How much Health Insurance Cover is good enough?
POSTED BY ON June 25, 2012 COMMENTS (101)
How much health insurance a person should buy? Is 5 lakhs cover enough or it should be 10 lakhs? Should it depend on job profile, city and income level? These are the most common questions which pop up when a person starts thinking about health insurance. Anil had raised this question on comments section few days back. He says –
I am recently married and look forward to start a family. Like for life insurance where you have a referral benchmark which say’s ideal insurance should be ideally be 10 times your salary, what would be an ideal coverage for us (Floater).
Now it’s not easy to answer this question, but we can brainstorm about it and get some ideas. There can be some ways you can think about how much coverage one should take while taking Health Insurance, let’s look at them one by one:
1. Depends on Affordability
A big factor which decides how much health insurance a person requires depends on the premium amount. Not everyone can pay the premium for Rs 20 lacs cover, as it will be very huge. However, a person can pay some amount which fits within his expenses- affordability. Like lets say 2% of yearly income. If a person is earning Rs 6 lacs a year, he might be able to pay an amount that is up-to 2% of that yearly – Rs 12,000, which will give him decent cover from today’s standard. So a person with 3 lacs salary can pay for health insurance up-to Rs 6,000. A person with 20 lacs income can pay up-to Rs 40,000 per year. So you do not decide on the cover, but you decide on the premium which you can afford. Obviously, there is a limit above an income level. A person earning Rs 1 crore might not even need health insurance at all! He has so much of wealth already to take care of it!
2. As percentage of Income
One way to look at Health Insurance cover can be percentage of your income, like let’s say 100% of your income can be the ideal figure for your health insurance cover. Like a person earning 12 lacs a year should be covered for 12 lacs cover, a person earning 4 lacs per year income should be covered for Rs 4 lacs health cover. However, there has to be upper limit to this like say 20 lacs! This is because a person earning 40 lacs don’t need health cover of Rs 40 lacs. This percentage will depend on how you think about it, I think 100% of income is good enough, you may feel 50% is fine. As per a survey done by jagoinvestor. as high as 60% of the health insurance customers have their health cover less than or equal to 50% of their yearly income, which is quite low. Here are survey results
3. Constant + Function(Past expenses)
If you have spent Rs 2 lacs in past 5 yrs on medical expenses and hospitals, one might want to consider it as the basis for calculating their health cover requirement. Like a person earning 6 lacs a year, who has spend Rs 2 lacs in past 5 yrs on health might be more inclined to take a higher cover than someone who has not spent anything in last 5 yrs. While the first person might feel a cover of Rs 5 lacs is important, the second person might feel Rs 3 lacs is good enough- because he has not experienced the pain of expenses on Health Insurance. So how about this
Health Insurance cover = 50% of Income + 100% of last 5 yrs expenses on Health (hospitals)
So in this case, the first guy will take a cover of 50% of income (6 lacs) + 100% of 2 lacs = 4 lacs in total. However the second person will take it for Rs 3 lacs only (50% of income).
4. Average bills these days
I think the most logical way of looking at health insurance cover can be, simply the expenses in the worst case for medical treatments these days for different kind of hospitalization. If you list down 10 things for which people are hospitalized and which are covered in health insurance and lets say the average bill of that comes to around 4-5 lacs, you can say that it can be the right figure for you.
5. Your Method
This method is your method. Each and every person has his/her own way of looking at a problem and I would like to hear how you think on this subject. So, I request you to please open up your thoughts and share on comments section what do you think should be the right health insurance cover and how it should be calculated ?
What are your thoughts on this? In your view how much health insurance cover is good enough ?
101 replies on this article “How much Health Insurance Cover is good enough?”
Comments are closed.
Hi,
I am looking for health insurance for my mother. Can you please advice a good health insurance policy.
Thanks for your help.
Hi Deepali
Just fill up this form and our team will help you on this – http://jagoinvestor.dev.diginnovators.site/services/health-insurance
Team, how critical is the number of hospitals covered in the area where we stay in choosing the policy ?
Hi Balachandar
While its a great thing that the company has tie ups with maximum hospitals near you, its not a blocker or such a big thing, but then thats my personal opinion. If it has tie with with few hospitals atleast, you have the options. And anyways you can anytime go to any hospital and get treatment and get the expenses reimbursement later.
Hi Manish,
Really appreciate your resourceful articles which help in financial planning. Thank you for that.
I have a query. I have my father’s insurance in religare care since last 3 years with SI 7 lac .
I want to include my mother in that as well. No major medical history till now. Father (55yrs) Mother(51yrs)
We live in Delhi-NCR region.
