How much health insurance cover should you ideally take

Health Insurance takes care of the financial backup needed in case of medical issues and emergencies. It helps to save money on various expenses incurred from hospitalization and other Out Patient Department expenses. However, there are various things that one should keep in mind before purchasing a health insurance cover.

Factors to be Considered while deciding on the quantum of Health Insurance Cover are :

Family History – The insurer will look at the history of health problems and diseases contracted by the family members in order to evaluate the risk of the insured contracting the same. Individuals falling under the high-risk category should get a comprehensive health insurance policy.

Age of the Insured – Age of the person affects the health insurance coverage. Individuals who have bought health insurance policies at a young age avail a discount on premium. However, individuals over 45 years of age would have to pay more premium amount for health insurance coverage since the health risks involved are higher.

Here is a table of premium according to Sum Insured and age of the policyholders for both individual and floater plans offered by Star Health Insurance.

The area/city where the Insured resides – Treatment costs vary according to the area or city of residence of the Insured person.

The treatment costs for commonly  found diseases in Bangalore are mentioned below :

Here, the Safe Amount specifies the maximum possible amount which should cover all the expenses with regard to a disease, while the Basic amount covers the minimum or basic expenses .

The above table has been constructed from figures derived from the below website : http://www.bigdecisions.com/health-insurance/health-insurance-calculator

This list of figures of frequently occurring ailments and their costs in Bangalore as derived from the above mentioned website is in turn sourced from the extensive database on internet.

Current Available Insurance – This helps to arrive at Additional cover needed to fully protect the insured and his/her family.

Number of Children and dependant adults for whom cover is needed and their age – The number of family members and their age is crucial to identifying a policy. For instance, a young  family can do with a basic cover of Rs 5 lakh, while a family with older members should opt for a larger floater cover. Family floater premiums are linked to the age of the oldest member. If the parents are over 50, it would be sensible to get a separate cover for them, and not include them in the floater plan.

Type of Hospital – Based on the grade of the hospital, different rates are charged for the same treatment. Thus, the amount of health insurance cover that is needed is determined by calculating the expenses that might be incurred from the hospital of the insured person’s choice.

Marital status of the Insured – This plays an important role, since if the marital status is married it means more number of people are to be insured.

Alternative Health Insurance Cover in addition to the one offered by Employer 

Most companies offer health insurance cover to its employees. However, this will be in effect only until the last date of employment with the company. Availing a health insurance policy in addition to employer health insurance would help one to be prepared for any medical emergencies after retirement. More so this would help in the face of any unforeseen event such as lay off, unemployment, job change, etc  which will cause the health insurance policy provided by the employer to stop.

Types of Health insurance cover for you and your family

A Critical Illness plan is helpful when the policy holder is diagnosed with a serious ailment.  This is because a regular indemnity policy will not suffice in case of such diseases. However critical illness policies come at higher costs, and cover only specific ailments.

 A Family floater Health Insurance Policy can be taken to include all the family members against multiple diseases under a single cover. Family floater Mediclaim offers a fixed assured amount for the family members that can be availed either by one or as a lump sum for treatment of one person. Family benefit means that the sum , as specified for the proposer under the policy, is available for any one  or all members of his /her  family for one or more claims during the tenure of the policy. Family mediclaim plans come at a marginally incremental expense. The amount of family health insurance in this case should be determined by the family’s needs , number of people, their age etc.

To note, the premium does not rise in the same proportion as the cover. For example if a Rs 5 lakh family floater cover is for Rs 12000 a year, a Rs 10 lakh cover will not cost Rs 24,000. It will be about Rs 18,000 a year.

Should you go for high health insurance

Renewal premiums will be higher after factoring in inflation and healthcare costs. The premium of every policy increases after 1-2 years because of inflation and rising healthcare costs and have to be factored into the cost of the premium.Thus, if an individual can afford the premium, he or she should go for the maximum health cover.

Building a separate corpus of Rs 5 lakhs for medical emergencies can be a way out for people who cannot afford the premium for high covers.

The Tax benefit  angle

Section 80D: Tax Deduction for Medical Insurance in FY 2015-16

Basic deduction: Mediclaim premium paid for Self, Spouse or dependent children.

Maximum deduction Rs 15,000. In case if any of the persons specified above is a senior citizen (i.e. 65 years) and Mediclaim Insurance premium is paid for such senior citizen, deduction amount is enhanced to Rs. 20,000.

We hope we have answered your queries on why planning for retirement at an early stage is beneficial for you. If you still have any unanswered questions or need help, feel free to contact us here.

We would be glad to help you with your planning and investment related decisions.

Debalina Roy Chowdhury

Para Planner Dilzer Consultants

Sources

http://www.bigdecisions.com/health-insurance/health-insurance-calculator

http://taxguru.in/income-tax/all-about-deduction-us-80d-for-mediclaim-premium-available-to-individual-huf-and-senior-citizens.html#sthash.z8dthtfG.dpuf

http://economictimes.indiatimes.com/articleshow/16934886.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

2 Sep 2016