Posted by: Arti Bhargava on Mar 14, 2017, 09.21 AM IST
Melwyn is a 40-year-old self-employed professional. He wants to get a family floater health insurance plan, which will cover him, his wife and child. However, he first needs to decide the amount of health cover required.
His agent is recommending a sum assured of Rs. 7-10 lakh, though if he were to look at maximising his tax savings under Section 80D, Rs. 15 lakh would be apt. Is health insurance coverage of Rs. 10 lakh enough or should he max it to Rs. 15 lakh or more? How much coverage should he take is a mind-boggling question.
Given the high cost of medical procedures today and the double-digit inflation in health care costs, buying adequate cover is very important. Age is an important factor that must be considered while deciding the amount of coverage.
If Melwyn had taken health insurance at 25, he could have started with Rs. 5 lakh and then increased it by 10- 15 % every year to cover for medical inflation. But now at 40, it will be a factor of his age and life stage.
Affordability is another key feature that helps to determine the amount of coverage. Though he has crossed 40 and needs a wider coverage, can he afford the higher premium that needs to be paid every year?
Any delay in renewing the health insurance policy or non-payment of the premium would mean discontinuation of the plan. Further, he must assess his lifestyle, his family’s and his own medical history to see if anyone falls in a genetically high-risk category. Accordingly, a wider health coverage will be necessary, irrespective of the age and prevailing health condition.
Melwyn must realise that health care costs vary significantly depending upon hospital, the kind of treatment and the facilities opted for. In other words, the size of health insurance should be linked to the family’s income and lifestyle.
So, is there any "right" amount when considering health insurance? Not really. It is an individual decision, to be taken after considering several factors. Most importantly, it must not be a 'do it, shut it, forget it' decision. It must be reviewed every time there is a change in any of the factors discussed above.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Mar 14, 2017, 09.21 AM IST