How much health insurance should I buy ?

Good health is something most of us take for granted. You must know why is having health insurance important these days. Unless ill health (and we don’t mean a fever) has affected you or someone close to you, it is difficult to comprehend its emotional, physical and financial impact. Investors keep asking how much health insurance should I buy to support myself in these difficult times.

While you can turn to friends and family for emotional strength and follow the doctor’s advice to overcome physical problems, for financial problems there is health insurance that provides the support.

Health insurance aims to protect you and your family from the crippling impact of the expenses involved in hospitalization and medical care. More specifically, health insurance pays for part or all of the insured’s hospitalization and pre and post-hospitalization medical care, according to the terms of the policy. These would usually include doctors’ visits, hospital stays, surgical procedures, tests, some prescribed day-care procedures and a daily hospital allowance.

With Health Insurance Portability and innumerable plans from insurance companies, you are today spoilt for choice on selecting the right plan.

Do you need health insurance?

Until you are a crorepati and can pay hospital bills with your petty change, yes you do need health insurance! Still not convinced? Have a look at the table below to see what a hospitalization would cost you.

This cost will vary from hospital to hospital. Besides the medical costs, there might be a loss of income too for the period of hospitalization. Looking at these costs, you get an idea how much health insurance should I buy.

How much health insurance should I buy for me and my family ?

There is no thumb rule to guide you about the amount of health insurance you need but be aware of facts before buying health insurance. The best answer to the question How much health insurance should I buy is – “the maximum you can afford”. You are free to take multiple medical policies from different insurers.

It is an industry practice that if you have medical policies with two or more insurers, then when the claim arises, the benefits will be paid out to you in the proportion of the sum assured. For example, suppose you have one health insurance policy with a cover of Rs 2 lacs and another policy with a cover of Rs 4 lacs. If a claim for a value of Rs 3 lacs arises, then you must put the claim to both of the insurers. They will pay you proportionately – the first insurer will pay you Rs 1 lacs and second insurer will pay Rs 2 lacs.

The amount of health insurance you need also depends on what stage of life you are in. If you are young and single, a lower health cover is acceptable. Buy a policy of Rs 1- 2 lacs and build it up as you go older. If you have a family with kids and even elder parents, buy the maximum health insurance you can afford. Do insure all members of the family by way of individual health plans or a joint family floater policy.

If you are employed then you may have some health insurance coverage via your employer. It may or may not be adequate. Do check if family members are covered under the health insurance provided by your employer. If not, then health insurance for them needs to bought separately.

Which health insurance plan should you buy ?

Do choose the right health plan. Not all health plans are equal. Important things to look for in a good health cover is higher age limit for renewal (preferably lifelong), minimum increase in premium with increase in age, lesser exclusions, caps on sub limits, among others. Also consider top up health insurance plans in case you have a good basic cover in place.

Besides various insurers competing for business there are different types of covers you need to choose from. The first choice you face is between a family floater and an individual plan. Though it is more cost effective, the greatest disadvantage of a family floater plan is that if there is more than one claim in a family in a year, the other family members are left with little cover. Individual health plans are best for families with older people and higher risk.

If you can afford it, it’s probably better to get an individual policy because you will get more coverage. However, if you cannot afford individual policies for all family members, then it might be more efficient to get a family floater policy that covers all your family members.

Another important choice to make is general health policy v/s a critical illness insurance plan.
A critical illness plan is a supplement to your basic health plan, not a substitute. So a health plan is essential but you can add on a critical illness plan too.

Take the case of Sujay Shetty, a 43 year old freelance event manager. He had a heart attack and was unable to get back to work for over a month. Nearly Rs.4 lacs were incurred due to expenses such as surgery, post operative treatments, medication etc. He also decided to change his stress filled job, so he needed time to look for the right alternate job. His health insurance policy covered Rs 3 lacs of expenses. However, it was his critical illness policy which gave him and his family a lump sum amount which helped them tide over this difficult period and also gave Sujay the freedom to sit back and re-think on his job.

Summing it up

• Health insurance is an essential cover.
• Increase your insurance cover as you get older.
• Try to buy individual policies for elderly in the family and not family floater plans.
• A critical illness plan is a supplementary cover and does not replace a health insurance plan.