Do you have enough health cover?

You need to revise the sum insured periodically to keep pace with medical inflation

If you own a personal health insurance cover, you need to check from time to time whether its sum insured is adequate. When you do so, you may well discover that you are grossly under-insured for your current needs. A recent survey by Apollo Munich Health Insurance, which covered 700,000 people across 82 cities, found that 51 per cent of those who own a cover are under-insured. Another key finding of the survey was that 63 per cent of those in the above-45 age bracket - people who are more likely to need health insurance - are under-insured.

One cause for under-insurance is lack of awareness. “People may have bought a cover worth Rs 2-3 lakh many years ago. It may have been adequate then but will not suffice now, more so if they lived in a smaller city then but have now moved to a metro, where medical expenses tend to be higher,” says Antony Jacob, chief executive officer, Apollo Munich Health Insurance.

The insured also need to take into account the high rate of medical inflation in India. “Factor in a medical inflation rate of 15-20 per cent when deciding on your cover,” says Kapil Mehta, co-founder and managing director, Secure Now Insurance Broker.

Some people mistakenly assume that their corporate (group) cover will suffice. “All corporate covers have limits, based on the seniority of the employee, tenure of service, and so on,” says Jacob. Understand the limitations of your corporate cover. Moreover, you could lose your job, get laid off, fall ill when between jobs, or decide to turn entrepreneur in your forties. If you try to buy a personal cover at a late age, say after 45, you may find it difficult to get one. Hence, supplement a corporate cover with a personal cover at the earliest.

Most distributors go by the rule of the thumb when deciding on the amount of cover you need. “One criterion we use is affordability. You should buy a cover equal to one year’s gross income,” says Rahul Mohata, chief operating officer, Ideal Insurance Brokers. Mehta suggests that you should estimate how much it will cost to get treated for a serious ailment in your city and in a hospital of your choice. Buy cover equal to double that amount to take care of your needs for the next five years.

So, if a bypass surgery costs Rs 7-8 lakh at a Delhi hospital, those living there should have a cover worth Rs 14-16 lakh. Based on data Apollo Munich Health Insurance has gathered over the years, it has suggested the sum insured you should have at different life stages, depending on the type of city you live in (see table). If your pocket allows, buy at least that much cover.

If you wish to hike your cover, don’t increase the sum insured on your base policy. A more cost-effective option is to buy a top-up cover. Exercise caution when buying one, however. Buy a policy that gets triggered the moment your hospital bills during a year (over more than one bout of hospitalisation) exceed the sum insured on the base cover. Avoid policies that reimburse you only if each bill exceeds the sum insured on the base cover. Mohata also suggests that policies with restrictions on the number of claims you can make in a year should be avoided.