1. WIll cover of 7lac good or should I opt for 10lac (given No claim bonuses upto 50% and recharge benefit)
2. Should I go for porting this insurance to oriental family floater as that seems more recommended. Also I am hoping the premium would be less in future for age 65+
3. Can insurance companies increase premium in future from what they currently show for higher age groups (like 65-70 yrs) assuming no claim based loading.
Your inputs will be really helpful.
Hi,
I am looking for health insurance for my parents. Can you please advice a good health insurance policy.
Thanks for your help.
Hi Sanjay
I have emailed you !
Hey Manish,
I have recently shifted back to India from Germany. I am struggling to select the Right health insurance for me and my wife. I am looking at Max Bupa Heartbeat Gold. Please suggest.
Thanks, Vamsi
Hi Manish – Amazing article.. no one addresses the issue of healthcare inflation while buying a medical cover and even 10-20 lakh cover of today will be nothing for a 30 years old when s/he may need it at an age of 70.
I am planning to take your advise as is in teh article – or do you have a more refined advise give that the article is a few years old now.
Also my mother has CGHS card – do i still need to buy medical cover for her?
Its good that she has CHGS card, but I am not sure to what level it covers ,how much , till which year etc etc .. I think you need to evaluate the gaps between having a CHGS card and having a comprehensive cover from health insurance companies !
Dear Mr. Manish,
Thanks for your nice educating blog. I am new to health insurance. my query is that is it worthwhile to take health insurance if i am getting CGHS facilities. Pl advise.
regards
manoj
I have emailed you on that !
Hi Manish,
Read a similar article at moneycontrol.com
(http://www.moneycontrol.com/news/health-insurance/how-much-health-insurance-cover-does-one-need_961375.html)
Parts of article seem to have been plagiarized from yours
Regards
Thanks for sharing that. WIll look into it
Thanks for the suggestion. The cover limit in Oriental would be 10 lakhs rite?
Also, wanted to check – there are some clause i believe that in Oriental only 26 day care treatments are covered but in others some 170 or so are covered. Is that a thing to worry about?
Thanks
Thank you for your blog on Health Insurance. Quite helpful. I am considering insuring my parents Dad age 56. Mom Age 50.
Which insurance should i go for. Currently no illness etc.
I have been seeing Max Bupa (5L each + 15L floater) does that make sense? Any other recommendation?
Having talked to people i am getting all different recommendations like Oriental, Religare, HDFC or Max Bupa. At their age (56 & 50) and if m looking for a coverage like either 5 lakhs each + 15 lakh floater or Rs. 10 lakh each. Which one would you recommend.
Thanks a ton for your time!
Generally for old age people, Oriental is a good choice . It would be cheaper and better option overall .
Manish
Confused about a strategy:
Details: Age : 28, married with no child and no loan . Family mom , dad and a wife(age 26).Planning for 1-2 kid, a home,current policy none.Income 6.5L ( me) and wife (6L)(plan to work for just 5 year more)
Plan:
1) Term policy(with accidental rider) from icici: 70L(mine)+ 50L(wife)
2)Health policy for wife , me, mom dad (specially looking for policy if covers delivery etc charges + discount on mom dad medicine)
3)Pension
Doubts:
1)Do all Term policy comes with accidental rider.?
2)Permanent disablement due to accident covered in health insurance?
3)Do i need pension policy or any other instrument will be better?
4) Any health policy that covers small things like fractures, baby delivery,otp medicine discount etc?
1. Not all , it will be seperately mentioned in most of the cases
2. NO , its again a rider
3. MF is good
4. I dont think so , healht insurance will cover hospotalization for all these things .
Sir, i am shailendra age 32, wife 27yr and 4yr son. i’m State Govt servant, protected family by government till age of retirement now 58. what do you think about separate Health insurance plan? Suggest,
If your govt cover is good enough , then you can avoid it
I got this policy in November 2012
Hi Manish,
I have policy of ICICI PRU LIFE named Health Saver for my wife and daugher also with sum assured of Rs.5 lacs and payment made through ECS mode of Rs.1500 pm (Rs.18000 pa) from salary account. When I took this policy I felt that it was good option. But now I am feeling that I made mistake because there are many other policy available in the market which also provide Rs.5 lacs sum assured with less premiums. The amount withdraw feature is disturbing me after 5 years because they need medicine bills for this purpose. How I can show the fake bills to get my investing amount? I have also cover of Rs.1 lac from my company. My earning is Rs.3 lacs pa. Now I am thinking for shifting to another policy. Guide me.
Thanks
I didnt not get your question . What is disturbing you ? When there is any health issue, you obviously have to show them original bills !
Manish,
I am more inclined towards 10 L cover assuming the health care inflation in later years and the hurdles for increasing SI later in life if diagnosed with or claim for any serious illness.
Am i right in thinking this way ?
