What it is
The cover amount of a health insurance policy is the money the insurer agrees to pay towards covered costs. It is often called the sum insured. Choosing it is one of the main decisions when you buy a policy.
The IRDAI (Insurance Regulatory and Development Authority of India) publishes guidance for policyholders on buying health cover. Its pages do not give a formula or a fixed rupee figure for the right amount. They do set out checks that should shape your choice.
How it works
Insurance, in the regulator’s description, is a promise to compensate the insured when a covered event occurs, on specified terms and conditions. That wording matters. The cover amount only helps for costs the policy actually covers, so the terms count as much as the number.
Before settling on an amount, the IRDAI’s advice points to these steps:
- Read what is covered and what is not. The regulator asks buyers to read the brochure or prospectus carefully and to ask for the full facts on scope of cover and exclusions.
- Stay within what you can afford. It says to consider only products you can afford and to beware of tall promises and over-selling.
- Know all your payments. Understand what you must pay when you take the policy, when you surrender it and when you make a claim.
- Be clear about your needs. The person advising you should understand what you are seeking.
Comparing quotes for a few different cover amounts, with the same exclusions and terms, makes the trade-off between premium and cover easier to see.
Who you buy from
The IRDAI says to check that the company selling the policy is registered with it. You can buy through a licensed agent or broker, and you can also buy directly from the insurer. Ask the agent or broker for an identity card or licence, and confirm they are authorised for the type of insurance being sold.
Intermediaries are expected to give all material information on a proposed cover so you can decide, with complete disclosure and transparency. They also help with policy servicing and claims after the sale.
What it means for you
Treat the cover amount as one part of a package. A larger amount with exclusions that rule out the costs you worry about may serve you worse than a smaller amount with clearer terms.
Some practical habits from the regulator’s guidance:
- Fill in the proposal form yourself and never sign a blank one. Ask for an explanation of any term you do not understand.
- If you pay premiums through an intermediary, check they are authorised by the insurer to collect them and insist on a duly signed receipt immediately.
- Read the policy document thoroughly once it arrives.
- Ask about the documents and procedure for making a claim, including any other agencies you may need to inform besides the insurer.
The IRDAI also notes that health policies with a term of three years or more have a free-look period, during which you can return the policy if you disagree with its terms. Check the length of that window in your policy document.
Premium is a regular cost, so a monthly or yearly budget is a sensible starting point. Neither the regulator nor this article can say what amount suits your family.
Common mistakes to avoid
- Choosing a plan on the strength of an agent’s big promises without reading the brochure.
- Ignoring exclusions and looking only at the headline cover amount.
- Buying a plan whose premium you may struggle to keep paying.
- Signing a proposal form you have not filled in or fully understood.
- Paying an intermediary without confirming authority to collect premium or getting a signed receipt.
