Does The Sum Insured Come With An Expiry Date?
Health Insurance is refillable - on a yearly basis. If you have chosen a sum insured of 10 lakhs, you are covered up to Rs 10 lakhs per year. Renewing your policy after every policy year restores your entire sum insured. Renewal of the coverage is an important highlight of a health insurance policy.
When you essentially look at a Rs. 10 Lakhs cover - it is a yearly cover, which if used replenishes next year. Hence, if you have a Rs. 10 Lakh cover for 30 years, you technically can spend close to 30 X 10 Lakhs = 3 Crores in a span of 30 years.
This should specifically be noted, when you are contemplating accumulation of your personal fund instead of investing in a health insurance policy.
Manav has a health insurance policy with Rs 5 Lakh sum insured. A few years after paying the premiums, he gets hospitalised for surgery, and the entire sum insured is spent in one year. In the event he requires further hospitalisation during the same year, he will need to pay for the expenses out of his own pocket.
He needs to be hospitalised again, in the next year. If he renews his policy, he will receive the amount of Rs 5 lakhs again to help him with hospitalisation expenses. As long as he keeps renewing his health insurance policy and paying the premiums in a timely manner, he will receive the sum insured every year.
So, How Much Sum Insured Do You Need?
Health Insurance is a product that you must buy before you hit a disease or old age. The coverage should be for the time when you will need it the most. Hence, you must buy health insurance with a sum insured that is relevant before you hit your old age.
For instance, if you are currently 30 year old, and the average hospitalisation bill today for an individual you think is say Rs. 3 Lakhs, then you should estimate how much would be required when you hit, say, 60 years of age. You can calculate this estimated sum insured by applying compounding inflation of 6-8% over 30 years.
So, your sum insured requirement depends on -
Your current age
The hospital bill you estimate
The approximate inflation (take around 6-8% over 10+ years)e