BTW I am 34, spouse-31 and child 3.5 years. No illness till date in my family except wife underwent appendicitis and appendix removed last year.
I have family history of diabetes from my mother.
Thanks
Harish
Harish
You are 100% correct ! . Thats the way you should think , which is rare 🙂
Hello Manish,
Got your Latest book delivered. Thanks for a great guide to personal finance.
For Health insurance I have zeroed in on Religare CARE (Floater for 2 adults and 1 child) but not able to decide on sum assured. From a long term perspective
should I go for 5 L or 10 L Sum assured as 5 L in CARE equals to 10L due to recharge option and 10L equals 20L. Do one really need 20L health insurance?
Need your expert guidance.
Harish
Go for it .. Take 10 lacs cover .. Its not very high premium , you should be able to afford it , health insurance is for future .. not current .. so later in 3-4 yrs .. the amount will be perfect !
Hello Manish,
Currently i am insured by TATA AIG health policy
Product Name : WELLSURANCE-EXECUTIVE-HEALTH
Max Sum Insured : Rs.750,000.00
I would like to know if this is best policy for me ?My medical expenses in last 3 years count only to <Rs 50000 .
I am 27 years old. I am unmarried and working in a software firm .I am currently not suffering for any major illness . I drink occasionally but smoke 3-4 sticks regularly . I am bit overweight (85 Kgs).
So i would like have a best health plan which cover me adequately during any hospitalization and also take care of expensive health checks , if i undergo any in future.
Thanks,
Himanshu Sood
As a health policy, good that you have taken one . I would suggest that first ready the policy documents which you should have ideally done before taking the policy . Does all the points mentioned there fit in your criteria or not ?
Also did you disclose all these facts about your smoking and drinking at the time of taking the policy ?
I have disclosed all points to company before taking up policy.
As i have to renew this policy in JAN-2013 , so would like to know , if i can continue with this or there are other best options in market ?
premium i pay here is 6000 Rs , But i am not worried about it. i need the best out there…
Dear Mr. Chouhan
I want a health insurance plan for
myself(32 yrs)
Wife(32 yrs)
Kid(1.5 yrs- Preterm baby)
Papa(58 yrs)
Mama(57 yrs)
1. Which is best plan for me?
2. My father has some eye problems ,may need operation but not now. and my daughter regularly admitted to hospital every 3 months,just recentlt have a minor surgery in intestine….Can these diseases covered?
3. Which is best for claim settlement?
4. TPA is good or cashless is good?
5. SI-2 lakh. will it be enough?
Hi Manish,
After reading your article it was really frightening to know that huge amount of money we need to health insure for ourselves.
Few months back, I decided to upgrade my insurance for my parents other than my company insurance (senior citizen – Father). After much research noticed that for senior citizens “Bancassurance” policy given by “PNB – Oriental insurance” is much much cheaper than others. I now covered my parents for 5 L. Planning to take this cover for me too.
I have three questions in my mind:
1) Do you see any drawbacks in Bancassurance policies?
2) Is there any policy available that has option of “renew guaranteed” till 80 years of age and that too for higher coverage amount?
3) Does it advisable to have more than one health insurance coverage? Because I think most of the players requesting original bills for reimbursement . For example, my company insuarnce needs original documents and my personal insurance also needs originals … what to do in case if I am in need of money from both ?
Thanks in advance,
Raju
Raju
1. There is nothing like Bancassurance policies, its just that those policies are sold by Banks medium , thats all
2. there are many now a days like Apollo and Max Bupa !
3. Depends ., you can always do that, but there is no compulsion like that 1
Dear Manish,
Please suggest best health insurance policy for family including couple and single child of age 1yr.
Also suggest another policy to include mother (55yrs).
Thanks
You can look at Oriental Family Floater Plan and Apollo Optima Restore !
Hi Manish,
Nice article on how to go about deciding on cover. Any thoughts on plans that are somewhat lenient on pre-existing conditions?
I am skeptical about dumping money in to a scheme and only to find that pre-existing conditions aren’t covered, which is has the most probability of occurring. I do understand that this is fundamentally against the notion of insurance…but would you suggest that people should have their own savings to cover such exigencies that arent covered by health insurance.
Thanks
Shanmuga
Having your own savings is the best thing , but that will happen over time only . So always start saving some money for the ailment on your own
Also note that preexisting illnesses are covered but after 2-4 yrs only depending on the policy . Note that if the ailment is very severe then it will be permanently rejected and not included especially for some one who is into his old age !
Hi Manish
We should also discuss how many health insurance companies do good cashless/(post-hospitalization claims) approvals during/(after) hospitalization. We are talking about health insurance and how effective is to a family and but we should also think is it worth in today’s trend of health insurance brands.
