How often should you review health insurance cover?

Ayush is a young professional in his late 20s with a small family, comprising his wife and a child. He had taken a life cover after his child was born and Rs.4 lakh of health insurance. He is worried if this is enough and whether he should upgrade it. How frequently should this review be done?

Healthcare inflation is on the rise and the cover needs to be upgraded. The sum insured may prove to be too low to cover even a single hospital bill in the next few years, let alone hospitalisation expenses during retirement. The increase in healthcare costs makes it necessary to periodically review the health cover and upgrade it in line with the known current costs and expected future costs.

Postponing an upgrade to later years may prove to be expensive. Insurance companies will be happy to upgrade when Ayush is young and healthy. Upgrading at a later age may have a two-fold disadvantage. One, it will attract higher premiums. Two, if Ayush is diagnosed with a serious ailment like diabetes, thyroid, etc., the cost of an upgrade will be too high, or a higher cover may be refused by the insurance company as it might perceive the risk to be higher.


A single upgrade might need a higher premium that can hurt Ayush’s savings surplus. Instead, a targeted upgrade can be planned every 7-10 years. Ayush can make an investment instead of paying the premium and build a corpus that will fund this upgrade. He can then take a single premium upgrade periodically to bump up the cover, as required.

Alternatively, Ayush can divide his savings between a health cover and health corpus. The cover can be funded with the savings and upgraded periodically to cover high-cost diseases and other eventualities. The health corpus is simply an investment that is set aside to be used in case there is a need. If there is no event of ill health, the corpus can be added to the retirement kitty as he ages.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.