Sum Insured in Health Insurance: Meaning & Importance
By Okbima 18 May 2023 48

Sum Insured in Health Insurance: Meaning & Importance

The total amount that a medical insurance provider can reimburse the insured throughout this policy term for the medical expenditures for the insured under a specific health insurance policy is known as the "sum insured" in health insurance. 

For instance, suppose someone buys a medical insurance plan with an Rs. 5 lakhs sum covered, becomes ill, and needs to be hospitalized. Let's say the hospital cost totals Rs. 4,45,000 instead. As the sum falls under the sum-covered limit, the insurance provider will cover all expenses. But, if the total cost of hospitalization is Rs. 7.5 lakh, then the insurance provider will pay Rs. 5 lakhs, leaving the remaining Rs. 2,50,000 to be covered by the patient.

Choosing The Correct Sum Insured Amount In Health Insurance Is Important

In a medical emergency, the uninsured may quickly deplete their money due to India's soaring healthcare costs. Even though getting health insurance is crucial, picking the appropriate sum covered is just as crucial.

A case study will help us grasp this. Consider the case when you successfully and on time purchased health insurance. You submit a claim to the insurer when a medical emergency occurs. But, it comes as a shock to learn that you are still responsible for the remaining balance after the insurance company has paid its share of the sum covered. It seems to be stressful. 

The moment this realization hits you, you realize that while you were wise to get health insurance coverage on time, you were less smart to select the appropriate total insured amount. As a result, it is crucial to pick the appropriate sum insured in the health insurance amount to avoid such occurrences and enable the insurance provider to pay the highest possible sum in the event of a claim. 

The insured can have peace of mind knowing they selected the correct amount of insurance, which also protects their future investments. These are some additional advantages of selecting the appropriate amounts insured:

In a medical emergency, the sum covered protects the insured. 

Protects the insured if a family floater medical insurance plan is needed. Because the family shares the health insurance policy's total insured amount under a family floater policy, a lesser total insured amount might not be sufficient. Therefore, the higher insured amount keeps all family members adequately protected.

How Much Health Insurance Should You Buy?

It's simpler to say than to accomplish when deciding on the appropriate sum insured under health insurance. Even if there isn't a simple method or step-by-step procedure for figuring out the perfect sum insured in health insurance total amount that someone needs, there are some guidelines that may be used to get at it quickly:

Chosen Health Insurance Plans

You may select from a variety of insurance coverage kinds on the market. For example, personal plans, family-floater policies, employer group policies, and critical illness policies exist. As a result, the kind of policy you select will affect the amount protected under your health insurance coverage. For example, when more persons are insured under a single policy for a Family-floater, the total amount insured may be slightly larger than it is for an Individual Plan.

Choose Your Age Group For Health Insurance

Getting health insurance when you're young is advised. In addition to being more inexpensive, fewer coverage characteristics would be needed then. Experts say an amount insured option of between Rs. 2 and 3 lakh is sufficient for a person in their 20s. Yet when the policy is renewed, the sum covered might be raised.

Choose The Insurance Amount According To Income

Choosing health insurance coverage with a sizeable but inexpensive insurance payout is advised. Experts recommend that consumers get health insurance coverage with a premium of at least 2% of their yearly income. For instance, if a person's yearly salary is Rs. 10 lakhs, they should choose a health insurance plan with a maximum 20,000 rupee premium.

Members Covered By The Plan

Unlike individual or senior citizen policies, some plans, such as family-floater and company or group plans, provide coverage for a greater number of covered people. Consider the number of persons the plan is intended to cover when choosing the sum insured in health insurance. As a result, you will have some flexibility to spend the sum covered for any medical emergencies that may arise throughout the policy term. Fewer claims might quickly deplete a lower insured amount. Your out-of-pocket costs can rise as a result of this.

Depending On Your Lifestyle, Choose Your Insurance Amount

Depending on their way of life, purchasers of health insurance policies must select a sum insured in health insurance. For example, the person should choose a healthcare insurance policy that safeguards them from numerous lifestyle diseases if they experience high stress, have a job that prevents them from exercising, don't eat a healthy diet, or often drink alcohol.

Take Into Account Family Members' Medical Histories

Insurance purchasers should choose a bigger sum covered choice if their relatives have a track record of medical problems. The insurance buyer will benefit from having enough protection for the ailments mentioned above as a result. In addition, it is advised to get a supplementary critical illness insurance plan and primary health insurance coverage in case any of these conditions qualify as critical illnesses. That's because typical health insurance plans sometimes don't provide enough protection against serious illnesses.

The Distinction Between The Sum Insured And The Sum Assured 

A non-life insurance policy's amount insured is its value, whereas a life insurance policy's sum guaranteed is its value. According to the indemnity principle, the sum insured in health insurance pays the insured in the event of hospitalization and reimburses or compensates them. As opposed to the sum assured, which is a predetermined amount paid to the policyholder in the event of an incident by the health insurance provider. On the other hand, the sum assured is a monetary payment made to the insured after the insurance period.

The Benefits Of Picking The Appropriate Sum Insured

You will receive the following advantages if you choose the appropriate amount.

Financial Protection To The Fullest

Your out-of-pocket costs may rise due to an inadequate insured sum. You must select the appropriate insured amount to be economically tension-free about health difficulties. It's because the provider will assist you in paying for any necessary treatments and other coverages outlined in the plan.

No Need To Deal With Several Claims

The regulator has permitted several claims to pay the total cost of a medical occurrence, as was already noted. Nonetheless, you ought to use this as a last resort. Time is needed to make several assertions. In addition, financial aid may not be available when you need it most due to the claim settlement procedure. By selecting an adequate amount, you may prevent this difficulty.

The Choice To File Claims Up Until The Policy's Expiration Date

You may be subject to financial obligations for additional claims if you have a lower sum insured in health insurance that quickly runs out. By choosing the appropriate amount of coverage, you can make claims throughout the policy's term without purchasing more insurance.

Which Period Is The Greatest For Increasing Health Insurance Coverage?

It is now the appropriate time to enhance your medical insurance if you think it is insufficient. Because of two primary factors, it is advised that you renew your healthcare coverage when you are young. First, upgrading your health insurance coverage in later years will be expensive because you'll have to pay a greater premium. Second, your insurance company can refuse to cover your health insurance because of your weakened immune system in your latter years.

When Is It Possible To Raise My Health Insurance Coverage Amount?

If you are not content with the amount insured, health insurance providers will let you raise it. When your health insurance is renewed, you may do the same. But, you must also be aware that when your coverage increases proportionately to the sum insured in health insurance amount, the insurer's liability also grows. Because of this, your premium will be greater. In case of a change in requirements, the firms enable you to raise and decrease the total insured amount.


Hence, in general insurance, the term "sum insured" refers to the maximum amount for which you may file a claim to pay for the medical care covered by the policy. Till the sum insured in health insurance is depleted, or the plan terminates, whichever comes first, a portion of it may be utilized, with the remaining money being accessible for the subsequent claim.

A health insurance policy's terms and conditions specify how one or more insured people may use the sum covered. Floater plans it is flexible, which means that the accessible amount of the sum insured is available to all insured members and is not set for any particular member.

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