Having health insurance coverage has become a useful weapon in the fight against growing medical expenditures, Covid-19, and critical illnesses.

A health insurance policy covers the insured member’s medical expenses for the duration of the policy year. These medical expenses include hospitalisation fees, cost of day-care treatment, domiciliary hospitalisation, pre-and post-hospitalization, and so on, depending on the type of health insurance chosen. However, the alarming situation that flared last year as a result of the epidemic caused many consumers to rush into purchasing their health insurance without thoroughly researching the plans they purchased. To some extent, this was fair because the objective at the time was to get coverage as fast as possible.

Now, over a year into the pandemic, most of those policies would be up for renewal. Further, Covid-19’s impacts might have reduced this year compared to the last one, but that shouldn’t be the reason to loosen your guard. This uncertainty caused by Covid over these two years and the ever-increasing medical inflation has forced more people to rethink their priorities and choose plans that cover most blind spots. Thus, while renewing your policy this year the first and foremost factor that one must consider is investing in a high sum insured plan.

Need for high sum insured plans

1. Medical inflation

Higher sum insured health policies are also considered essential, as the cost of hospitalisation has risen by nearly 150 percent for an urban citizen in the last decade, which is quite concerning. Health insurance with a bigger sum insured is the only way to combat such high medical inflation rates. Further, a sum insured of Rs 7-10 lakh may not be enough in the event of a pandemics like Covid-19, where we saw multiple hospitalizations taking place in a single family.

Taking this into consideration, many people are starting to switch to higher-sum-insured plans. According to the current data, this has resulted in a nearly 100 percent increase in the overall sum insured, from roughly Rs 11.4 lakh in FY20 to over Rs 22 lakh in FY21. There has been a tremendous increase in the number of requests for porting existing plans to ones with improved coverage by roughly 150 percent. People are now investing in plans with a sum insured of over Rs 25 lakhs, and up to Rs 1 crore as well.

2. Sub-limits

Another important factor why people must invest in high sum insured plans is because these plans don’t have clauses such as sub-limits of co-payments in their policy. In order to offer insurance at lower prices, several insurance firms apply limits. It is a predefined restriction on the total claim amount set by the insurer for certain conditions or medical procedures.

Sub-limits are commonly placed on doctor consultation fees, hospital room rent, ambulance fees, and various pre-planned medical operations such as plastic surgery, cataract surgery, knee ligament surgery, and a few others. The sub-limit clause differs from claim to claim. The sub-limit may be a percentage of the total sum insured in some situations, while it may be up to a particular amount stated by the insurer in others. In general, the cap on hospital room rent are normally 2 per cent and 1 per cent of the entire sum assured.

3. Co-payment

A co-payment clause requires the policyholder to pay a set percentage of the claim amount while the insurer pays the rest. Suppose, you buy a health cover with Rs 10 lakh sum insured and 10 percent co-pay. Now, if you file a claim for Rs 3 lakhs during your hospitalisation, you will be responsible for 10 percent of the total claim amount, i.e. Rs 30,000, while the insurance would cover the remaining 90 per cent, i.e. Rs 2,70,000.

The author is Head-Health Insurance at Policybazaar.com. Views expressed are that of the author.