Do you really need family health insurance of Rs 1 crore?

A few years ago, general insurance companies started offering large-sized family floater health insurance policies (of more than Rs 1 crore), aimed primarily at high net worth individuals (HNIs). However, nowadays insurers have started selling these big-ticket insurance covers to middle income people as well.

For many, taking such a big-ticket health insurance policy ends up being a financial burden. So, is it worth buying a family floater health insurance cover of Rs 1 crore or more?

How much does a Rs 1 crore health insurance cover cost?
Health insurance policies with a sum insured amount of Rs 1 crore can provide sufficient coverage to a family of 4 members (assuming Male: 36, Female:35, Child 1: 4 years, Child 2: 1 year), but at a premium which might not be affordable for a middle-class family.

Amol Joshi, Founder, Plan Rupee Investment Services, said, "Having a higher cover is good but also be mindful of the fact that it costs money (premium), especially when you have a set household budget and your pocket doesn't allow you to make discretionary expenses beyond a certain limit."

Here are the premium rates of family floater health insurance policies with higher sum insured offered by insurers. These policies do not have any top-up plans in the combination. (Male: 36, Female:35, Child 1: 4 years, Child 2: 1 year)
As on March 16, 2020| Source: Policybazaar.com

Naval Goel, CEO, PolicyX.com said that public sector insurers do not offer a sum insured of Rs 1 crore under a family floater insurance plan. The maximum sum assured that you can get is Rs 50 lakh from National Health Insurance Company and the premium for the same is around Rs 63, 678 + GST yearly (assuming Male: 36, Female:35, Child 1: 4 years, Child 2: 1 year). "Rest of the PSU insurers offer family floater plan with a maximum sum insured of Rs 15 lakh- 25 lakh only. The premium of the same would vary from person to person," Goel added.

However, the income level of a person generally increases as his/her age increases, but one must remember that the premium rates for health insurance plans also increase with age.

Adhil Shetty, CEO, BankBazaar.com said, "Getting a health insurance cover of Rs 1 crore may not be possible for a common man. Therefore, while buying any form of family floater health insurance, compare your options. Look at the premiums, exclusions, inclusions, waiting periods, sub-limits etc. Don't sign on the dotted line before you have understood the scenarios in which the insurance policy will help you."

Do you really need a Rs 1 crore health cover?
Many financial planners believe that Rs 1 crore is probably too much health insurance coverage.

Suresh Sadagopan, Founder, Ladder7 Financial Advisories said, "We need to be realistic about how much cover is needed and take that much cover only. Don't forget for such a high health insurance cover, the premium will be huge. Hence, you should only take that much insurance which will cover most of the risks at a reasonable cost. We need to be practical and learn to live with some amount of risk," he said.

Hence, the family floater health insurance coverage amount should be adequate based on the place where you stay (cost of medical care depends on this to some extent), medical expenses that one may incur in case of hospitalisation, and so on.

Harsh Gahlaut, CEO, FinEdge said, "The 'right' cover is whatever makes you feel secure and comfortable, subject to a bare minimum floor of around Rs 10-15 lakh for a typical family of 3-4 people. Those living in metro cities with higher healthcare costs may opt for a number that is 25-30 per cent higher."

Understand the math when buying high health insurance cover
Note that family floater health insurance pricing is nonlinear, which sharply tapers off in terms of incremental cost per additional rupee of the sum insured, once you go past the Rs 15-20 lakh sum insured mark.

Gahlaut said, "A Rs 1 crore health insurance cover does seem like a bit of an excess coverage. However, having said that, there is no fixed formula for one's 'optimal' health insurance coverage. Given the underlying math, the cost of a Rs 1 crore health insurance cover will, in most cases, be just 25 per cent or so higher than the cost of a Rs 50 lakh health insurance cover, and probably around twice the cost of a Rs 25 lakh health insurance cover. So, if you are aiming for a Rs 50 lakh health insurance cover and you feel that a Rs 1 crore health insurance cover will help you sleep better at night, it certainly makes financial sense to go for it."

Though it appears that a Rs 1 crore health insurance cover might be an overkill for most people, there can be at least one reason to go for a higher sum insured.

Reasons to go for a higher health cover
Nowadays, the advancement in medical technology has made it possible to cure diseases that were once considered incurable. However, at the same time, thanks to medical inflation, the cost of treatment is also sky rocketing.

Therefore, in a situation like this, if you do not have adequate health insurance cover, then arranging huge sums of money for getting the right treatment can become a big issue for you.

Amit Chhabra, Business Head - Health Insurance, Policybazaar.com said, "The medical inflation in 2018-19 increased at the rate of over 50 per cent, i.e., from 4.39 per cent in 2017-18 to 7.14 per cent."

Apart from this, one must also know that a family floater health insurance policy extends the coverage to the entire family, rather than just an individual, where every family member gets benefits under the same sum insured.

Shetty said, "You can go for higher health insurance cover primarily because your family shares the sum insured of your family floater health insurance policy. So, in the case of multiple claims in the same year, higher health insurance cover with an adequate sum insured would never fall short."

What should a policyholder do?
Healthcare expenses are rising exponentially. A regular-sized coverage, for instance, a health insurance family floater cover with a sum insured of Rs 5-10 lakh may prove grossly inadequate once the illness strikes. Hence, having an inadequate cover can put families at financial risk as well. However, one should go for higher family floater health insurance cover only after assessing their needs. Take the help of a financial adviser before availing such high ticket-size health insurance policy.

Joshi said, "There is an argument that as time goes by the treatment costs will go up, this is true, but for that purpose, periodically, one may opt for additional cover or top-up or super top-up covers," he said.

Therefore, if you think that your current health insurance policy seems to be inadequate, you can opt a base health insurance policy and a super top-up plan from the insurer of your choice.

Rakesh Goyal, Director, Probus Insurance said, "There are health insurance plans offered by a few insurers that have an in-built option of having Rs 1 crore sum insured."

Having an in-built option in health insurance means the plan is not just a basic health plan, it is a combination of a base health plan and super top-up plan to have a total sum insured of Rs 1 crore. A customer doesn't have to opt super top-up plan additionally to increase the sum insured. Such plans offer a higher sum insured at a reasonable rate, because it has an additional feature of a super top-up plan along with a base health plan.

However, Goyal further said, "Since all insurers do not yet provide in-built health insurance policies offering Rs 1 crore cover, you can even opt for a combination of a base plan and super top-up plan from the insurer of your choice. You can simply buy a base health insurance policy, having a cover of Rs 10 lakh and opt for a super top-up plan having a cover of Rs 90 lakh and Rs 10 lakh as the deductible amount."

Also read: Should you buy health insurance with higher sum insured or add top-up policy?