When to increase health cover

Buying a top-up, switching the insurer or a critical illness add-on are recommended

If you had bought a health cover five years earlier, there is a good chance your sum assured would be Rs 2-3 lakh. With the cost of medical treatment jumping 15 to 20 per cent every year, a cover of less than Rs 5 lakh will not be sufficient in case of hospitalisation. In case of a severe disease you would easily need Rs 8-10 lakh.

Hence, it is of utmost importance to review your health insurance coverage, says Manasije Mishra, chief executive officer of Max Bupa Health Insurance. A need to upgrade insurance cover arises, typically with increase in responsibilities and liabilities. Mishra advises upgrading your cover if you are still on a plan of less than Rs 5 lakh or when responsibilities like childbirth or additional expenses like home loan come up. If you are over 35 years and still depend on your employer for health insurance, you might need to increase your health cover.

It is advised to revisit your cover every two years. Typically, health covers should be bought earlier in life because as you grow old, the risk of developing health problems increases and so does the cost of insurance. Hence, upgrade at the earliest.

To upgrade, buying a top-up is an economical option. Bajaj Allianz's Extra Care (top-up plan for existing policy holders), with a sum assured of Rs 10 lakh and deductible of Rs 3 lakh costs Rs 2,500 (age up to 40 years). On the other hand, Bajaj Allianz's individual health, a standalone policy, charges a premium of Rs 10,913 (between 26 and 40 years) for a sum assured of Rs 10 lakh.

For a young family, a family floater plan works quite well. It will cost Rs 21,826 for a Rs 10-lakh cover from Bajaj Allianz for a family of four, with the proposer aged between 26 and 40 years.

In case you are not able to increase the cover in your existing policy, you can now switch or port to another insurer. To port and upgrade a policy, you need to apply to a new insurer 45 days before your existing policy's renewal date and ask for an upgrade. You will get portability only for the existing sum assured and not for the upgraded amount. Say, your existing cover of Rs 3 lakh has to be upgraded to Rs 8 lakh; only Rs 3 lakh of the policy will continue and the remaining Rs 5 lakh will be treated as a new policy.

If affordability is an issue, buying just a critical illness plan as it covers the major pocket-draining diseases can also be considered. Bajaj Allianz's critical illness cover will cost you Rs 3,000 (age = 26 to 35 years) with a Rs 10-lakh cover. Or, a top-up on a corporate group cover could be looked at, though that's a tad expensive at Rs 6,000-7,000 annually for a Rs 5-lakh cover.

When you apply for an upgrade, you need to make a fresh application to the insurer giving declaration of your current health conditions. The insurer will evaluate the request as a new application. On approval, all kinds of waiting periods will be applied to the upgraded part, from the year of upgrade. It is advised to own a life policy if you have liabilities, especially a home loan. And, given that a pure life cover isn't very expensive, you could consider buying a new policy. Ideally, one should own a life cover that is five times the annual income. Bajaj Allianz's iSecure costs a 30-year old Rs 3,723 a year for a Rs 25 lakh plan for 20 years.

"A critical illness add-on can be considered when upgrading life insurance," Deepak Yohannan of MyInsuranceclub.com had earlier told Business Standard.

This column has cited only Bajaj Allianz's policies for the sake of consistency and relative comparison between various options from the same insurer