What is Sum Insured in a Health Insurance Plan?

It is impossible to contemplate the risks of old age when you’re young. However, the world is an unpredictable place where any event can happen at any time without advance notice, to anyone. People generally believe that health insurance is only for those who are approaching retirement, as their bodies are tired and might require frequent medical treatment. Strangely, it is the opposite, as more people at a young age visit hospitals frequently due to their sedentary lifestyle. That is why purchasing the right health insurance policy is important while you are young. Make sure it should have an optimal sum insured value for coverage.

Rohit and Riya are twins and are covered under the family floater health insurance policy, purchased by their father, many years back, for a basic sum insured of Rs.5 lakhs. Rohit, on his way home, got involved in a road accident and was hospitalized for multiple injuries. The total expense towards his treatment was Rs.1 lakh, which was settled through the health cover. After Rohit`s claim, the remaining value in the floater plan was Rs.4 lakhs, which can only be utilized for that particular year. In the next few months, Riya and Rohit were diagnosed with COVID-19 and both had to be admitted to the hospital for treatment. After a month, they fully recovered and returned home, with a hospital bill of Rs.3 lakhs. With 4 lakhs coverage value remaining in the floater policy, the hospital bills were settled using the policy itself, except for a few thousand that were spent as out-of-pocket expenses. If the family floater health policy had a less basic sum insured, Rohit & Riya`s family would have to bear the entire hospital bill by themselves but thanks to their father, whose planning helped them tide over such emergency situations

What is Sum Insured in a Health Insurance Plan?

With the cases of the COVID-19 epidemic in India expanding exponentially, there is a requirement for the right health insurance plan. The health plan should be such that it can reduce the financial burden at the time of hospitalization. Sum insured is the first word that you will encounter while choosing any medical insurance plan.

Sum insured refers to the amount given by the insurance company to the policyholder in the event of an emergency medical situation. It’s the amount that shall be provided for the medical expenses that are incurred during hospitalization. If the amount of the medical expenses falls within or is less than the amount insured, the insurance company will pay the entire cost or reimburse that amount if you’ve already paid the hospital cost. If the medical bills exceed the sum insured, the insured person is liable to pay the excess cost from his/her pocket.

Factors that determine Sum Insured:

The choice of choosing the right sum insured lies with the policyholder. Let us list the essential factors that directly determine the amount of coverage that one is able to get from the insurer:

• Medical History: If you are suffering from any known illness/ allergies or are more prone to get sick in the future due to certain other risks, opt for a higher sum insured or coverage.
• Age: It is prudent to go for a health policy with a higher sum insured while you are young due to good health. The risk of contracting any critical illness is low and moreover, the premiums are also very affordable if you lock in at a young age.
• Lifestyle: The type of life you lead also plays a major role in selecting a proper policy with the right sum insured. If you smoke, drink and follow an unhealthy lifestyle, it is better to go for a higher sum insured, considering the high risk of you falling sick.
• Location: The place where you stay also holds a place in determining the sum insured value of your health insurance policy. For example, if you are residing in a metro city such as Delhi, Mumbai, Bangalore, etc., you should opt for the highest amount of sum insured as the medical expenses in these cities are more expensive compared to those in smaller cities.

Why it is important to Choose the Right Sum Insured in Health Insurance? 

The right amount of insurance for health insurance is crucial. This is because, if you’re hospitalized, your insurance company pays for the hospital cost. For instance, if the amount insured by your policy is 5 lakhs, and the cost of treatment is at least 3.5 lakhs, then the insurance company would be able to pay the amount of Rs. 3.5 lakhs from the sum insured amount of 5 lakhs.

However, if the maximum amount that you’ve chosen for your insurance policy is 3 lakhs, but the cost of hospitalization is 3.5 lakh in total, the insurance company will only cover you upto 3 lakhs. The remaining 50 thousand must be paid by the patient. In this scenario, you could be in financial trouble. It is important to pick the appropriate amount of sum insured to avoid such circumstances.

• A higher sum of insurance is crucial because it allows you to have enough money to deal with an emergency medical situation.
• With a substantial amount of money insured you will be able to protect your savings.
• A higher sum of insurance lets you be less stressed in a medical emergency.

Select a higher sum insured, especially for family floater plans. Since the family members share the insurance coverage under family floater plans, having a lesser sum insured in the event of multiple claims will be inadequate.

Sum Insured & Sum Assured: 

Many are confused between both the term sum insured as well as the word sum assured in insurance. The two terms are distinct. Reading further will help you understand what is the sum assured in insurance and how it differs from sun insured:

• Sum Insured: This is the value offered in health insurance. The basis of it is the concept of indemnity, which provides the right to compensation to the victim of a loss, or damage. It does not reward monetary benefits. In fact, reimbursements are made according to the sum insured in insurance.
• Sum Assured: The sum assured is a term that is applied to life insurance policies. It is a predetermined sum that the insurance company will pay to the policyholder in the event of an eventuality. Sum assured in insurance is a benefit in cash provided to the insured, or their family following the time the policy has ended.

The Conclusion:

Now, you must know the answer to that question what is the sum insured for medical insurance, which has been all over the place with multiple meanings floating around. With a higher sum insured for your health insurance policy, it has multiple benefits as it frees you from the emotional burden and provides financial freedom too, at a fraction of cost as its premium.