What is Sum Insured in Health Insurance?

Have you ever wondered how much your health insurance will cover if you actually land in the hospital? That’s where your sum insured comes into play. It’s not just a number on your health insurance policy, it’s your financial safety net that protects you when life throws unexpected medical bills your way.

Have you ever wondered how much your health insurance will cover if you...

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Sum Insured in Health Insurance

The sum insured in health insurance is the sum or the maximum amount your health insurance company will pay for your medical expenses in a year. However, if your medical bills exceed that amount then you have to pay the difference.

For example, if your sum insured is 3 lakhs and you’re hospitalised due to an accident with medical expenses amounting to 3 lakhs, then your insurance company will cover the cost. But, if those bills amount to 5 lakhs, then the insurance company will only provide the sum insured, which in this case is 3 lakhs, and the remaining costs have to be paid out of your own pocket.

Types of Sum Insured

There are two kinds of sum insured - individual sum insured and floater sum insured.

Individual sum insured

applies to only one person, the sum or the entire amount can be claimed only by that person in the policy year.

Floater sum insured

applies in cases of family floater plans where more than one person is insured in the policy. The sum insured covers all members in the policy which means any member can use it until the limit is exhausted. For example, if the sum insured is 10 lakhs, then any one or all members can use it.

Why is Sum Insured important?

It acts as a financial shield or a safety net against healthcare costs.
A higher sum insured means more protection, especially if you are at risk of frequent hospital visits or illnesses.
At first it may seem like low sum insured can help you save on premiums, but it may fail to be a safety net for
you resulting in you having to pay huge expenses in the future.

Difference between Sum Insured and Sum Assured

Along with sum insured, you may come across the word sum assured as well. Sum assured is the fixed amount that your insurance policy will cover. It can be easy to confuse the two but they both hold different meanings Let's take a look at the explanation below:

	Sum insured	Sum assured

Insurance type	General insurance like Health, Motor, Travel, Home	Life insurance
Definition	Maximum amount that the insurance company will cover	Fixed amount paid by insurance company
Benefits	Pays for what you actually spend	Gives fixed amount of money in lump sum
Purpose	Takes care of hospital bills and other costs	Acts as a financial safety net for your loved ones
Settlement	Settled based on actual bills or expenses	Settled as a fixed amount and a one-time payment
Flexibility	Flexible as claim amount can vary	Not flexible as it is a predetermined amount

How to choose the right sum insured

Choosing the right sum is very important, you need to make sure that it is high enough to cover unexpected medical emergencies while at the same time making sure it does not put a strain on your savings. Here are a few things to consider when deciding on the sum insured:

Your age & health status

Younger people with no major illnesses can go for a lower sum insured but if you are over the age of 40 and have certain health conditions it would be wise to select a higher sum insured.

Your area of residence

Healthcare costs differ from city to city, for example, cities like Mumbai and Delhi would have higher sum insured than small towns.

Family size

A larger family with kids or senior parents will need more coverage. In these cases it is wise to consider plans that have at least 10-15 lakhs just to be on the safer side.

Treatment preferences

Your treatment preference will also help you determine whether you need a higher or lower sum insured. For example, if you prefer a private hospital with high-end facilities then your sum insured needs to reflect that.

How to claim your Sum Insured

You raise a claim after hospitalisation or treatment.
The insurance company will then check these claims and confirm whether these fall within your available sum insured.
If it does, then they approve the claim and reimburse you or settle it with the hospital directly.
If it does not, they provide coverage up to the limit in your policy and you have to pay the rest.

Conclusion

The sum insured is not just a number on your policy, it is your financial safety net that will help you with your medical expenses. Choosing the right sum insured can make a big difference when life throws an unexpected health crisis your way. Understanding what sum insured does in your policy will also help you plan not just your future better but your loved ones too.

Frequently Asked Questions

How is the sum insured calculated?

Your sum insured will be calculated based on the type of health insurance you are purchasing. For example, if you buy a family floater plan, the age of the eldest family member, number of members covered in the policy, and the area of residence will be taken into consideration.

Can I increase my sum insured after buying a policy?

Yes, you can. Most insurance companies will allow you to increase the sum insured but only at the time of renewal of the policy.

Is sum insured and coverage the same thing?

Not exactly, sum insured is the maximum amount your insurance company will pay, while coverage refers to the things that are included in your policy like ambulance charges, hospital bills etc.

What will happen if my bills exceed the sum insured?

If your bills exceed the sum insured, the insurance company will only pay the maximum amount as per your policy, the balance will have to be paid out of your own pocket.

Do I have to pay tax on the sum insured?

No, the sum insured is not seen as income and hence, it will not be taxed.

What if I change my mind and want to reduce my sum insured?

You can change or reduce the sum insured, but it will only be possible at the time of policy renewal.

Written by Roocha Kanade

2.5K Linkedin Followers

Reviewed by Dr. Harshita Dahiya

Health Insurance content enthusiast who turns complex topics into easy, binge-worthy reads—fueled by SEO, creativity, and way too much chai! Loves juggling multiple projects, cracking impossible deadlines, and sprinkling humor into the mix. When not geeking out over digital trends, you'll find her lurking on Quora and Reddit, planning the next getaway, or passionately decoding all things health and insurance!