What Is Sum Insured In Health Insurance

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In the dearth of seemingly complex jargons are simple terms such as ‘sum insured’. The sum insured depends on the premium price that a policyholder pays for the insurance coverage. With increasing unhealthy lifestyles and eating habits, the threats against your health are soaring high. In addition to the health issues, skyrocketing medical and treatment expenses make it undoubtedly difficult. Hence, it is important that you have sufficient sum insured in your health insurance plan. Choosing your health insurance policy is more pivotal than just buying one. Aligning and customising your insurance requirements should be your major goal.

Important Update (Dated May 30, 2024) – Good news for Health Insurance policyholders! According to the Master Circular on Health Insurance Business 29052024 rolled out on May 29, 2024 by IRDAI, insurers are to decide on the request for cashless claims within 1 hour of receiving the request. Also, the final claim is to be granted within 3 hours after the policyholder’s discharge from the hospital. Insurers have been directed by IRDAI to establish necessary systems and procedures for this process by July 31, 2024.

The Master Circular on Health Insurance Business 29052024 circular is available here - https://irdai.gov.in/document-detail?documentId=4942918

Understanding Sum Insured in Health Insurance

Sum insured in health insurance is the maximum amount you can claim on a particular health insurance policy. If you suffer from an ailment that is covered under your health insurance policy or meet with an accident, the expenses of the resultant treatment, including hospitalisation (if required), are covered by your policy.

It is important to note here that the sum insured in a health insurance policy is not an assured monetary benefit. You will not get this amount if you do not face any health-related issues. The aforementioned amount is payable only in the form of a cashless claim or a reimbursement claim if you need any medical treatment and/or get hospitalised.

Let us understand what is sum insured in health insurance with the help of an example. Supriya has a health insurance policy with a sum insured of Rs. 10 Lakhs and a Critical Illness Cover. During the third year of the tenure of the policy, she is diagnosed with cancer. The resultant treatment is estimated to cost around Rs. 14 Lakhs.

Since the sum insured for Supriya's health insurance policy is Rs. 10 Lakhs, she can file a cashless claim or a reimbursement claim only to the tune of Rs. 10 Lakhs. The remainder of the treatment cost has to be borne by her. However, if she had another health insurance policy or a Top-Up Health Insurance Policy, she could have utilised the sum insured of those plans as well.

Therefore, if the cost of your medical treatment and/or hospitalisation are less than the sum insured in your health insurance policy, then you shall be paid ten exact amount of the treatment expense. However, if the aforementioned expenses are equal to or greater than the sum insured in your health insurance policy, then you can claim the entire sum insured available under the policy.

You must choose your health insurance sum insured with extreme care and mindfulness. The sum insured ought to be sufficient to provide you with adequate medical insurance coverage. However, if you go for too high a sum insured, the corresponding premium burden would be high as well. On the other hand, a low sum insured could prove to be insufficient to assist you during any medical emergencies. It is advisable to choose a comprehensive health insurance plan with the option to top up the sum insured, if required.

What Is The Impact Of The Sum Insured On Health Insurance Premiums?

The sum insured in a health insurance policy is one of the main factors that influence the policy's premium. As a general rule, the higher the sum insured for a health insurance policy, the higher your health insurance premium would be.

Since a higher sum insured entails a higher burden on your health insurance provider should you file a health insurance claim, the corresponding premium is also proportionately higher. Therefore, the health insurance premium for a policy with a sum insured of Rs. 50 Lakhs would be higher than that for a policy with a sum insured of Rs. 40 Lakhs.

How To Choose The Right Sum Insured In Your Medical Insurance Policy?

It is critical to choose an adequate sum insured for your health insurance policy. Failure t0 do so may render the purchase of a health insurance policy virtually ineffective since you would not be able to get the required financial assistance during a medical crisis.

You can choose the right sum insured for your health insurance policy by taking the following significant factors into account.

Your age:

If you purchase a health insurance policy at a young age, say in your twenties or thirties, then you can get a high sum insured in your health insurance policy without having to pay a high amount as premium. Thai is because of the lower risk of the occurrence of a wide range of diseases amongst young people. If you buy health insurance at a later age, then you must opt for a high sum insured to have sufficient health insurance coverage.

Your health:

If you have any pre-existing diseases, for instance, Diabetes, Hypertension, Cardiovascular Ailments, etc., then you must opt for a high sum insured. The treatment for such ailments is usually quite costly. Therefore, having a high sum insured in your health insurance policy is prudent.

