Insurance terminologies often make the entire buying and claiming process seem daunting. However, these terminologies are often crucial for insurance buyers to understand before buying any policy.
With this blog, we will break down one important insurance terminology: sum insured in health insurance. Sum insured refers to the maximum amount an insurer will pay for covered expenses.
We will discuss the meaning and significance of the sum insured, helping you make informed decisions about your health insurance policy to ensure financial protection during medical emergencies. We will also understand how it is different from the most commonly confused term, sum assured.
What is Sum Insured in Health Insurance?
The sum insured in health insurance is the maximum value for a year that your Insurance Company can pay if you file a claim for any covered conditions. Any amount above and beyond the sum insured will have to be taken out of your own pocket.
Simply put, the sum insured meaning is the maximum coverage you will receive from your insurance company in case of insured medical expenses. This amount is determined and agreed upon by both parties, the insurer and insured, when purchasing the policy.
Let us consider an example to understand this term better:
Suppose your sum insured is ₹2 lakhs, and you are hospitalised twice in 12 months.
Parameters |
First Incident |
Second Incident |
Hospital Bill | ₹70,000 | ₹1.5 lakhs |
Out-of-pocket Expense | Nil | ₹20,000 |
Remaining Sum Insured | ₹1,30,000 | 0 |
The total medical expense in a financial year, in this case, is ₹2.2 lakhs, which is greater than the sum insured. Thus, your health insurance company will pay only ₹2 lakhs of this amount while the remaining 20 thousand need to be cleared by you.
Importance of Choosing the Right Sum Insured in Health Insurance
Adequate Coverage
Selecting an appropriate sum insured ensures comprehensive coverage and that all potential risks are covered. This prevents unnecessary out-of-pocket expenses and last-minute panic to meet the cost, as the insurance company will cover it.
On the other hand, if you choose an excessive amount of insured sum, you will end up paying higher premiums for no good reason.
Protection from Inflation
Medical costs are rising every year due to the increased inflation rate. Thus, the right sum insured in health insurance will help you cover the increased healthcare costs while also providing you with the necessary coverage.
No Need to Buy an Additional Coverage
Suppose your sum insured is lower than the medical expenses. In that case, the coverage limit will exhaust quickly, and you will be left with managing the remaining costs on your own.
This often leads to buying additional coverage to cover the extra costs. However, with the right sum insured, your policy will suffice for all the costs incurred.
Peace of Mind
Knowing that you have the right sum insured provides you peace of mind. This allows you to focus more on caregiving or recovery rather than worrying about meeting the expenses during a medical emergency.
Factors to Consider While Choosing Your Sum Insured in Health Insurance
Age of the Insured Person
Age is one of the most crucial deciding factors, as with increasing age, medical expenses may increase, too. Thus, before buying a health insurance policy, understand the sum insured meaning and consider your age. Ideally, if your age is higher, your sum insured should also be higher.
Type of Health Insurance Plan
Your coverage amount must depend on the plan choice. For example, suppose you choose
critical health insurance with a low sum insured. In that case, the amount will not cover the significant expense of treating a critical illness.
Thus, to ensure comprehensive coverage, choose a sum based on the type of your policy. If your policy covers expensive treatments, ensure that the sum insured covers it well.
Current Life Situation
If you have been setting a sum insured to cover a single individual but are now thinking of starting a family, consider the additional financial requirements and adjust the insured sum accordingly. Go with a higher sum so that your policy covers your spouse or children adequately.
Lifestyle
You should consider your lifestyle while choosing the right sum insured in health insurance. If you lead a lifestyle that exposes you to greater risks, such as a night shift job or high exposure to UV rays, consider these factors as well.
Such scenarios are likely to add more risk to your health, requiring insurance claims and ensuring a higher sum insured.
Health History
If you have a known health history, such as diabetes, asthma, high blood pressure, etc., you are likely to require more medical assistance than usual. Thus, adjust your sum insured accordingly to accommodate these expenses.
Difference Between Sum Assured and Sum Insured
Parameters |
Sum Insured |
Sum Assured |
Meaning | The sum insured meaning is the maximum limit of coverage provided by the insurance provider under the health insurance policy. | Sum assured means the pre-decided fixed amount the insurer assures or promises the insured in case of an insured event, such as death or maturity. |
Applicability | This is applicable for non-life insurance policies, such as health insurance, motor insurance, fire insurance, etc. | This is applicable to life insurance plans, such as term plans. |
Payout | This can be claimed more than once as needed in a financial year until the limit is reached. | This is received as a lump-sum amount in case of occurrence of the insured event. |
Purpose | The purpose is to provide financial support for hospitalisation or treatment expenses. | The purpose is to provide financial security to the beneficiaries in case of policy maturity or death of the policyholder. |
Importance of Health Insurance During Hospitalisation
Hospitalisation or treatment for an injury or illness can be expensive, given the increasing rate of healthcare facilities. Health insurance plays a significant role in ensuring that you and your family get the right treatment at the right time.
The sum insured when purchasing a health insurance policy ensures that all your expenses are covered while you recover or tend to your loved ones.
In addition, getting a
health insurance plan from Reliance General Insurance ensures a quick claim process, cashless treatment, 24/7 emergency assistance, minimal paperwork, access to valuable add-ons and much more.
With such assistance during critical times, you can have peace of mind and provide your family with all-around financial protection.
Conclusion
To get the most out of your health insurance and get adequate financial protection at a critical time, having the right sum insured is crucial. Thus, before you buy an insurance plan, ensure that you are well-versed in important insurance terminologies, such as sum insured, and understand significant differences between similar terms like sum insured vs sum assured.
Additionally, consider key factors such as age, lifestyle, inflation, health histories, etc, before you finalise the insurance amount. With the tips shared in this blog, ensure you secure the right plan and sum for yourself and your family.
Frequently Asked Questions
Can I change the sum insured in my health insurance policy?
Yes, you can change it by choosing add-ons or top-up plans or at the time of policy renewal.
Will the premium of my health insurance policy increase if I increase the sum insured?Yes, the premium costs are directly proportional to the sum insured. This means that the higher the sum insured, the higher the premium.
How many times can I claim my health insurance policy?It is at the discretion of your insurance provider ?
However, your claims should be within the sum insured. If not, you will have to bear the exceeding expense yourself.
