Why You Should Review Your Health Insurance Cover

How much cover is sufficient?

The answer to this question is highly personal for obvious reasons. It depends on your age, location, family mix, employment status, budget, hospitals you may go to, health condition, and many other factors. This guide puts the base cover first, explains how to right-size it for your city and family, and uses a top-up as a secondary buffer only when needed.

Remember this: A ₹10 lakh hospital bill today could cost approximately ₹19 lakh to ₹19.5 lakh in 5 years, with 12% medical inflation. The same cost could rise significantly over 10 years at a 7% inflation rate.

A Simple Calculation

1. Fix your hospital level

   Pick the hospitals you’re likely to use. This could be a private room in a metro or a quality Tier II facility. Your sum insured should match that choice, not the cheapest option you’d avoid in reality. You may live in a Tier-III city but go to the nearest metro for expert medical treatment. Your policy should cover this aspect.

   
   

2. Estimate one major claim at today’s prices

   Use hospital package rates or recent bills from your city for events like cardiac procedures or joint replacements. In a good hospital located in a metro city like Mumbai, with a private AC room, this cost could range between ₹5 to ₹10 lakhs.

   
   

3. Inflate for 10–15 years

   Future cost ≈ Today’s cost × (1 + inflation rate)^years

   Use 6–8% inflation if you prefer a conservative CPI-Health band (RBI/MOSPI).

   Consider 11–14% if you want to reflect private medical trends (MMB 2024).

   
   

   Set your base to cover most of that future cost

   Target your base cover to handle at least 70–100% of one big claim at your chosen hospital level.

   
   

4. Add a top-up/super top-up as secondary (Optional)

   If your base policy does not give you enough cover and also does not cover the inflation factor, layer a top-up policy. Keep the deductible aligned with or slightly below your base. Remember: top-ups come into play only after the deductible is crossed.

   
   

Why "Base Cover" Matters

• Portability: Changing your health insurance company and accrued benefits like bonuses are primarily linked to your base policy. If you decide to port to another company in the future, the reference point is always the base and not top-up policies. If you develop any medical situation with a lower base cover, other insurance companies may not give you a porting option. Even your existing insurer may not increase your 'base cover' then.

  
  

• Cashless ease when it matters: Base policies typically settle directly with the hospital. There’s no deductible to cross.

  
  

• Avoid complications: Handling multiple policies like base cover and top-up cover can be cumbersome. Different features and multiple claims add extra work to track during painful situations like hospitalization.

  
  

City-wise Recommended Covers (Illustrative)

• Metros (Mumbai/Pune/Delhi/Bengaluru/Hyderabad/Kolkata etc.):

- Base: ₹10–20 lakh

- Secondary buffer: Top-up/Super top-up ₹25–50 lakh (optional)

• Tier II (Coimbatore/Indore/Lucknow etc.):

- Base: ₹7–10 lakh

- Secondary buffer: Top-up/Super top-up ₹20–40 lakh (optional)

• Tier III/smaller towns:

- Base: ₹5–10 lakh

- Secondary buffer: Top-up/Super top-up ₹15–30 lakh (optional)

Life-stage Recommended Covers (Illustrative)

• Single, 28: Base ₹7–10L, Optional top-up ₹25–30L (₹5L deductible)

• Couple 35 + 1 Child 5: Base ₹12–20L, Optional top-up ₹30–50L (₹5L deductible)

• Parents 60+: Separate senior policies each with robust base (₹10–15L). Focus on network reach.

• HNI family: Base: ₹20–25L, Optional top-up ₹50L–₹1Cr for catastrophic events.

  
  

Still Have a ₹2–5 Lakh Policy?

• Accept that it’s outdated for most private hospitals today. Room charges alone can trigger proportionate deductions.

  
  

• Prioritize upgrading the base. Options include sum insured enhancement or portability at renewal. Insurers may apply waiting periods on the increased portion—plan accordingly.

  
  

• If your budget is tight, upgrade the base first. Use a top-up sparingly as a temporary buffer while you work towards a stronger base.

  
  

Premium and Budgeting Tips

• Consider allocating around 1–2% of your annual income for core health premiums. HNIs may allocate more for flexibility. This is guidance, not a thumb rule.

  
  

• If premiums feel heavy, trim non-essential add-ons or increase the top-up deductible—avoid cutting your base sum insured.

  
  

• Treat employer cover as a bonus. Jobs change; caps and waiting periods do too.

  
  

FAQs and Myth-busters

1. I have a ₹5 lakh family floater - am I fine?

   For most private hospitals, especially in metros, that’s outdated. Prioritize increasing the base; use a top-up only after the base is comfortable.

   
   

2. Can I keep a small base and rely on a big top-up?

   This is risky in real life. Top-ups trigger only after the deductible. Mid-size claims may leave you out-of-pocket. Maximize the base first.

   
   

3. Will upgrading the base reset waiting periods?

   Insurers may apply waiting periods on the enhanced portion or specific conditions. Read policy terms and plan the timing with your advisor.

   
   

Conclusion

There isn’t a single “right” number for everyone. However, there is a solid order of priority: maximize your base cover to handle one major claim at your preferred hospital. Then, consider a top-up as secondary protection if base + inflation protection is not sufficient. Review as life changes and costs evolve. A planned, personalized approach reduces guesswork and bill shock.

If you’d like a second set of eyes for your city, family, and hospital preferences, Y2J Moneytree can help you evaluate fit.

Happy Investing!