Sum Insured in Health Insurance: Meaning & Importance

What is Sum Insured in Health Insurance?

Sum insured refers to the maximum amount that the policyholder can claim under a health insurance policy in a policy year. It is the maximum amount that the insurance company pays to the policyholder in a policy year in case one or more claims are filed due to a medical emergency or for the treatment of an illness.

When a claim is filed, the insurance company assess the coverage available under the policy and pays the claim amount up to the sum insured limit. If the claim amount is more than the sum insured, then the additional amount is paid by the insured. The insurance companies do not pay for medical expenses beyond the sum insured limit.

For example, suppose you have a health insurance policy with a sum insured of Rs 10 lakh. During the policy year, you raised the first claim for Rs 7 lakh. Since the claim amount is less than Rs 10 lakh, the insurer will pay the entire claim amount. A couple of months later, you file another claim for Rs 4 lakh. In this case, the insurer will pay only Rs 3 lakh to you as your sum insured limit will be exhausted. Hence, you will have to pay the remaining amount of Rs 1 lakh on your own.

Importance of Choosing the Right Sum Insured in Health Insurance

Here are some of the reasons why choosing the right sum insured for your health insurance policy is important:

• Ensure Sufficient Coverage – By choosing the right sum insured, you ensure sufficient medical coverage for yourself. If you opt for a lower sum insured, you will have to pay the additional amount during a medical emergency from your own pocket. But if you opt for a higher sum insured than required, then you will unnecessarily pay expensive premiums.
• Protect Your Savings – A health insurance policy with the right sum insured helps you to keep your savings intact. When you face a medical emergency, your savings will remain untouched as your sum insured will be sufficient to cover your medical expenses.
• Lead a Stress-free Life – If you have a health policy with sufficient coverage, you wouldn’t have to worry about arranging money in case of a medical emergency. Hence, you would not have any financial burden and would be able to lead a stress-free life.

Things to Keep in Mind While Choosing the Right Sum Insured

Take a look at the factors that you must keep in mind while choosing the right sum insured for your health insurance policy:

• Age – You must choose the sum insured of your health policy based on your age. The higher is your age, the higher should be the sum insured. This is because the chances of getting sick and developing a health condition increase as the age increases. However, a higher sum insured will attract a higher premium.
• Current Health Condition – Your current health condition should also be considered while choosing your policy sum insured. If you suffer from any pre-existing diseases like diabetes, then you must opt for a higher sum insured. This is important because you will be required to make regular trips to the doctor and hence, your medical expenses will be more.
• Plan Type – The type of health plan you choose to buy should also be determined while deciding the sum insured. In case you are buying an individual plan to cover yourself, then a lower sum insured will do. But if you are opting for a family floater health plan, then you may need a higher sum insured as the coverage should be enough for the whole family.
• Lifestyle – The lifestyle you lead should also be considered while determining your sum insured. If you lead a fast-paced stressful life, then you are at a greater risk of developing diseases like obesity, hypertension, etc. In that case, opting for a higher sum insured is recommended.
• City of Residence – Your city of residence should also be considered while choosing your sum insured. If you live in a metropolitan city, you must opt for a higher sum insured as healthcare facilities are expensive in such cities. But if you live in a smaller city, you can choose a health insurance plan with a lower sum insured.

When Can You Increase the Sum Insured of Your Health Insurance Policy?

You can increase the sum insured of your health insurance policy in the following circumstances:

• At the Time of Policy Renewal – When your health policy is due for renewal, you can choose to increase your sum insured. Depending on the increase in your sum insured, your premium amount will also increase.
• Through Cumulative Bonus – The sum insured of your policy can also be increased through the cumulative bonus. This bonus will be granted to you after every claim-free year but without any hike in the premium amount.

In a Nutshell

Sum insured is one of the most important components of health insurance. It helps you to opt for sufficient medical coverage that ultimately safeguards your lifelong savings. However, the higher is the sum insured, the higher will be your premium amount. Hence, you must keep the above-mentioned factors in mind while determining the right sum insured for your policy.