How much health insurance cover is enough?

I was in the hospital last week since my dad was admitted and I got to know a few people who had their relatives admitted. A lot of people did not have health insurance which was not that surprising to me. However; what was more shocking to me was for some, their bill had run into a huge amount and they did not know when their relative would be discharged and what the final dent this hospitalization is to going to cause them financially. So, this again made me wonder what is an ideal amount of insurance coverage one should take?

If you go to Niva Bupa’s health insurance webpage, they would show you INR 10 lakh coverage is good enough for 87% of hospitalizations and you increase it to INR 20 lakhs then it is good enough for 97% of hospitalizations. Even Ditto recommends INR 10 lakhs policy as a good starting point and INR 20 lakhs being sufficient.

Now coming back to the experience I had in the hospital, one gentleman whose wife was in her 50’s had been in the hospital since 2 months and had already run a bill of INR 37 lakhs. Another lady had airlifted her husband from a Tier 2 city due to a brain stroke had been in the hospital for 12 days and was told atleast another 10 days more of hospitalization, her bill was atleast going to be INR 40 to 50 lakhs if more complications did not arise. Another gentleman who had her 80 plus year mother in the ICU since over 40 days, his bill was already over INR 1 crore. When I was getting billed, I checked with the billing guys and they told me it is no longer a rarity to have a bill over INR 50 lakhs.

People are very comfortable taking a term insurance policy of INR 1 crore or INR 2 crore or even higher to ensure a comfortable life for their family in case of premature death. Now a high hospitalization cost is also going to be similarly financially draining for you and your family.

There is no calculation that can be made for the right health insurance amount like it can be done for life insurance. But life insurance is taken for the small probability of premature death and same way there is a small probability of you or your family member getting hospitalized and the bill running into a very high amount. But then that exactly is what insurance is for, to cover for that small probability of something unplanned / bad happening.

For healthy individuals in their 20s and 30s the thought is always that let us start with a small INR 5-10  lakhs cover and we will increase it later as income grows or when they reach their 40s or 50s and then there is a higher chance of hospitalization. The only problem is if any medical conditions arise in between there is a good chance your coverage would not be increased by any medical insurance company. I already have 2 Client in their early 30s who got brain strokes and are now stuck with only their company provided insurance.

Imagine you are 30 years old living in a Tier-1 city and have an INR 10 lakhs policy that now cannot be increased because of a medical condition you developed. How relevant is this amount going to be when you turn 50 or 60 or 70? Do not think of saving INR 5-10k annually and take a low insurance coverage, it really may turn out to be penny-wise pound foolish. Even if you have a lower insurance coverage, get a super top policy. If you are in your 30s and have a base policy of INR 10 lakhs, a super top up of INR 50 lakhs to 1 crore will cost you less than 10,000 annually.