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How Much Health Insurance Do You Need?

In the absence of a concrete formula to help one arrive at an adequate health insurance cover, we can turn to thumb rules and more subjective factors to arrive at a ballpark number. Here are a few things to consider

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A question many people ask commonly is - exactly how much health insurance cover do they need? First and foremost, its important to understand that there's no formulaic answer to this question. No precise framework exists that can ask you a series of questions and calculate your 'optimal' health insurance coverage requirement. Some people will be perfectly satisfied with their company provided coverages, whereas others would be happy with a coverage of 20 Lakhs or more.

Additionally, the decision to retain or transfer risk is a personal choice in itself - some people will be perfectly happy retaining risks related to medical costs or personal accidents, whereas others are more comfortable transferring a whole gamut of risks to an insurer!

Different advisors propose different models to arrive at an optimal Mediclaim coverage number - some say it must be enough to cover a Coronary Artery Bypass Graf surgery (Rs. 4.5 Lakhs or thereabouts, depending upon the hospital) while still other suggest a coverage that's equal to at least half your annual income (a framework that makes very little sense).

In the absence of a concrete formula to help one arrive at an adequate health insurance cover, we can turn to thumb rules and more subjective factors to arrive at a ballpark number. Here are a few things to consider.

Family Floaters - at least 2.5 Lakhs per member

If you're a young family with a health insurance cover that flats between your family members, opt for a cover that's equivalent to at least 2.5 Lakhs per family member. For a 3-member household, that works out to be a total floating cover of 7.5 Lakhs. Since the chances of multiple family members in a young household getting hospitalised in a given year are remote, this cover should suffice for most people.

Metro or Non-Metro City?
The next factor to consider is whether you reside in a metro or a non-metro city. Medical costs are higher in metro cities - this is the price one pays for having access to higher quality medical professionals round the clock. If you live in a metro city, it would be wise to inflate this basic coverage requirement by 10%.

Your Family's Health History
Consider your family's history for illnesses for a moment. Is there a trend of hospitalisations due to accidents or illnesses related to lifestyle diseases or hereditary illnesses? How much have you spent on medicare over the past 3 years, on average? If your family seems to incur above-average levels of medical expenses, it would be wise to inflate your basic coverage requirement by a further 10%.

Your personal preference
Needless to say, the difference between getting treated at a government hospital and an elite, private establishment can be quite stark! Your personal preferences in terms of the type of hospital you'd prefer to be admitted to if the need were to arise, will also have a role to play in the calculation of your optimal health coverage requirement. If you'd prefer receiving 5-star treatment during your time of need, it would make sense to add another couple of lakhs per family member to your basic coverage requirement.


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