Ideal Health Insurance Cover
I am 24 years old working in Mumbai (permanent resident of a town in Madhya Pradesh). I am researching on health insurance for quite some time. During my research, I came across Care health insurance - Care Advantage Plan that offers health cover of Rs.1 crore at a premium of around Rs. 12,500/-. Star Health through its Young star policy also offers the same cover at Rs. 14,000/- approx. I want to know whether I should go for 1 crore cover or less? What will be the ideal health insurance cover?
Further, whether the two mentioned companies are good to go or should I look for any other company (if you can suggest).
Also, could you please share any eBook or any comprehensive content on what to look for when buying a Health Insurance?
- You need to buy a coverage for your needs when you hit 50. The ideal health insurance coverage in our view is hence the ideal cover for today factored for around 8% inflation till you hit 50. If you take 5 Lakhs as the adequate cover today, and do the math the number you would get is around 30 Lakhs in 20 years.
- 1 crore policies are attractively priced today since you are unlikely to use this entire cover today or in the next few decades. Such attractively priced products are likely to see multiple price revisions and may not remain as affordable as they are today - forever, especially when you need it in your old age.
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Why premiums are likely to rise faster for the 1 Crore cover:
In my view, the premiums for the 1 Crore cover are significantly discounted (compared to lower coverage like 25L/30L) given low utilization (average claims divided by average cover) today. Given past experience, the premium for the 1 Crore cover will see frequent hikes, catchup in a decade or so - once you get older, and as the utilization increases.
Why 1 Crore cover could be useful:
On the other hand I am also conscious of the fact (looking at the shocking hospital bills for COVID19 treatment, especially for senior citizens and people with chronic diseases) that it is difficult to predict the healthcare costs of the distant future. All we can do is add up inflation and estimate the coverage we will need.
We live in crazy times, and no one really can say with guarantee whether a 25L or 30L cover will be adequate in the future, say in 2050! Keeping this in mind, and that upgrades in the future can be difficult, the alternative approach is to buy the highest cover you can afford!
Confused? Here's a step-by-step approach:
- Compare the premium of 1 Crore cover and 25/30 Lakhs cover. Further compare the premium of 1 Crore cover with a combo of 10L base policy and 15 Lakh Super top-up. If you find the difference in costs for the 1 Crore policy with the other two options to be affordable today - then you can go for the 1 Crore cover. If the difference is material - then stick to a 25 to 30 L cover - keep reviewing your cover every few years of renewal.
- If you go for the 1 Crore cover and in the future you see a significant rise in the premium for 1 Crore cover making it unaffordable, you can always downgrade your cover to 25L/30L (the actual cover you need).
- This way you have an affordable ultra high coverage for your family - that keeps your healthcare expenditure inflation proof on one side, with the option of easy downgrading on the other - it is easy to downgrade a health insurance cover - very difficult to upgrade once you hit old age (above 50/55)