What Is Sum Insured in Health Insurance?
- Author :
- TATA AIG Team
- Published on :
Health insurance is a necessity in today’s life. A comprehensive health insurance policy aims to financially protect you and your loved ones against medical uncertainties, which could otherwise cause a serious dent in your savings. However, it is important to buy a health insurance policy after carefully assessing the policy terms and terminologies.
Understanding the meaning of different insurance terminologies helps you to make an informed decision and ensure you carefully and fully utilise your health insurance plan benefits. One of the most important terms related to your health insurance is the sum insured. Hence, it is critical to understand what sum insured is and its impact on your health insurance policy.
What is Sum Insured in Health Insurance?
Here is everything you should know about sum insured meaning and its implication:
In terms of health insurance, the sum insured refers to the maximum amount for a particular year payable by the insurance company to you in case of hospitalisation. Sum insured is not a monetary benefit. It is a reimbursement (cashless or non-cashless) of the cost you bear in a medical emergency, such as hospitalisation. Any amount exceeding the sum insured is paid from your pocket. However, if the medical costs/hospitalisation bills are less than or equal to the sum insured, the insurance company will reimburse the entire cost. The concept of sum insured works on the principle of indemnity, which means that the insurance company reimburses for damage or loss.
Any amount exceeding the sum insured is paid from your pocket. However, if the medical costs/hospitalisation bills are less than or equal to the sum insured, the insurance company will reimburse the entire cost. The concept of sum insured works on the principle of indemnity, which means that the insurance company reimburses for damage or loss.
For instance, you have a health insurance policy with a sum insured of ₹5 lakhs. During a particular year, you were hospitalised twice due to medical reasons. During the first time, your hospital bill was ₹2 lakhs and the second time, your hospital bill was ₹4.2 lakhs. Your total hospital bill was ₹6.2 lakhs but your health insurance policy has a sum insured of only ₹5 lakhs. In this scenario, the insurance company will reimburse ₹5 lakhs of your hospital bills and the remaining ₹1.2 lakhs are payable from your pocket.
Therefore, it is advisable to carefully select the appropriate sum insured for your health insurance plan. A large sum insured offers comprehensive protection but also means hefty premiums. But given the rising medical expenses and increasing health risks, it is also wise to have a health insurance plan with an extensive sum insured to cover possibly high medical expenses, if needed.
What is the Impact of the Sum Insured on Health Insurance Premiums?
As specified, the sum insured has a direct bearing on your health insurance premiums. Technically, sum insured meaning in health insurance is the maximum cap on the costs that can be covered in a year against any unfortunate event. The higher the sum insured, the higher sum the insurance company will pay you in case of a claim. Therefore, higher will be the health insurance premiums.
Why is it Important to Choose the Right Sum Insured in Health Insurance?
Choosing the right sum insured is critical to ensure your health insurance policy is failproof, and can financially protect you and your family against any medical emergencies. Choosing the wrong or insufficient sum insured could fail the primary purpose of a health insurance policy.
For instance, imagine you made a wise decision of buying a health insurance plan and are at peace because you know you have financial protection. However, when you face a medical crisis that causes a huge hospital bill, you realise your health insurance sum insured is insufficient to compensate for the expenses incurred. You end up paying the charges from your pocket, which causes more trouble in an already emotionally stressed time. If you were wise and chose a sum insured adequate to cover your healthcare expenses, you would be financially relaxed at that emotional juncture. Further, if you have a family health insurance, you would need a higher sum insured because of the number of members. With a higher sum insured, you are assured that your family has reliable financial support during times of need. To understand how the choice of sum insured effects your premium payable, check our Health Insurance Premium Calculator resource.
Understand sum insured meaning and choosing the right sum insured is important because:
- Increases your financial cushion for emergencies
- Preserves your savings
- Reduces stress during medical emergencies and emotionally tiring situations
How to Determine the Right Sum Insured?
Choosing the right sum insured depends on the following factors:
Age: If you are young, you should go for a higher sum insured because you will easily get a high sum assured at affordable rates. If you buy health insurance at a later age, you should buy a higher sum insured because your medical expenses are likely to increase with age.
Health condition: If you have some health conditions like diabetes, heart problem, blood pressure issues, kidney issues, etc., it is advisable to opt for a higher sum insured because you could need to tap your health insurance policy more often than others.
Current life stage: If you have a family or are thinking about getting married or having children, you should consider a higher sum insured because of the increasing financial responsibilities of dependents.
Lifestyle habits: Today’s lifestyle, such as sedentary living, unhealthy food habits, etc., has increase health risks. As a wise person, invest in a higher sum insured to ensure you have adequate protection in case of any unexpected eventuality.
Difference Between the Sum Insured and Sum Assured
Most people confuse sum insured meaning with sum assured in a health insurance policy. However, both the terms have different meanings and implications. Sum assured is a pre-decided sum that is given to the policyholder in case the insured event occurs. For instance, if you buy a life insurance policy, the insurance company guarantees to pay a fixed sum to your nominee in case of your death. This sum payable to the nominee on the happening of the insured event is known as sum assured.
The concept of sum assured is more applicable in life insurance plans and does not fit into a health insurance policy. However, now some policies offer both sum insured and sum assured benefits.
Overall, understand the relevance of critical health insurance terms, such as sum insured, and ensure you choose an amount per your and your family’s needs. A higher sum insured does come with higher premiums, but it saves you from the financial burden during an emotionally stressful time. Moreover, given the exponentially rising health costs, a higher sum insured has become unquestionable.
We at TATA AIG understand that your healthcare needs are unique. Hence, we offer a range of health insurance policies that fit your needs and budget. You can choose any Tata AIG health insurance plan and opt for a sum insured that is adequate for your requirements. When you buy health insurance online from TATA AIG, we seamlessly work for your benefit. You get a wide-reaching network of over 7,200 hospitals, paperless and hassle-free policies, a high claim settlement ratio, round the clock assistance and above all, a TATA promise based on a 150-year legacy.
Choose your health insurance plan wisely!
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.