Increase base cover or take riders in health insurance? Understand the complete mathematics of premium and claim before renewal.

The biggest dilemma faced by most policyholders while renewing a health insurance policy is whether to increase the base sum insured of their existing policy or add add-on riders like critical illnesses and consumables.

Medical inflation of 12 to 14 percent is being recorded annually in the cost of treatment in hospitals. In such a situation, the old base cover of Rs 5 lakh or Rs 10 lakh may prove inadequate in case of any major illness or surgery. It is necessary to analyze the financial and practical aspects of both the options before the policy renewal date arrives.

Before taking a decision, it is important to understand how both options strengthen the policy:

• Base Sum Insured (Base Cover): This is the total coverage limit of your main policy. On hospitalization, all expenses like room rent, doctor fees, ICU, surgery, medicines and pre-post hospitalization are paid from this limit. This applies to all in-patient claims without any additional conditions.

• Riders/Add-ons: These are supplementary protection covers added to the main policy. Such as Critical Illness Rider (lump sum amount on cancer, heart attack), Consumables Cover (gloves, PPE kits, syringe bills), Room Rent Waiver (removal of capping on room rent) and No-Claim Bonus Protector.

Comparative structure of premium and protection of both the options based on the current base plan of ₹5 lakh for a 35-year-old individual:

Non-Medical Expenses / Consumables bear the biggest burden on the pocket during hospitalization:

Suppose the total bill for 7 days of treatment in a major hospital comes to ₹ 4,50,000. The bill includes around ₹45,000 to ₹60,000 (10% to 15% of the total bill) for gloves, mask, surgical tape, disposable kit and administrative charges.

• Without rider: Even if you have a large base cover of ₹15 lakh, but do not have consumables cover, the insurance company will pass on ₹3,90,000 and you will have to pay ₹60,000 from your pocket.

• On having Consumables Rider: If you have a base cover of ₹5 lakh with a ‘Consumables Rider’ of just ₹600 to ₹800 per annum, the company will pay the entire ₹4,50,000.

If your objective is to secure a larger fund of ₹20 lakh to ₹50 lakh, instead of increasing the base cover directly Super Top-up Policy Taking proves to be the most economical method.

Super top-up has a ‘deductible’ limit. For example, if your main policy is worth ₹5 lakh, you can take a super top-up of ₹20 lakh with a deductible of ₹5 lakh. Whenever the total medical bills cross ₹5 lakh in a year, the Super Top-up will be activated immediately and will pay the remaining claim up to ₹20 lakh. Its annual premium is 50% to 60% lower than directly increasing the base cover.

Adapt this strategy to your age, family history and budget:

1. Create a base cover of at least ₹10 lakh: In today’s times, the base cover of ₹5 lakh is inadequate for treatment of critical illnesses in metros and big private hospitals. Ideally take the base cover to at least ₹10 lakh.

2. Consumables rider must include: This is the cheapest add-on (₹500-₹1,000), but completely eliminates the unwanted 10-15% deduction from the hospital bill at the time of claim.

3. If there is a family history of serious illness, take Critical Illness: If there is a family history of cancer, kidney or heart disease, it makes sense to add a critical illness rider or a standalone policy with a fixed payout.

4. Check Room Rent Capping: Make sure your policy has the facility of ‘No Room Rent Capping’. If the old base plan has a cap of 1%, remove it immediately by taking a rider or upgrading the base plan to avoid Proportional Deduction.