How Much Health Insurance is Adequate for a family?
The rapidly rising healthcare costs in the country have made investing in a health insurance plan quite necessary. Lifestyle diseases such as diabetes, hypertension, and heart ailments are gradually becoming prevalent among the people living in towns and cities. With the rapid advancement in the field of medical sciences, very sophisticated health care technologies are being used for the treatment of ailments. These technologies are modern and highly expensive too. The minimum expenses incurred in the hospitalisation of a serious disease can cost you around INR 5 lakh. This is enough to cause a big hole in your pocket and deplete your savings. So, health insurance is very important; however, even more, important is to know how much health insurance is necessary or adequate for you.
If you approach financial advisors then you might get suggestions on the purchase of health insurance of around INR 3 lakh, some might suggest for purchasing medical insurance of around INR 5 lakh or even higher i.e. INR 10 lakh. It is not feasible to generalise on the actual amount of health cover an individual or a family might require. The need might be for INR 3 lakh, INR 5 lakh, or even more. So, there can be certain factors that would help you at least determine what can be your real needs related to health insurance.
- Your affordability
This is the most important consideration while thinking about how much mediclaim to purchase. Your affordability would depend on your income. You might get the advice of purchasing a health insurance policy of INR 10 lakh, but your annual income might not be adequate to purchase such a high cover. You would have to settle down with a lower coverage health insurance plan. There are some other important financial objectives such as life insurance, planning for retirement, children’s education, etc. which are important. There is a need to have a balanced approach towards these objectives along with your health insurance as health is most important. Your financial planning would help you in such a scenario. You should be prudent, consider your past experiences, and take a good decision about the coverage needed.
- Your location
The coverage provided by your medical insurance is highly dependent on the place you are living in. For example, if you live in a town that is either small or mid-sized then in case of a major illness the hospitalisation expenses can be in between INR 2 lakh to INR 3 lakh. However, if you are residing in a big city then hospitalisation expenses can be within the range of INR 4 lakh to INR 5 lakh. Your cover of medical insurance must be chosen based on the expenses which would be incurred in case of major illnesses.
- Your family
When you have a family and also dependents, then it is obvious for your health insurance needs to increase. It is necessary for you to ensure that your family members are covered under health insurance. In case, you are newly married or you have parents then they must have health insurance cover. However, this does not mean that you would have to purchase different health insurance plans for each member. You should opt for purchasing a Family floater health insurance plan.
In a family floater health insurance plan, your entire family can be covered under the coverage amount which is shared. The major benefit of the family floater plan is that the premium which is to be paid for each member would be low as compared to the premium in case of insurance plans purchased for each family member. However, there is no denial of the fact that your expenses related to healthcare would increase once you have a family and dependents. So, you would have to increase your health insurance cover. The amount of increase would, however, depend on your situation. For example, if you are expecting a baby then you must add up the maternity cost and childcare expenses to your cover. If there are pre-existing conditions for your parents then the cost related to that must be included in your cover.
- Your group health insurance policy
You might be having a Group health insurance policy provided by your employers and it is obvious for you to deny the purchase of any other health insurance plan. However, you need to think and analyse whether the cover which is provided by your Group health insurance policy is adequate or not? Usually, many employers offer Group health insurance cover of INR 2 lakh. You need to consider if this cover is adequate for you or not. In case if you are living in a metropolitan city, then the hospitalisation expenses would be quite high and this cover may not be adequate. You must check out the illnesses your Group health insurance plan is covering. Also, you must find out if the company's Group health insurance plan would provide cover for your spouse, children, and parents. In case, you find out that the coverage provided by the Group health insurance policy is not adequate, you should purchase your additional health insurance plan.
- Your past experience
Your experience in the past regarding the health care costs associated with you and your family is the biggest factor that would help you to decide on the medical insurance cover that would be required in the current times. Suppose, you have been spending around INR 4 lakh on the health insurance cover of your family for the last 3-4 years then you must purchase a health insurance cover of at least INR 4 lakh this year too. You should not take a risk by lowering the health insurance cover as this would not reduce the health care cost associated with your family members.
Can there be the right coverage amount that you can look at?
In reality, there cannot be any such amount which is the right coverage amount for you. It would definitely vary from one person to another. However, there are two main broadly accepted rules on this.
- You must ensure that your health insurance cover must be at least 50% of your income in a year.
- The cover provided by your health insurance policy must be able to cover at least a major heart surgery in a hospital that is of your choice.
Usually, financial advisors would suggest you to purchase a health insurance cover of at least INR 5 lakh for comprehensive coverage. Your basic insurance plan may not be covering other additional expenses such as extensive nursing care, rehabilitation, etc. You can enhance the coverage by adding riders and top-up plans to your base insurance plan and increase the cover.
So, with these factors, you can have an idea of how to estimate adequate health insurance coverage for yourself and your family. An experienced financial advisor can guide you on this. A health insurance plan with adequate cover would help you to remain stress-free and to focus on other financial goals.