When buying critical illness insurance, it is extremely important to choose the right sum insured. Since a critical illness insurance plan mainly serves as income replacement, you would want the payout to suffice in case you never work again due to your illness and treatment.
That now brings us to an important question –
What is the right sum insured in critical illness insurance?
Let’s answer this question in this article.
How much sum insured you can get in critical illness insurance?
First, let’s understand how much of a payout you can expect from a critical illness insurance plan. These days, insurers offer critical illness insurance coverage which starts at Rs 5 lakhs and goes right up to Rs 1 crore. Now, that is a huge range – so, how do you know the right amount for you?
The answer to that question honestly depends on your unique financial obligations.
In order to correctly determine the right amount of payout you need from critical illness insurance, you need to evaluate the following –
- Major loans
Take note of any major loans you have such as a home loan, car loan, or even an education loan for your children.
- Monthly household expenses
Next, add up all your monthly expenses for running your home. This will include your rent, electricity bills, groceries, and so on.
- Loss of income
Now, note any possible loss in income that you may suffer if you fall ill with a critical illness.
- Retirement funds
If you are impacted by a critical illness, you may not be able to work again. However, you will still need to plan your retirement years. Think about your lifestyle and how much money will be required for your retirement savings.
Let’s elaborate with the help of a quick example –
Ajay has a pending house loan amount of Rs 45 lakhs, his monthly household expenses are Rs 10,000 (adding up to Rs 1.2 lakhs for the whole year), and he has a car loan of Rs 5 lakhs. Ajay would ideally opt for a sum insured of around Rs 60 to 70 lakhs. This way, he can pay off all his debt if he develops a critical illness and still have some surplus of the payout left over for his retirement years, in case he cannot work again.
With the backing of a critical illness insurance plan, Ajay will not have to worry about his family’s financial condition if he falls seriously ill with a critical illness. Even if he stops earning, they can still pay all their debt and keep the home running. With that kind of peace of mind, Ajay can focus on getting better.
Do also ensure to keep your health insurance policy renewed each year too. If you have not bought coverage yet, you can easily compare health insurance policies and critical illness plans online and pick the ones that are right for you.
We hope that this information has been helpful for you today. Take care.