Personally I faced too much issues during discharge of my wife tiwce during illness. These insurance companies will make you feel very bad at that time and since you have no other options, finally we end up in paying from our pocket.
But in my case since I took the health insurance offered by the company which I am working, I got the support of HR in getting my complete amount that I have spent for hospitalization after post-hospitalization claim. Also got an appology mail from the insurance company for the behaviour.
These insurance comapnies will wait for the time to ask some few silly questions to the hospital during discharge and 90% they will push the customer to pay from their hand. This is not only in my case and I have talked many people around and 70% this is case after getting the health cover with most of the health insurance brands.
Since in my case my employer were very supportive in getting the claims by blasting the insurance company for their invalid queries, I am not sure how we will manage these kind of issues if we take privately (apart from employer coverage) for our family. This question blocks me in getting a separate health cover apart from the company is providing me.
Just I want to share this view on healt insurance.
Thanks,
Nathan
Hey thanks for sharing these views .. really they are helpful !
Dear Mr. Mahavir,
1. Last year i got a family floater policy from Oriental for 4 lacs for my wife, child and me. My age is 31 yrs. I just wanted to know whether this policy has co-pay and loading ? Also are there any other factors which matter ? Is this a good option or there are some better options than this ?
2. Also my parents ( 63 yrs and 61 yrs) have an individual policy from Oriental for 1.5 lacs each for last 5 yrs. Can i get a family floater for then or increase the cover ?
Regards,
Hitesh
Regards,
Hitesh
Dear Hitesh,
Apologies for the delayed response.
Yes, Oriental HFF does have a copay of 10% till the sum insured of Rs. 5 Lakhs. It has a loading of maximum 20% of premium for claims, which is reasonable.
Other factors:
1. It has a room rent limit of 1% of Sum insured. Which means in your current sum insured you can go for rooms of only Rs. 4000 or less.
2. Intimation of Claim is required within 24 hours of admission or discharge.
3. Submission of claims in 7 days from discharge.
4. Since it is a PSU, it is important to have a good health insurance advisor who can handhold you during renewals, claims etc. Without a good advisor/agent, you could face response issues.
Would suggest you go for a higher sum insured of atleast 7-8 Lakhs, in the long term view. You could step it up every year.
Alternatively, if you are in good health, you could take recommendations from a good health insurance advisor and port your policy to a Private Insurer. Note, you need to plan atleast 2 months before expiry for this.
Regards,
Dear Mahavir,
Thank you for the informative reply about the family floater policy. Also would like to hear from you about a query raised above on my parents health cover .
Regards,
Hitesh
Hello Hitesh,
If there are no claims history, you can apply for increase in the cover to Rs. 5 Lakhs each at the time of renewal.
You could also apply for a floater, with a recommended sum insured of minimum – Rs. 8 Lakhs. In this case approach your Insurance Co. (in writing) atleast 2 months in advance, as it could be treated as portability by Oriental.
Regards,
Mahavir Chopra
My Dad has claimed thrice for his diabetic foot and my mom has claimed twice for knee replacement and an accident.
Now increasing the sum insured individually is there but it is beyond my budget, so thought of converting it to a family floater.
I was thinking of following two options, keeping parents claimed history in mind.
1. Family floater only for parents with sum insured of 6 lacs.
or
2. Family floater of complete family (parents +wife+kid+self) with sum insured of 8 lacs .
Also are Family floater plans available after age of 60 yrs , if my parents were under individual plan for last 5 years and their current age is 62 and 61 resp.
Regards,
Hitesh
Hello Hitesh,
Though Family Floaters are available for age above 60, with this kind of health history, it would be extremely difficult to get a family floater coverage. We would recommend you to try gradually upgrading the individual insurance cover.
Thanks for the reply.
Oriental HFF does have a copay of 10% till the sum insured of Rs. 5 Lakhs.
What does it mean.
It means that if the Sum assured is below 5 lacs, then company pays 100% money, you dont pay anything from your pocket , If its more than 5 lacs, then you pay 10% of bill and 90% is paid by company
Dear all,
What are the thoughts on whether one should consider having a separate medical insurance even if your employer provides a reasonable cover ?
Also I understand the health insurance premium does not increase with age like life insurance, considering health conditions remaining same ?
Cheers
Ameya
You should have one seperate health insurance ideally so that you have independent control over it .
Health Insurance premiums can change each year , there is no much relation with what happened to you .
Hi
Any post on best medical insurance provider or a comparative which can help decide whom to go for
Thanks
Amit
I want to ask you first that what makes you think that there can be one policy which can be “best policy” . If it was the case, wont everyone go for it !
Hai Manish Chauhan
I am planning to file my income tax return after a long time period (about 6 year). at present I am working in UAE (since December 2007).
