How much hospitalisation insurance is enough? For the average city living middle class family ₹5 lakh looks woefully inadequate because which city hospital even has ₹5,000 rooms?

Because, with the sub limit of 1% of sum insured (SI) on room rent, you will be dipping into your pocket for the extra room rent. You can buy an additional cover for extra premium to protect against that. Be sure to read up about it and opt for it on your next renewal. But what is left uncovered is the share of expenses you will bear on all other services like surgeons’ or physicians’ fees going by the sub-limit rules. Mercifully medications and diagnostic procedures don’t come under the sub-limit. A higher SI comes at a higher premium and that escalation is going to be endless, we have seen. The real problem we are left to focus on is the inadequacy of SI. With rising healthcare costs, the question has changed to how much of your expenses are left uncovered by your SI. Remember, that gap is going to widen each coming year. This diminution of protection is cause for serious concern.

Let’s get back to the ‘Why not self-insure for the first ₹10 lakh and take only a top-up?” idea.

We saw that if you can maintain a ₹10 lakh medical fund and keep enhancing it, if you can resist spending it on that family holiday, and if you can pay your hospital expenses and replenish your fund without feeling the financial pain, this is a workable idea. This comes with some age-related pros and cons. For the below-30s family, it may work well because hospitalisations may be few and far between and the fund can keep earning returns and growing. However, nobody can predict serious illnesses and accidents and the fund would be one more demand on the family’s expenses.

In the next decade and a half of your life, till age 45, the medical fund is much easier to create and maintain with better earnings and cashflows, and you can have no basic policy, saving on premium and maintain the top up. However, this is when lifestyle illnesses start making their appearance, parents are getting older and children can contribute with ills and spills. At this stage you can move to start a small basic policy of ₹5 lakh.

From age 45 to 60 avoiding a basic policy means substantial premium savings as the rates rise sharply. If you have significant accumulated wealth you can rely on self-insurance with maybe that small basic policy we saw earlier plus a sizeable top up.

This is the age group when chronic illnesses increase and hospitalisations can be expected. You should be sure that you can maintain an even higher medical fund and that should be over and above your retirement planning. Insurance becomes a much more efficient part of the game plan at this stage. Your medical fund also should be periodically reviewed and enhanced, preferably during your earning years when the funds are still flowing. By the 60s your basic policy should be for a higher SI and that means you should enhance it a few years prior in order to work off the waiting period for pre-existing diseases. Definitely do this before retirement so that you are not left without insurance. Getting a fresh policy or enhancement of SI after this age is quite a challenge. If your employer provides a retirement policy, it is wise to opt for that and build other policies around it.

Much as we may plan about and spend on insurance, we are truly happy When we don’t need to use it. So, after reading all this if you plan on jogging every morning, cutting back on smoking and junk food and getting a full night’s sleep, even better!

(The writer is a business journalist specialising in insurance & corporate history)