Understanding the terms of the health insurance policy helps an individual purchase better coverage. The health insurance policy helps policyholders deal with medical uncertainties.
It protects the financial interest of an individual which otherwise may be dented in the absence of a health insurance product.
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Sum Insured in Health Insurance
The sum insured is the maximum amount that the insurance company is bound to pay to the policyholder. It is the maximum coverage that the insurance company offers to the policyholder to discharge the liability. However, the claim made by the policyholder must be approved in order to discharge such liability.
Let us understand the sum insured in health insurance with an example.
Mr A purchased a family health insurance policy for a sum insured INR 5,00,000 with a 10% deductible. This indicated that Mr A or his family shall receive a total compensation of INR 5,00,000 with a 10% deductible for the claim made by them which comes under the purview of the policy. Mr K, the son of Mr A got diagnosed with dengue. The doctor advised him to get hospitalised in order to obtain better treatment. The patient who received the bill amounted to INR 75,000.
Six months later, Mr L, the younger son of Mr A sustained a major injury due to an accident. He was hospitalized for more than 7 weeks. The bill for hospitalisation amounted to INR 4,50,000 which also includes the cost of surgery.
Here is how the health insurance company is likely to help Mr A financially during both instances.
| Parameters | Incident 1 | Incident 2 |
|---|---|---|
| Hospital Bill | INR 75,000 | INR 4,50,000 |
| Claim Amount | INR 75,000 | INR 4,25,000 (Since INR 75,000 out of total sum insured is already utilised) |
| Out-of-pocket Expense | INR7,500 (10% deductible of INR 75,000) | INR 67,500 (10% deductible of INR 4,25,000 + remaining hospital bill) |
| Remaining Sum Insured | INR 4,25,000 | INR 0 |
Mr A was expected to bear 10% of each of the total claims made by him during both instances. He made the first claim of INR 75,000. According to the terms of the policy, he was expected to bear the 10% i.e., INR 7,500. As a result, he received INR 65,500 from the insurance company during the first claim. Now the total sum insured left was INR 4,25,000 since he already utilised INR 75,000 of the sum insured.
During the second event, he received the hospital bill which amounted to INR 4,50,000. However, he could have only availed INR 4,25,000 as the total sum insured. Hence, he made the claim and received INR 4,25,000 – INR 10% deductible = INR 3,82,000.
This is how the health insurance policy helped Mr A in order to receive the sum insured he was expected to claim.
Factors to Consider for Right Sum Insured of Health Insurance Policy
Here are the factors that one must consider in order to choose the right sum insured that shall align with the future requirements of the policyholder.
Type of Health Insurance Plan
One may find different kinds of health insurance plans available in the market. The insurance companies recommend different options for an individual to choose from. This includes individual health insurance plans, employee health insurance plans, family health insurance plans, serious ailment plans, etc. The sum insured explicitly depends on the types of health insurance plan an individual purchases.
For example, an individual health insurance plan does not require much sum insured as it is required for the family or group health insurance plan. A fit and healthy individual may be satisfied with INR 2,00,000 – INR 3,00,00 sum insured. However, when a policyholder purchases a health insurance plan for the family, he must ensure at least INR 5,00,000 total sum insured for one year. Similarly, while purchasing health insurance plans for employees, the employer must take a note of the total number of workers and then evaluate the sum insured accordingly.
Health History
An individual must take note of their health history before purchasing a health insurance policy. Some people may face medical issues due to asthma, diabetes or other diseases. In case of a disease, the policyholder must choose the higher sum insured. However, if the policyholder is healthy, he must opt for the standard sum insured. In addition, an individual must also check the previous claims made by him and whether all the claims made by him could be successfully covered under the policy. If not, then the policyholder must renew the policy by opting for a higher sum insured.
Income and Dependants
The income and dependents of an individual also play a crucial role in determining the sum insured. Individuals opting for a higher sum insured may be obliged to pay a higher premium. However, in the case of low income, he may not pay the higher premium. Hence, it is in the best interest of the individual to either save more from the income if possible or opt for a low sum insured which may ideally cover the family or dependents along with the bread earner of the family.
Medical Facilities
An individual must also consider the medical facility he expects from the insurance company and the city where he resides. A rural area may not have sufficient health infrastructure. Hence, the policy buyer may opt for a low or standard sum insured. However, in urban areas, people may expect wise medical facilities by opting for a higher sum insured.
Conclusion
A sum insured is the maximum amount that a policyholder may receive from the insurance income in case of a medical emergency. However, the medical emergency must be covered under the purview of the terms and conditions of the policy. Before deciding the sum insured, a policyholder must consider the types of plans he needs and the number of members he wishes to cover under the plan. In addition, he should also consider the health history and the age of the insured. The income and number of dependents is also a crucial factor for consideration while determining the sum insured in a health insurance policy.
FAQs
Q. What is deductible in the health insurance policy?
A. A deductible is the percentage that a policyholder is expected to pay from the total claim made by him during a medical emergency.
Q. What are the benefits of selecting the correct sum insured?
A. Here are the benefits of selecting the correct sum insured.
- A policyholder shall receive the maximum amount he needs to settle the medical bill.
- A policyholder may avail of multiple claims.
- A policyholder may make many claims during the tenure of the policy.
Q. Can a policyholder change the sum insured in a health insurance policy?
A. Yes, a policyholder may change the sum insured in a health insurance policy.
Q. What does the term exclusion mean in a health insurance plan?
A. Exclusion is the condition and circumstance when the insurance company is not liable to pay the compensation for the claim made by the policyholder.
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