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Deciding how much health insurance you need

Team AckoMay 13, 2024

Life is full of unpredictable events, and it is possible for anyone to become ill at any given moment. According to the World Health Organization (WHO), India is placed in a top position amongst the countries impacted by the increasing trend of premature deaths caused by non-communicable illnesses. Around 3.2 crore people in the country go below the average poverty line by spending on healthcare from their own pockets.

The increasing expenses, along with the rising occurrence of illnesses and medical conditions, have increased the importance of health insurance. However, finding the right balance between cost-effectiveness and inclusive coverage can be a challenging endeavour among the numerous options of insurance policies and companies in the industry. In this article, we help you determine how much health coverage you might need to protect yourself and your family.

Contents

Importance of Health Insurance
How does health insurance work in India?
How much health insurance do I need in India?
Minimum health insurance coverage
Health Insurance for Family
Health Insurance for Parents/ Senior Citizens
- Takeaway
Frequently asked questions

Importance of Health Insurance

Before you start looking for appropriate policies, you should understand why health insurance is important. To begin with, it offers financial security by taking care of a significant portion of sudden medical costs. In addition, health coverage guarantees access to a wide variety of medical services, including preventative care, tests, surgeries, and hospital stays.

‘By covering preventative measures like immunisations and regular check-ups, health insurance promotes regular medical appointments and early identification of potential health problems. One of the major advantages of health insurance is peace of mind. It helps in easing the anxiety that comes with worrying about medical bills and allowing individuals to concentrate on their recovery.

How does health insurance work in India?

If you are trying to figure out how health insurance works in India, you should know that you will have to pay premiums to the insurer. The insurance firm commits to funding a fraction of the medical costs incurred by the policyholder. Health coverage plans in India often include the option of receiving treatment at network hospitals without the need for upfront payments. Alternatively, individuals can choose to pay for medical services themselves and later request reimbursement from the insurer.

How much health insurance do I need in India?

Your family and requirements are unique — your health insurance should be too. The cost of a simple heart ailment treatment might cost about Rs. 5 lakhs in present times (depending on where you reside); however, this might not be the case in another 5 or 10 years. One of the first steps to buying health insurance is by deciding how much coverage you will need. Here are some pointers before you decide on the right plan.

Types of health insurance policies: Understand the type of health insurance plans available in the market and then match them with your perceived healthcare requirements. An Individual plan can have less coverage and the Family health insurance plans can have more coverage since all members would be sharing the sum insured amount. You need to assess if you need Individual, Family Floater or Senior Citizen health insurance plans and zero in on the suitable plan.
Identify medical costs for potential illness: Critical illnesses such as kidney failure, heart ailments, cancer, stroke, etc., are some of the common potential diseases you might be affected by in the future. Factor in such uncertainties before you decide the sum insured amount of your health plan. You can also opt for a critical illness plan to extend your base plan.
Hospital of your choice: Find health insurance plans that include your preferred hospital among its network hospitals to avail of cashless treatment. Also, check how much is the approximate cost of hospitalisation at your preferred hospital or in your location to understand how much coverage you require.
Evaluate if you have additional health insurance plans: If you hold a Group Insurance offered by your employer, it’ll help you understand the amount of coverage you require for your private or personal health insurance plan.
Family’s medical history: Certain illnesses such as diabetes and hypertension can sometimes be due to hereditary causes. Factor in the possibility of you or your family members who might be affected by hereditary diseases in the future and select the plan that offers the benefit.
Lifestyle: A lot of illnesses that people suffer from are usually caused by bad lifestyle choices. The sedentary lifestyle coupled with unhealthy food habits are major instrumental factors in causing high cholesterol, hypertension, organ failures, diabetes, etc. Even improper sleep habits and stress can trigger lifestyle diseases. You should ensure your health insurance plan will cover such health conditions in future.
Age: There are different age-related illnesses that people can contract as they get older. So, if you need to cover senior citizens such as your parents or parents-in-law, consider buying health insurance that covers illnesses related to older people. However, the possibility of young adults (aged 20-30 years) falling ill is lower. Hence, opt for a health insurance plan that offers sufficient coverage, yet is affordable.
Affordability: Your ability to pay the premium is a vital factor while pondering how much health insurance you need. It is futile to opt for a higher sum insured when you can’t afford it since it attracts a higher premium. Weigh in your affordability and then decide on the plan.
Tax benefits: If you are buying health insurance to avail of tax benefits, evaluate the amount of tax deduction you wish to avail of through the insurance plan and then decide on the plan that suits your need.
Covers high-cost medical treatment: One of the easier ways to determine the right health insurance coverage is that the sum insured should be adequate to provide financial protection for high medical cost treatments such as artery bypass in a hospital of your choice.

Minimum health insurance coverage

A good rule of thumb is to have coverage that’s about 50% of your annual income. So, if you earn Rs. 20 lakhs, a Rs. 10 lakhs health insurance policy may be the right choice for you. However, it is recommended that the minimum coverage should be at least Rs. 5 lakhs, considering the soaring medical costs.

Furthermore, purchasing insurance in your 20s can decrease the likelihood of filing a claim. This allows you to potentially boost your coverage amount without any additional expenses because you get a cumulative bonus rewarded for each year without a claim.

Health Insurance for Family

Like yourself, the significance of insurance applies to your entire family. This is crucial as a medical crisis can arise with any family member at any moment, and a single hospital stay can significantly deplete your family's finances.

Now, you might be wondering, “How much health insurance do I need for my family?” Insurance professionals recommend that a family of four consider obtaining a minimum health insurance coverage of Rs 10 lakh.

Purchasing health insurance for your loved ones comes with a great advantage. You can choose a family floater scheme and significantly lower your insurance fees.

In family floater schemes, a collective amount is allocated for all members of the insured family on a floating basis. This means you do not need to purchase separate health insurance policies for each family member, decreasing overall costs. Additionally, the likelihood of all family members claiming in the same year is quite minimal.

Health Insurance for Parents/ Senior Citizens

Buying health insurance for parents can get tricky if they are senior citizens. They need health insurance the most, as they are at a higher risk of developing a medical condition or needing hospitalisation.

In today's world of rising medical costs, a major surgery like bypass surgery can cost up to Rs 2 lakh in a reputable hospital. Even a minor surgical procedure can cost up to Rs 1 lakh. Therefore, the best health insurance for parents will have a substantial sum insured.

You should look into policies that cover pre-existing conditions when buying medical insurance for parents. Moreover, they might need nursing or assisted living care in future years. So, you should try to find a long-term policy.

Takeaway

Analyse your unique requirement with the above pointers and opt for an adequate health insurance cover to ensure you and your loved ones are well-protected with a robust health insurance plan.

Frequently asked questions

Here are some of the common queries about health insurance coverage.

When is the right age to buy health insurance?

It is advisable to buy health insurance when you are young. The premium is lower when you purchase health insurance at an early stage of your life, and you can complete any of the specified waiting periods early.

What if I need to change the health insurance coverage later on?

As time passes by, your health conditions might change. Your age, possibility of impact of hereditary illnesses, probably a larger family, or perhaps your financial needs have become more significant, and you want more coverage. You may opt for a plan that can be customised at a later stage of your life, or you can purchase a separate plan to increase the overall health insurance coverage.

Do health insurance plans cover pre-existing diseases?

Several insurance companies might offer health insurance plans that cover pre-existing diseases but may come with a waiting period. Please note that this benefit can vary between insurance companies. It is prudent that you read the terms and conditions carefully before finalising the plan.

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