Could you please advise me what is the last date for filing & how to file my personal returns online.
thanks & regard
Dnath
Your case can be discussed at length at http://jagoinvestor.dev.diginnovators.site/forum
Excellent, really I am discussing with almost all the people, who already have health insurance and medi claim policies. But this is so informative than all other.
Mr. Manish, personally can you advice for a good option (company), please.
I have taken health insurance from Apollo Munich – Family floater -Easy health insurance.
Their is one clause mentioning
“Daily cash for choosing shared accommodation (Rs. 500 per day, maximum Rs. 3000)”
What does it mean.
Hi all,
I think in place of taking one Single Policy one Should consider combination of Health Insurance and Top Up Super Top Up Health Insurance.
I have a family floater from apollo munich – apollo munich easy health of 3 Lacs Sum assured. I am planning to take Top Up/ Super Top UP Policy of 7-10 Lcas.
Mahavir/Manish Can Put more light on this.
If we go for this combination Premium will be much less as compared to Single Policy of Higher Sum Assured.
Hi Pradeep,
The premium difference would not be more than 20% in the 3/10 Top up, and 10% in the 5/15 Top up.
Finally, its a personal choice, which you need to evaluate with your health insurance advisor.
I personally would like to have one large policy, than a small + topup combo.
Also, if you are taking PSU Insurance policy, which may have limits on room rents, one could get stuck.
(I foresee every health insurance company (including private) putting limits on room rent, someday or the other, as this is one of the most abused part of the policy, and hence the limit makes sense. )
I have deliberated on this for last one year and gone through the details of Healthcare insurance providers, here are few of the findings in brief:
0) Protecting Your Savings: This is the fundamental aspect of healthcare, so I put it as zero point or the base point – healthcare cost can dent your savings and future saving, remember this cannot be calculated and depend in next few point. Always consider healthcare as an INVESTMENT to protect your Health and eventually life.
1) Where do you stay?
This is the most important factor in determining your cost of healthcare, In metros cost of healthcare is very high. Hospitals assume you have the insurance.
while in tier B cities in case of emergencies you are mostly referred to specialty hospitals and you need to sometime visit metros cities too. You can do a simple survey about the cost of healthcare in your city before deciding upon sum assured.
2) Your Health: Its good to get your health check up done regularly, this will help you in assessing your future health. Your family doctor may give you a better advice, meet him during lean hours and discuss on this without disclosing that you are going for a health insurance.
Check your family history, if anyone in your immediate family had or have some medical problems then there is a rare chance that you might also get that in future. Also dont hurry up, dont buy health insurance just for the heck of it or to save taxes, take you time. You need to have detailed analysis of your health before deciding on future of your health.
3) Health Insurance is not free: Most people try to maximize their cover for healthcare expenses. Refrain from this, always take a basic plan and never succumb to plans offering post, pre-hospitalization, and pity hospital expenses like ambulances, telephone, newspapers etc. If you can pay your premium then you can also pay these expenses too. Most hospitals make bills according to you insurance plan and they try to maximize their share.
Remember more you utilise your sum assured more your health insurance get expensive next year and creates further risk to cost of healthcare in another case or instance of hospitalization in same year.
4) What is Not Covered, Till when it is not Covered? Instead of focusing on what is covered, ask your agent what diseases are not covered? Also ask if there are any specific diseases are covered after some years?
This will help you plan accordingly, if you think you should be covered for specific diseases then its better to ask if there are option to pay extra and get these covered – its called loading charges. It always better to go for these by sacrificing pity things like ambulance charges, remember you will get pre post hospitalization, ambulance expenses only if your diseases or medical condition is covered at first place.
5) Health is wealth: Remember the base point “0” at the top. Thousands of people every year see their savings perish because of healthcare expenses. The point that I want to make is getting health insurance should not be an end to you healthcare worries, you need to invest in your health, stay healthy and exercise regularly. Live a stress free life, and that’s why we opt for Health Insurance. Your final objective should be to never get into a situation where you need to avail health insurance with few exceptions like maternity.
5) Do you need it? Now the final point. Yes after all this you can still decide whether you need health insurance or not? The main post already discussed this, but i would like add something to it. If you decide to opt out of Health Insurance invest some money in preventive healthcare or think about others in your family whom you can insurance like senior citizens in your immediate family or your in-laws or people whom you think you may need to spend money on in emergency. The point is to anticipate and mitigate the risk, wherever it is.
Hope this will help. Wish you a happy disease free life.
Wow! Harish…you summed it up so well. I am going to tweet this on our account…Cheers!
Mahavir Chopra
Harsh
Very nicely put all the points ,really appreciate it !
Dear harsh, thanks for posting the details in a simple yet effective manner.
Thanks
Ashal
Actually I shud be saying thanks to you guys! Just came across that site few days ago and its like a text book for me now. Thanks Again – Keep Sharing.
