Health insurance has become an integral part of financial planning. With the rising medical expenses and inflation rate, healthcare costs have increased. It is needless to say that if you are not buying a health insurance plan, you are taking a big risk.
The importance of buying a health insurance cannot be over-emphasized. Buying a health insurance plan is the basic requirement. But it is important that you have the right amount of coverage as per your needs.
The first question that comes to your mind while buying a health insurance plan is the amount of coverage you would need.
So is there any ‘right amount’ of coverage that you should buy?
There is no fixed formula to compute the optimum coverage that is ideal for you. Yet there are some factors that can help you in making your decision regarding the amount of health insurance coverage.
Factors affecting the amount of health insurance coverage
- Financial abilities: The first and foremost factor in calculating your health insurance coverage is your ability to pay. Premium is directly proportional to the amount of coverage. Before buying a policy, you must check your financial ability to pay the premium for the coverage.
It is not necessary that you always need to buy a policy with a large coverage. If you cannot pay a high premium, you can go for a small coverage. You can increase the coverage in future if your pocket allows you.
- Age: Age is an important factor in deciding the amount of coverage you need. If you are taking a policy at an early age, you can take a small coverage and then increase it in the coming years.
Alternatively, you can take a large coverage initially as the premium payable is less for young people due to lesser chances of pre-existing diseases.
A middle-aged or old aged person generally needs to purchase a higher coverage as the chances of diseases are more and so the premium payable is also high.
- Hereditary diseases: If your family has a trend of hereditary diseases, the probability of it being passed on to the future generation is high. In such a case, you should buy a health insurance that provides a wider coverage while you are young.
- Percentage of income: Your income plays a key role in your decision of buying a health insurance plan. Your health insurance coverage should be at least 50 percent of your annual income. It is practical for you to buy a health insurance coverage which ranges from 50 to 100 percent of your total annual income.
- Type of hospitals: There are different categories or types of hospital. Different insurance plans charge a different amount for different categories of hospitals. Your decision regarding the amount of health insurance coverage is also determined by the category or type of hospital you would prefer for your treatment.
There are the factors that can increase the value of your coverage without any additional cost. With features like riders and top-ups in your plan, you can always have the additional benefit without any increased premium.
The Bottom Line
There is no set formula or rule for calculating the amount of health insurance coverage you need. Different people have different needs. The amount of coverage depends on your financial ability and requirement.
So you should analyze all the above-discussed factors from your point of view and choose an optimum coverage that is ideal for you.