Health insurance — what to layer and at what sum insured

Health insurance in India is among the most rapidly inflating cost categories. Medical procedure costs rise 12-15% per year — significantly above general CPI. The combination of expensive private-hospital care and growing demand for specialised treatment means insurance cover that was adequate 5 years ago is often half what's needed today. Most families need to layer multiple policies to reach the required cover at manageable premium.

Sum insured guidance

Today's prices, metro India family of four:

• Minimum essential cover: ₹10-15 lakh family floater. Handles most routine emergencies and minor surgeries.
• Comfortable cover: ₹15-25 lakh family floater. Handles most major procedures (heart surgery, cancer treatment first line).
• Premium cover: ₹50 lakh+ family floater. Handles extended specialised treatment.

For senior parents living separately, individual cover of ₹10-25 lakh per parent.

The employer cover question

Most salaried Indians have employer-provided health insurance. Typical features:

• ₹3-10 lakh family floater, often increasing with seniority.
• Covers self, spouse, dependent children, sometimes parents.
• Free during employment; ends on resignation / retirement.

Employer cover is valuable but cannot be the only cover. Two limitations:

• Ends when you leave the job. Mid-career transitions or retirement = sudden loss of cover.
• Sum insured is usually inadequate alone (a heart surgery in a metro hospital costs ₹3-7 lakh; the employer ₹5 lakh cover is consumed by one major event).

The layered approach

A typical layering for a metro family with employer cover:

• Layer 1: Employer cover (₹5 lakh). Free.
• Layer 2: Individual / family floater of ₹15-25 lakh from a private insurer. ₹15-25k annual premium.
• Layer 3: Super top-up of ₹50 lakh with ₹15-20 lakh deductible. ₹5-10k annual premium.

Total cover: ₹70-80 lakh family floater for total premium of ₹20-35k/year. The layering uses the super top-up's low premium for the high-end cover; the base policy fills the gap up to the top-up's deductible.

How super top-up works

A super top-up policy pays out only after a "deductible" (also called "threshold") is exhausted. With ₹15 lakh deductible:

• Hospital bill ₹5 lakh: paid by base policies (employer + individual), top-up not activated.
• Hospital bill ₹25 lakh: ₹15 lakh from base (assumes adequate base cover); ₹10 lakh from top-up.

Because top-up activates only at high claim levels, its premium is much cheaper than equivalent base cover. A ₹50 lakh sum insured top-up with ₹15 lakh deductible can cost ₹5-8k; a ₹50 lakh base policy might cost ₹40-60k.

Family floater vs individual

Most younger families start with family floater; layer individual cover for seniors as health risk grows.

Senior citizen cover

Parents above 60 face specific challenges:

• Cover availability is restricted at older ages (some insurers won't offer above 65).
• Premium is significantly higher (₹40-80k+ annually for ₹10 lakh cover at age 65+).
• Pre-existing diseases (PED) usually have a waiting period of 2-4 years before coverage.
• Sum insured limits may be lower (max ₹15-25 lakh).

Specialised senior-citizen policies — designed for the 50+ age group — have features adapted to this cohort.

Critical features to check

• Pre-existing diseases waiting period: typically 2-4 years. Some recent policies offer no waiting (with higher premium).
• Hospital network: cashless treatment is much easier if the hospital is in the insurer's network. Check that major hospitals in your area are network providers.
• Co-pay: some policies require the insured to pay a percentage (typically 10-20%) of every claim. Adds friction but reduces premium.
• Room rent capping: the policy may cap daily room rent at 1-2% of sum insured. Hospitals charge a multiple for higher categories of rooms; exceeding the cap means proportionate deduction from the claim.
• Disease-specific sub-limits: some policies cap claims on specific conditions (cataract, hernia). Compare across insurers.
• Restoration benefit: if you exhaust the sum insured, some policies restore it for subsequent claims in the same year. Useful for families with multiple events.
• No-claim bonus: sum insured may increase 5-50% each claim-free year, up to a cap.

OPD and consumable cover

Many policies exclude outpatient consultation, diagnostic tests, and certain consumables. Look for policies with OPD cover if you have frequent medical needs; or take a separate health-insurance add-on for diagnostics.

Renewability and lifelong cover

Most policies are sold for 1-year tenure with annual renewal. The insurer cannot decline renewal unless fraud / misrepresentation is detected. The premium can increase at renewal based on the insurer's experience.

"Lifelong renewability" is a feature to verify — some older policies have upper age limits beyond which the policy ends.

Claims process

Two main claim modes:

• Cashless: insurer settles directly with the hospital. Requires pre-authorisation; for planned procedures done 4-7 days in advance.
• Reimbursement: patient pays, then files for reimbursement with documents. Slower (typically 30-60 days for approval).

Keep a kit ready: insurance card, policy document, hospital admission requirements.

Tax benefits

Under the old tax regime, Section 80D allows deduction:

• ₹25,000 for self + spouse + dependent children.
• Additional ₹25,000 for parents (₹50,000 if parents are senior citizens).
• Preventive health check-up: ₹5,000 within the above limits.

The new tax regime does not allow 80D deduction.

Annual review

Recheck health insurance annually:

• Is the sum insured adequate for current city costs?
• Has the family composition changed?
• Are parents' medical costs increasing — do they need separate / higher cover?
• Are there better policies in the market now?

Switching insurers preserves portability of pre-existing diseases waiting periods if done correctly.