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Why Should you know About Sum Insured in Health Insurance?

Health insurance policies play an unprecedented role in securing your savings and life as they come up with a chunk of benefits. Don’t purchase a health insurance policy without knowing its offerings. One of the most talked-about benefits offered by a health insurance policy is the sum insured.

What is the Sum Insured?

The sum insured is an important term in the field of the health insurance industry. Sum insured is the amount that an insured gets from the insurer in the case of an unanticipated situation like any medical emergency. This amount offers coverage for all the expenses during a healthcare emergency or planned hospitalization. If your hospital bills surpass the sum insured, then you need to pay the remaining amount from your pocket.

Let’s understand it with an example. You purchased a health insurance policy with the basic sum insured of Rs. 2 lakh. In a financial year, you need to be hospitalized twice for your treatment. In the first incident, your hospital expenses were Rs. 70,000. For the second time, your bill amount was Rs. 1.5 lakh. So, your total hospital expenditure in a year is Rs. 2.2 lakh. Your insurance company will pay Rs. 2 lakh, but the remaining Rs. 20000 you need to clear from your side. That’s why it is always advisable to purchase a higher sum insured policy to stay protected against various ailments and medical inflation.

A health crisis can grasp anyone at any time without notice. If all your family members need to get admitted to hospitals simultaneously under a health crisis like the COVID-19, then a sum insured of Rs 7-10 lakh will not help you to overcome the situation. Moreover, you can’t ignore medical inflation that is thriving hurriedly with each passing year.

Understanding all the scenarios, now people are desperately looking for a higher sum insured to increase their coverage. A plethora of statistics has also claimed that there has been a sudden rise in the overall sum insured by almost 100 percent, from around Rs 11.4 lakh in FY20 to over Rs 22 lakh in FY21. So now, policy buyers are discarding a sum insured of Rs 3-5 lakh; rather, they are opting for a higher sum insured of Rs 25 lakh, and even choosing Rs 1 Crore sum insured policy to secure themselves.

Sum insured also depends on an individual’s residential city. If you are staying in Class A cities, the cover amount should be at least Rs. 10 lakh given the high cost of living in metro cities. The premium will also increase gradually.

Young customers, who are scouting for health insurance plans, should purchase an optimum health cover. This will help them to get their much-needed coverage due to illness without enhancing their premium costs. Moreover, young people can enjoy the benefits of no-claim bonuses or cumulative bonuses as they are less susceptible to any disease. This means their sum insured can increase every year by up to 150%.

How to Select the Right Sum Insured?

In this fast-paced world, knowing what is the sum insured in health insurance will not help you sustain. You also need to understand how to select the right sum insured to fulfill your healthcare requirements and needs. Because the right sum insured will only protect you and your family against various diseases and also secure your savings.

  • Age

Once you are growing older, you will become more vulnerable to various diseases. Therefore, if you purchase a health insurance policy in your 40s, you certainly need a higher sum insured than a wholesome individual in his/her 20s or 30s. 

  • Present health scenario

Certain health conditions like diabetes, cholesterol, etc., are very common among families. If your ancestors had these conditions, then you might suffer from these diseases in the future. Therefore, enhance your protection by choosing a higher sum insured.

  • Current Life Stage

If you are planning to start a family or get married, then the number of dependents will increase. And this will automatically deplete your savings. On the other hand, a higher sum insured may add an extra layer of protection to your savings.

  • Lifestyle

High-profile job life increased stress levels, and unhealthy eating habits could certainly impact your health in the future. So, you should equip yourself by selecting a high sum insured policy.

Higher Sum Insured Health Policy Benefits

  • A higher sum insured policy offers adequate coverage in the case of a healthcare exigency
  • It protects and safeguards your hard-earned money
  • A higher sum insured is beneficial in the case of a family floater policy. Since the family members share the sum insured among them hence, you may not face any financial crisis during multiple claims. Thus, a higher sum insured ensures that your loved ones are adequately covered.

Sum assured in life insurance

Sum assured is the pre-decided amount that an insurer will offer to the insured policyholder when the insured event takes place.

Sum insured Vs Sum Assured

  • Sum insured only compensates for the cost of loss or damage (based on the indemnity principle). In sum assured, the beneficiary gets a fixed amount from the insurer in case of the policyholder’s death during the policy term.
  • Sum insured offers only reimbursement; this doesn’t come with any monetary benefit. But for sum assured, the beneficiary or the insured policyholder is eligible for monetary benefits.
  • Sum insured is relevant to non-life insurance products like health insurance. Sum assured is valid for life insurance and return policies.

The healthcare cost is increasing at a faster speed in our country; thus, a medical emergency could quickly drain out all your savings. By purchasing a health insurance plan, you can smartly tackle this medical inflation. At the same time, it is equally important to select the right sum insured in health insurance to stay protected against any unforeseen situation.

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