Your lifestyle patterns:

The lifestyle that is the norm in these times increases the risk of several diseases and lifestyle disorders such as Obesity, Hypertension, Diabetes, to name a few. It is, thus, prudent to choose a high sum insured in your health insurance policy.

Your life stage:

If you are in a life stage wherein you have few responsibilities and few or no people dependent upon you, then you can afford to have a low sum insured in your health insurance policy. However, it is advisable to have a sufficient health insurance sum insured all the same. If you are in a life stage wherein you have some people dependent on you (and by extension, your health and well-being), then you must opt for a higher sum insured in your health insurance policy.

Why Is It Important To Choose The Right Sum Insured In Your Health Insurance Policy?

It is extremely important to choose the right sum insured in your health insurance policy. Without an adequate sum insured, your health insurance policy may not suffice during an adverse medical event. Here are some of the reasons why it is pivotal to select the right health insurance sum insured.

Sufficient coverage:

One of the most important reasons for selecting the right sum insured in your health insurance policy is the necessity to have adequate coverage. If you are opting for a family health insurance plan, in particular, then it is critical to opt for a high sum insured that can be sufficient for all the insured family members. Even for individual health insurance policies, it is advisable to have an adequate sum insured.

Protection for your savings:

If you have an insufficient sum insured in your health insurance policy, then you may have to delve into your savings to bear the cost of your (and/or your family's) medical treatment beyond the sum insured of the plan. This could put your savings and, in turn, your investment plans into disarray.

Peace of mind:

With the selection of the right sum insured for your health insurance policy, you can be at peace about being financially prepared for most, if not all, medical emergencies. Peace of mind, as they say, is not tangible but it is priceless. And without much financial stress, you can be better placed to handle the emotional turmoil that is characteristic of such situations.

Differences Between Sum Insured And Sum Assured

The sum insured in health insurance policies must not be confused with the sum assured offered by life insurance policies. A sum assured is a pre-decided monetary benefit that a policyholder (or their beneficiary) is eligible to receive:

At the end of the policy tenure and/or
The occurrence of the event mentioned in the policy (the death of the policyholder)

The sum assured in life insurance plans is usually paid at the death of the policyholder or at the maturity of the policy depending upon the type of the policy and the terms thereof. On the contrary, the sum insured in health insurance policies is only paid for the actual cost of the medical treatment of the insured. If there is no treatment and no claim, no amount is paid by the insurance provider.

Here are the major differences between Sum Insured and Sum Assured.

Point of Difference	Sum Insured	Sum Assured
Meaning	Sum Insured is an indemnity benefit that offers a policyholder the reimbursement of the actual cost of their medical expenses (in health insurance policies).	Sum Assured is an assured monetary benefit that is promised to a policyholder or their beneficiary at the beginning of a policy.
Applicability	You can file a claim on your policy and get the reimbursement of the actual cost incurred by you.	You can claim this benefit at the end of the term of the policy (if it is a maturity benefit) or your beneficiary can claim it in the event of your demise.
Scope	Sum Insured is usually applied in non-life insurance plans, for instance health insurance plans and motor insurance plans.	Sum Assured is usually applied in life insurance plans, for instance term plans, endowment plans, ULIPs, etc.

To Sum It Up

Now that you have clarity on what sum insured in health insurance is, you must be careful to select the right sum insured for your health insurance policy. It is important from the perspective of having sufficient health insurance coverage.

What factors should I keep in mind whilst selecting the sum insured for my health insurance policy?

Whilst selecting the sum insured for your health insurance policy, you must keep the following factors in mind.

Your age
Your present life stage
Your health condition
Your lifestyle patterns

How does the sum insured in health insurance affect the policy's premium?

The sum insured for a health insurance policy is directly proportional to its premium. The higher the sum insured, the higher is the premium.

Is Sum Insured the same as Sum Assured?

No, Sum Insured and Sum Assured are two different concepts. Whilst sum insured is an indemnity benefit usually offered with non-life insurance policies, sum assured is a monetary benefit usually offered with life insurance policies.

Should I opt for a high sum insured in my health insurance policy?

Yes, it is advisable to opt for a high sum insured in your health insurance policy, particularly if it covers multiple people, for instance, a family health insurance policy. The sum insured ought to be sufficient to provide you (and the other policyholders, if any) with adequate health insurance coverage.