Good to hear that !
Hi Manish,
Shouldn’t future and the impact of rising medical expenses not be considered ?
As you age, your insurance premium would increase hence wouldn’t it be wise to pick up little more than average.
Yes Good point , thats one very valid thing to note !
Manish, what about Top cover offered by some Insurance companies? I feel taking that Policy over and above a normal Policy can give good cover in a very cost effective manner.
Yes top ups are nice way to increase your cover !
To me, One should purchase whatever cover S/he is comfortable with, in the beginning. After that every year at the time of renewal, increase the sum assured by at least 15-20% to reach a far higher figure in next 5-7 years.
Thanks
Ashal
Yes Ashal
I think that way one gets faster into action ,else he will keep on delaying his decision !
Now I hv 2 lac Floater Policy ApolloMunich…. Bt on next renewal i wil increase my SA upto 3 Lac…..
thanx ……….
I am in the same boat. But I dont know if I can increase SA at the time of renewal. Will it be a new policy altogether or increase SA of the same policy.
You can increase your SA upto the next round figure, say, if you had 2lac SA with no claim bonus after one year it increases to say 2.1 Lac. At renewal you can opt for 3Lac SA.
You can increase your SA upto the next round figure, say, if you had 2lac SA with no claim bonus after one year it increases to say 2.1 Lac. At renewal you can opt for 3Lac SA. It will not be treated as a new policy.
Very Nice Article Manish…..Keep It Up……..
Now Everybody Realised How Importance Health Insurance In our Life ?????
Yea , earliar one understands , better it is !
Hi Manish,
Excellent Topic.
I agree with Ashish, that Family History (for say Diabetes, Heart Attack, Cardiac surgeries, Hypertension etc.) plays an important role in assessing the health risk profile. A High risk profile would need a Higher coverage.
While affordability would be important, we also need to assess the cost of not having an optimum coverage.
In addition to the above, suggest one look at the following points:
1. Location: Where you live. Where do your family members live. If you live in a metro city, you need to have a sizeably high, atleast a 50% extra coverage, to a small town guy’s requirement.
2. Type of Hospital preferred: Your preference of quality. If you are one who would like to get even the smallest surgeries at a “branded” hospital, then you need a high coverage. (A higher quality hospital would attract high room rents. When the room rent is capped as a % of sum insured, ensure your sum insured covers the room rent estimated for your hospital.)
3. Risk profile of members: If you have a member with a high risk profile (Members who have high cholesterol, overweight/obese, chain smokers, critical illness) suggest you cover him in an independent individual mediclaim, instead of adding in the same floater. In case you add in the same floater, ensure you have factored this risk.
Whatever amount you arrive at, ensure that you ADD HEALTHCARE INFLATION upto the estimated living years. According to credible resources, healthcare inflation is anywhere between 15 to 25% depending on the location, and quality category.
Remember you would need the coverage more when you are 60, than today.
STEP UP TO LONG TERM OPTIMUM COVERAGE:
In case the final amount is too high and unaffordable. PLAN! You could gradually step up your cover every 1-2 years to the optimum amount. Ensure you do it before the age of 35-38 if possible.
It is increasingly becoming difficult to upgrade cover once you cross 40, or one of the members contracts a chronic/acute ailment, or even has a lifestyle disease like obesity. Options for UPGRADED are limited.
Mahavir Chopra
Thanks for additional points Mahavir !
Always a pleasure contributing to JagoInvestor 🙂
Dear Mahavir and Manish
I read your comments with interest. The keywords here are ‘Final Amount’ and ‘Upgrade’. By Final Amount we mean cover appropriate for the estimated living years.
As per Mahavir’s advice, one should get the cover of ‘Final Amount’ by the age 38 since any upgrade thereafter is difficult. But can someone really afford to do it? Considering a most conservative healthcare inflation rate of 15% , a humble 3L coverage requirement as on date for a 38 yr old would translate into a whopping Rs 130 Lakhs ‘Final Amount’ at the age of 65. 3L*(1+.15)**27 =130L
Such a policy is not at all available at present . Even if it is, someone who can afford it must be really really rich! For the others like me who can’t, the 3L policy will pay peanuts at the age of 65 (when one may need it most)! And when I go to my insurer (at 44, 48, 50 and 52) seeking inflation-approprite upgrade, they may look at my age-aquired potbelly with raised eyebrows, have a glance at my medical report, and show me the door. Ofcourse I would still have with me my 3L policy , but that won’t get me even a general ward treatment in the year 2039 (Present value of Rs 3L of year 2039 is Rs 6890/-).
The point which I make here is that in absence of any Guaranteed Upgrades, the much clamored about ‘Guaranteed Renewal’ is of no use.
