Doing the math: Choose the right healthcare cover

Published in livemint on 22 Jun 2019.

Even as overall inflation continues to remain below 4%, the price rise in healthcare has seen doubledigit growth.

While you can’t control the cost of healthcare, here’s the good news: You can insure yourself against illness and protect your savings from depleting by spending on a medical emergency.

But before you take a decision, there are multiple things you must consider: How can you choose the right insurance cover? How much cover is enough? Here is how you can arrive at the right amount of health cover to opt for.

According to experts, there are three things to consider: healthcare inflation, your family medical history and your salary.

“Firstly, look at healthcare inflation, typically if you expect a hospitalisation bill of ₹5 lakh. Assuming 5% inflation for 10 to 12 years, it will cost you ₹13-15 lakh,” said Mahavir Chopra, director, life insurance and strategic initiatives, Coverfox.

Another way to determine the healthcare cover is to consider the kind of treatment you are likely to seek. You could do this by considering the cost of a certain procedure in your city and the facilities available.
“You can look at the cost of an expensive procedure in your city and the kind of hospital you would go to. For instance, cancer treatment at a regular hospital in Delhi will cost you ₹10 lakh. Look at a 5-year projection with a medical inflation of 15% and it would cost ₹20 to ₹25 lakh. You can link the sum assured amount to the actual cost of the disease,” said Kapil Mehta, founder, Securenow.in.

Moreover, the decision will also rest upon your income or the funds available to you. “You can also look at your one-year salary as a rule of thumb to take a decision on what amount of healthcare you want.”

Further, depending on your family background and age, you will know when you should upscale your health cover. What this means is that instead of one basic cover, you can increase the sum assured by adding a top-up cover and a critical illness cover, depending on your family’s medical history.
“For instance, if you are 25 years old today, ₹5 lakh cover is good enough. As you move to 30 to 35 years of age, you should take the highest cover you can afford, which could be in the range of ₹20-25 lakh. This is based on the idea that the difference in the premium between what you pay for a ₹15-lakh cover and a ₹20-lakh cover is not very high if you use the top-up strategy,” said Chopra.

The usual recommendation is to take a ₹10-lakh basic health cover, buy a ₹20-lakh top-up, and then upgrade it to a ₹30-lakh cover. The reason is that the premium difference for buying a ₹20-lakh and ₹30-lakh cover is hardly anything. You must take the maximum top-up you can afford. This should not be more than ₹3,000-4,000 extra annually,” said Chopra.
If you have a history of medical illness, you can supplement it with a critical illness and top-up, which you can buy after the age of 35.

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