In the last few decades, medical advancements have increased the life expectancy rate. However, poor lifestyle choices, stressful life and changing climatic conditions have deteriorated the quality of health and made us more vulnerable to hospitalization.
Moreover, taking into consideration the inflation rate of the healthcare cost, it becomes imperative to have adequate health insurance cover.
Let us look at certain factors which will help you to choose the right health insurance cover:
Affordability – Ability to Pay
When you plan to buy a health insurance cover, affordability is the most important factor which decides your coverage & the premium. Everyone cannot pay a premium for a sum insured of 15 to 20 lakhs, as it will be a huge amount. However, an individual can bear a certain percentage of his annual income which fits within his expenses.
Let’s understand with an example:
Mr. Sharma earns around Rs 5 lakhs annually. If we consider the affordable premium amount to be 3% of his annual income, he will be able to pay a premium of Rs 15,000. Whereas, if someone is earning around Rs 10 lakhs annually, he will be able to pay a premium of Rs 30,000.
It is important to check the affordability and the capacity to bear the premium before choosing the right health insurance plan.
The study reveals that the estimated cost of medical inflation will grow at 15% per annum. So if a surgery which now costs Rs 1 lakh would be much more expensive in the next 5 years. It is vital to plan beforehand and opt for a cover which should not prove inadequate for your future needs.
Percentage of Income
An ideal health insurance cover should be 100% of your annual income. While opting for a better health cover you should consider certain factors like inflation, the rising cost of treatment, unhealthy habits, etc. You may follow a simple rule that says:
Health Cover = 100% of your Annual Income. (This can be considered for those individuals who do not have any Health policy)
For example: If you earn Rs 15 lakhs annually, then you should have a health insurance cover of Rs 15 lakhs.
A cover lesser than 50% of your annual income is considered as low health cover. However, this is not applicable to all, if someone's annual income is on the higher side, say above Rs 30 lakhs or Rs 40 lakhs, then 50% or lesser coverage is sufficient.
Constant + Function (Past Expenses)
Another factor which we also need to keep in mind is the amount spent for the medical expenses and hospital bills. Let’s say if you have spent Rs 2 lakhs in the last 3 yrs on medical expenses & hospital bills, then you should also add the Rs 2 lakhs to your health insurance cover.
In this case, Mr. Sharma’s health cover will be:
100% of the annual income (Rs 5 lakhs) + 100% of Rs 2 lakhs (hospital bills for the last 3 yrs) = Rs 7 lakhs.
In short, depending on the situation one needs to calculate their health care need.
There is no thumb rule while choosing the right health insurance plan. Every person is different and hence their healthcare needs are different. It is important to understand your requirements with the help of an expert to make a better decision.