The Health Insuranec companies, eargerly selling policies to younger age group (mostly), are actually giving them a false sense of security about their twilight years. No doubt, the current policy will be good for next 5 years, but not later than that. So this sense of security has a shelf life of max 5 years. After that my fate will lie in the hands of insurer-whether it finds me upgradeworthy or not.
But does the buyer think about it? or do the insurers allow them to see this broader picture? No. They are too busy collecting premiums from from a generation who has recently become aware about importance and benefits of Term Life Insurance (thank to JI and Manish) and thinks of their Family Floater policy in the same terms as Term Life Insurance. They draw the same sense of security from their Family Floater as they do from their Term Life Plan, which in fact, should not be like that.
I have asked Mahavir to reply on this .
Hi Saket,
An excellent point for discussion. Thanks for taking it up.
Here’s my take.
The really really rich do not need cover on future healthcare expenses, as much as the ones who would not be able to afford the huge costs, in the future. We have very few choices; we can afford it, plan for it, or pray 🙂
In my opinion, its people like you and me who need a systematic plan for the future. According to your calculations, the healthcare expense of 3L today, will cost an unaffordable 1.30 Cr. in 2039. That is the problem.
What is the solution?
Solution is to plan, to include risk management in your financial plan, for such exigencies.
The risk: Short term and Long term Healthcare expenditure.
The solution:
(a) Commit yourself to healthy living: Regular Exercise, Healthy nutrition, No ill-habits. This will help you avoid many huge healthcare expenses. BTW, there is no concept of age acquired pot belly. Talk to a good doctor and you will know. Read Nandish’s brilliant article: http://jagoinvestor.dev.diginnovators.site/2012/03/health-sip.html
(b) Given point (a), create Long term and Short term financial plan: for the unavoidable healthcare expenses, like hereditary ailments (Diabetes, Thyroid), age related (like knee replacement), or infectious diseases (like Malaria), or even diseases like Cancer (which still have many unknown causes. Perfectly healthy people have got cancer, in spite of no ill habits).
Now, if you cannot commit to point (a), you need more long term and short term funds to cover healthcare expenses.
How do you create such fund? Though I am no expert in Financial planning, here’s what I think, my common sense says:
1. Make a financial plan, with the help of a good financial planner. Invest into a long term healthcare contingency fund.
2. Buy Health Insurance of Rs. 3-5 Lakhs individual. This will at least take care of 10 years of healthcare expenditure. Go for a health insurance plan, which provides a good cumulative no claim bonus, rather than a no claim discount. In my opinion, you cannot avoid Health Insurance, for the short term, since any short term healthcare expenditure, without insurance, will eat into your investments for long term.
3. Take a large top-up cover which covers upto 15 Lakhs. Top-up covers are excellent for the long term healthcare expenses.
4. Upgrade Health Insurance regularly till you can. Even if you take care of your health at 60% of what is ideal, you should be able to upgrade your coverage till the age of 50-55. Only you can guarantee upgrade for your health insurance policy, not the Insurance Company. So Renewal guarantee is helpful, if you remain healthy. Speak to any financial expert, Health Insurance premium being a community driven fund, would always be lower than the same amount being invested in a fund. (Our recommendation of getting the final amount before 38 is on account of us taking a worst case scenario, of the average Indian is unhealthy.)
5. While you create a strong contingency fund in say 15 years, you can review the cost-benefit of your health insurance investments/covers. If the cost-benefit starts looking very small and insignificant, in light of the then healthcare expenses, maybe you drop it.
Comparison with Term Insurance:
**Health Insurance and Term Insurance are not comparable.**
A Health Insurance policy covers the members for the sum insured, EVERY YEAR, YEAR ON YEAR. Its a completely different financial model. The risk covered is multiple of number of years, the policy is renewed. If the sum insured is exhausted due to an illness in one year, your cover is reinstated next year, for the same sum insured. So you have a 28 X 3 Lakh Cover by paying a measly average premium of Rs. 8000 yearly for 28 years. This is the power of community contingency fund, that Insurance is based on.
On the other hand, a term life policy pays the sum insured ONLY ONCE for ONE EVENT (death) throughout your lifetime. By your calculations, if I buy a Term Insurance of Rs. 1 Cr. at the age of 35 yrs. for a term of 25 years, and I die at 69, I would get a PV of 4.61 lakhs, which are again peanuts to protect my family. (Note, the same rules of upgrade (increased age, and major ailment) of sum insured apply to term insurance, for a term of 25 years, and I don’t die in those 25 years)
Note, no one can give you false sense of security, if you are aware of what you are doing, and you have capable (read “unbiased” or “fee paid”, but not commission driven) financial planner to advise you.
Please continue contributing.
