How to Select Right Sum Insured

Selection of the sum insured is also a very crucial decision that you must make. Best Mediclaim policy plans from IFFCO Tokio offer extensive coverage against a vast array of medical conditions and critical illness. This helps you meet any unexpected health-related emergencies without affecting your savings. Ideally, you should consider the cost of quality Medicare facilities in your city and your lifestyle to ascertain the amount of Mediclaim you require.

If you go for a coverage amount lower than what is needed, then it would result in unaffordable quality health care, and you will be forced to choose a sub-standard healthcare provider. If you choose a very high amount, depending on your age and medical condition, then you will end up paying a much higher premium than what is necessary and lose out on better investment opportunities.

These situations are called under insurance and over insurance, both of which must be avoided at all costs. Let’s have a brief look at this two phenomenon: -

Under-Insurance: - It is a situation which occurs when you underestimate your insurance requirements and end up with lower than required coverage. This leaves you vulnerable to a lot of uncertainties in life, and the worst part is that you do not realise this until it’s too late. A lot of reasons could be attributed to the rampant practice of under-insurance in India, such as: -

  • Unnecessary overconfidence: – You might think that as you are leading a healthy lifestyle and haven’t fallen sick in ages, there is no need for spending money on a Mediclaim policy.

  • Reluctance to pay high premiums: - You might think of Mediclaim policy premium as an unnecessary expense and try to subscribe to a Mediclaim policy with the lowest premium and bare minimum coverage.

  • Only for tax saving purpose: - You might opt for only that much policy amount which is well-suited to your tax-saving requirements and financial planning.

  • Miscalculation of future Medicare requirements: - You might miscalculate your future health-related requirements and inadvertently opt for a low amount for your policy coverage.

  • Unaware of benefits: - You might not be aware of the extensive benefits offered by a Mediclaim policy other than just covering for the hospitalisation expenses.

Whatever be the reason, under insurance is a very serious issue which might come to hurt you back when you are least prepared for it. Just imagine yourself falling victim to a critical illness like cancer which is treatable but needs you to be admitted into one of India’s best hospital, which will cost a huge sum of money. But due to your misjudgement at the time of availing the policy you forgot to select the critical illness cover and now have no other option than to just spend all your savings. This is a very sorry situation but one which is entirely possible. There is a very simple way to avoid facing such serious and embarrassing situations, IFFCO Tokio’s cashless Mediclaim policy with optional critical illness cover which offers you extensive coverage against a vast range of medical ailments by paying an optimum amount of premium.

Over-Insurance: - Although a very rare phenomenon in India, but it is still prevalent in major urban centres. This is a situation where you end up buying a Mediclaim policy with coverage amount which is much more than what you or the insured family member requires. As a result, you end up paying too much money in premium which could otherwise have been used by you for some other investment opportunity. This can happen when you try to overcompensate for a previous error of judgement, where you opted for inadequate insurance cover and ended up spending some money from your pocket.

There are various reasons that could lead you to over-insurance, such as: -

  • Miscalculation of future requirements: - It is possible that you are too worried about your future medical requirements and end up buying a policy with considerably more coverage than is required at your age or your child’s age.

  • Lack of Knowledge: - In case you do not educate yourself about the availability of various optional riders, which offer higher coverage for a smaller premium, you end up buying a policy with higher coverage against a higher premium.

  • Lack of Financial Planning: - Sometimes it may happen that you do not plan enough about your future finances. You simply end up investing more than necessary in your Mediclaim policy while you could have invested it better elsewhere, had you planned it all better.

  • Only for tax saving benefit: - It might be possible that to take advantage of the tax exemption offered under the Sec. 80D of the Income Tax Act, you decide to subscribe to a policy with premium as much as the exemption limit is, irrespective of whether or not you need that much coverage.

  • Group Mediclaim Policy: - You might already be covered under a group Mediclaim policy offered by your employer and need not opt for a relatively higher amount of coverage from an individual Mediclaim policy. But you might not be aware of the group Mediclaim policy details and end up subscribing for higher Mediclaim coverage than required.

As you would have been able to analyse from the above concepts of Under-insurance and Over-insurance, choosing the optimum coverage is very important to be safe against any future medical exigencies.

Therefore, it becomes very important for you to carefully consider the following factors, before opting for the amount insured that you require: -

Age: - Your age has a very important determinant for the extent of coverage you require. If you are young and healthy, you can start from a low sum insured and increase it gradually over the years, whereas if you are in your 40’s, then you need higher sum insured to take care of increasing medical expenses.

Health: - You should also take the current status of your health into consideration while deciding on the coverage you need. If you are young and enjoying excellent health, then you may start with a lower coverage amount as you may not get hospitalized regularly. Whereas if your health condition is not very good and you feel that in the future you may need to undergo certain medical procedures, then you should choose the policy coverage amount accordingly.

Existing Ailments: - If you are suffering from certain ailments that require regular visits to doctors, then you should opt for higher policy coverage to take care of your medical expenses. Sometimes you know that with age, your ailment will worsen further, and your medical expenses are going to increase further. Hence, it would be wise for you to opt for a higher coverage amount and increase it gradually every year so that your premium payments do not increase suddenly.

Surroundings: - The city and environment that you live in also need to be taken into consideration while deciding on the policy coverage that you must have. If you are living in a metropolitan city such as Delhi and Mumbai, then you are likely to face pollution and stress on a regular basis and are more likely to need regular medical attention. Medical facilities in these cities are also relatively expensive, making higher policy coverage a necessity. In comparison, if you live in a smaller town with clean surroundings and low pollution levels, then your medical expense will be little lower as the medical facilities here are relatively cheaper.

Income: - Your income level should also be considered as an important parameter while deciding the extent of Mediclaim coverage required for you. Although good Mediclaim Policy with high coverage is desirable for everyone, affordability is also an important factor, as you must take care of other routine expenditure as well. So carefully analyse your income level and medical requirements and then make a balanced decision which satisfies all your requirements.

Financial planning: - Analyse your future requirements such as the extent of Mediclaim coverage required, investments you need to make and commitments you need to honour carefully and then according to your income level, allocate a proper percentage to each of these heads so that all your future requirements are well taken care of.

As your trusted insurance partners, we at IFFCO Tokio suggest you introspect and analyse carefully before opting for cashless Mediclaim policy.