Thanks again…
Really good advice and insights on this topic. Will make a post on this soon ! ..
Manish,
If one is willing to pay 12k premium then he/she can get a floater of 25Lacs from max bupa. (Family First, Heartbeat Plan, Silver). The only major exclusion is maternity in this plan. This premium is for 2 people, however the premium will go up if you include more.
-Imon
PS: There are two floater plans from Max Bupa, family first, and family floater (am not exactly sure of the 2nd name). The second one is terribly costly though/
Hi Imon,
Max Bupa is a good plan. The other important points to note before you sign up in case of Max Bupa are:
1. Silver covers only shared accommodation rooms. Many (specially one who is looking for a 25 lac cover!) would like to use private rooms, instead of sharing with others.
2. 20% Copay after you cross 65 years of age.
The other plan from Max Bupa is called “Heartbeat”.
Hi Mahavir,
For Private Accommodation, the premium increases to 15k. But I am assuming that, 25L cover is not a symbol of status, but a need for todays medical emergencies,. A kidney transplant or an open heart, or a liver transplant will just erode away any savings of middle class families in a no time.
I feel a high medical cover is needed for a low / middle income group more than an affluent family. A family with an early income of 5L will suffer more to fund a surgery of 8L than a family with an yearly income of 15L-20L. So, I have a view that medical cover should be an inverse function of yearly income or not a function at all. All lives are equally important. Its how much you want to protect your wealth that matters in making a choice of cover.
Yes, I know there is 20% copay for above 65 yrs, but you can always use portability I guess, if you are not satisfied
I also have double checked the premium when one comes at the age of 45. It surprised me that the premium for max bupa is less than many PSU health insurance cos.
-Imon
Hello Imon,
I am completely with you, that a higher sum insured is more important for middle class or the upper middle class, than the affluent class.
The class would be better measured by savings than income. A person with an income of 6 Lakhs can have better earnings than a 12 Lakhs guy.
What I meant was Max Bupa is not the only option.
At 15K you can get better covers, with similar rate of increase in premiums at 45 and even higher.
For instance Apollo Optima Restore for Rs. 15 lakhs sum insured, with 50% NCB for 2 years (taking the cover to Rs. 30 Lakhs in 2 years, if you dont claim), comes at premium of around Rs. 14K for the same family config, with no room rent limits, and no copay ever!
Product recommendations come from detailed need and preference analysis, and hence should not be generalized.
A person with an income of 6 Lakhs can have better *savings to stand on, than a 12 Lakhs guy.
Very useful post.
I have a question – Why I have not taken health insurance plans (assuming others are in same boat) and overcoming the feeling that nothing will happen to them. – because
1. they are covered to some extent by their employer. (How much coverage an employer gives is sometimes not clear).
2. They are young and are unable to decide the age at which to take. Unlike term insurance where plan is for lo…ng term and one is clear on how much to take. In health insurance should I take at 30 or at 35 or 40 or 45?Is their an optimum age at which we can strike a balance between value return for money spent on health insurance.
I would recommend to take health insurance at the earliest may be immediate after getting a job. The reason for this is bcos life is unpredictable and our young generation are the ones who are affected with various health problems even before they reach 40. More importantly youngsters are prone to accidents as well. There may not be an ideal age but would still recommend asap.
Thanks for your suggestions
Earlier I have worked with few employers where I didnt even have a card for the Insurance. I was told that I have been covered for xx lakhs. God’s grace I didnt have to use it. Could be that cheapest insurance.
Generally all the companies give the card to you , they scan it and email to you atleast .
Bemoneyaware
1. This will really go away in coming years as companies find it hard to fund it , already they have started limiting the benefits
2. For this I suggest taking it asap
Hi Manish,
Please correct:
So in this case, the first guy will take a cover of 50% of income (6 lacs) + 100% of 2 lacs = 5 lacs in total.
Yes , if he wants to follow this model
Ideally, your option-4 (average bill) is the correct way.
Unfortunately, there is no source of data which can give you average bill for various treatments at various hospitals.
On a different note, this insurance-driven-healthcare is going to make pauper out of so many of us in the future. I do not know what is the solution though. It is not only a problem in India but around the world. Government funded healthcare (like NHS in UK) has its own problem. Insurance-driven-healthcare is screwed too. Hopefully somebody finds a solution.
Thanks for your views on this topic , do you have some solution from your side on this issue ?
Hello,
Most importantly – we should consider the family history of any disease/ailment. After this with consultation with docs the idea about the amount could be easier. These days the diseases like diabetes could be tracked by history.
Another factor is work culture and related diseases. People in most jobs have an diseases related to stress hypertension etc.
Keeping these in mind may help us in arriving at a particular number.
THats a good thought . Its very important to consider stress related matters when planning for health insurance