What is Sum Insured in Health Insurance: A Complete Guide

Q: If my policy has unlimited restoration, do I still need a high sum insured?

Yes. Unlimited restoration supports but does not replace a high base sum insured. It mainly helps with multiple hospitalisations and often has conditions. A single large bill beyond your base cover would still need to be paid out of pocket.

Quick Review

Sum insured in health insurance is the maximum amount an insurance company will pay for covered medical expenses during a policy period (usually one year). It acts as the upper limit of coverage under the policy. If your total medical expenses exceed the sum insured, the excess amount must be paid by you (out of pocket).

According to recent market reports in 2025, the average sum insured (SI) in India has jumped from ₹13 lakh to ₹18 lakh in just one year. With nearly 45% of individuals now opting for similar covers, the “standard ₹5 lakh policy” is officially a thing of the past. This is a trend that’s also clearly reflected in our own health insurance purchase data.

But what exactly is this "sum insured," and why is everyone rushing to upgrade it? In this guide, we break down everything you need to know about sum insured in health insurance, from what influences it to the "hidden" clauses that could reduce your payout.

Factors That Influence Sum Insured in Health Insurance

Age and Life Stage

As age increases, so does the risk of chronic illnesses and surgical needs. Younger policyholders can start with lower coverage, but older individuals or those planning for retirement, should opt for a higher sum insured to handle substantial age-related medical costs.

Medical History & Pre-existing Conditions (PEDs)

If you or your family have a history of heart disease, diabetes, or hypertension, your likelihood of hospitalization is statistically higher. A larger coverage limit ensures that these anticipated treatments don't drain your personal savings.

Number of Insured Members

In a family floater plan, the sum insured is a shared pool. If one member has a major surgery, it could exhaust the limit for everyone else. More family members (especially seniors or children) require a higher total limit to protect the entire group.

City of Residence and Healthcare Costs

Healthcare expenses vary widely across cities. Treatment, room rents, and specialist fees are significantly higher in metro cities like Mumbai, Delhi, and Bengaluru. If you live in a high-cost urban area, you’ll need a higher sum insured in health insurance to ensure adequate coverage.

Medical Inflation

Healthcare costs in India rise by 10–14% annually. A limit that feels sufficient today may be inadequate in five years. Choosing a higher sum insured now (or a plan with a "No Claim Bonus") future-proofs your policy against escalating treatment costs.

Lifestyle Factors

Sedentary habits, high stress, smoking, or poor diet increase the long-term risk of lifestyle diseases. If your daily habits elevate your risk profile, a higher sum insured provides a necessary financial buffer for the health issues that may arise later.

What Happens When the Sum Insured in Health Insurance Is Exhausted?

When the sum insured in health insurance is fully used, your insurance coverage for the remaining policy year becomes limited or unavailable. However, the actual impact depends on the features included in your policy. Below are the different scenarios explained clearly.

Basic Health Insurance Policy: You Pay Out of Pocket

Once your sum insured is fully exhausted under a standard plan without add-ons:

No Further Claims Are Approved: Any additional hospitalization or treatment during the policy year will not be covered by the insurer.
All Expenses Are Yours: You must pay for any new medical costs entirely out of pocket.
Coverage Resets at Renewal: Your sum insured becomes available again only when the policy is renewed for the next year.

Restoration or Refill Benefit: Automatic Sum Insured Reset

If your plan includes a Restoration (Refill) Benefit, your coverage can be replenished when the sum insured runs out:

Complete Exhaustion: The sum insured is refilled only after it reaches zero.
Partial Exhaustion: Some plans restore coverage even if the sum insured is only partially exhausted after the first claim.Example: If you have a ₹15 lakh sum insured and spend half of it on heart surgery, the insurer restores the used 7.5 lakh for subsequent medical emergencies in the same year.

Super Top-Up Health Insurance: Extra Coverage Beyond the Base Sum Insured

When your base sum insured is exhausted, if you have bought a super top-up plan, then it will provide additional coverage after a predetermined deductible:

Activation: The Super Top-Up starts paying only when total medical expenses in a policy year exceed the deductible (base sum insured or out-of-pocket amount).
Coverage: Once triggered, it covers all eligible expenses above the deductible, up to its own sum insured. Example: Base sum insured: ₹5 lakh | Super Top-Up: ₹15 lakh → Total coverage in a year: ₹20 lakh. If expenses reach ₹12 lakh, the base policy covers ₹5 lakh, and the Super Top-Up covers ₹7 lakh.

Why Super Top-Up Helps:

Offers higher coverage at a lower premium.
Protects against large or multiple medical bills in a single year.
Ensures financial security even after your base sum insured is fully used.

Key Takeaway

If you choose a lower sum insured in health insurance, consider a Super Top-Up plan and check how restoration of sum insured works. These features provide extra coverage after your base limit is exhausted and ensure strong financial protection against high or multiple medical expenses at a lower cost.

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Health Insurance Terms That Can Affect Your Sum Insured

Cumulative Bonus

This rewards claim-free years by increasing your sum insured without raising premiums. While it grows annually, insurers usually set a limit, often ranging from 50% to 100% of the base sum insured. Note: Filing a claim may reduce or reset the bonus, though your base sum insured remains intact.

Copayment Clause

A fixed percentage of each claim must be paid by you, while the insurer covers the rest. Example: With a 20% copay on a ₹5 Lakh bill, you pay ₹1 Lakh and the insurer ₹4 Lakh. Some policies have mandatory copays for seniors, while others allow voluntary copays to reduce premiums.

Room Rent Caps & Proportionate Deduction

Many policies limit daily room rent, often as a percentage of your sum insured (e.g., 1%). If you choose a costlier room, all eligible expenses, including surgery, nursing, and medicines, are reduced proportionally, increasing your out-of-pocket costs.

Disease-Wise Sub-Limits

Insurers may cap payouts for specific procedures like cataracts, hernia, or kidney stone removal. Example: If your cataract surgery costs ₹80,000 but the sub-limit is ₹30,000, you pay the remaining ₹50,000, even with a high unused sum insured.

Key Considerations When Upgrading Your Health Insurance Sum Insured

Fresh Underwriting & Medical Screening: Insurers may require a health reassessment before approving a higher sum insured. Those over 45 or with new health conditions may need medical tests, and premiums could increase due to loadings.
New Waiting Periods for the Extra Amount: Any increase in sum insured is treated as a new policy portion. The additional coverage may have fresh waiting periods of up to 3 years for pre-existing conditions and specific diseases, along with the standard 30-day initial waiting period.
Timing and Renewal Window: Upgrades are usually allowed only at the policy renewal. Inform your insurer 30–45 days in advance to accommodate medical tests and paperwork.
Impact on No-Claim Bonus (NCB): NCB is often tied to the base sum insured. After an upgrade, some insurers recalculate it on the new sum insured, while others retain the old base. Always clarify how your bonus is affected.
Portability Challenges: When switching insurers with an upgrade, waiting periods already served apply only to the old limit. Any additional sum insured starts its waiting periods from scratch.

When to Review and Upgrade Your Health Insurance Sum Insured

Milestone Life Events

Major life changes like marriage, parenthood, or adding ageing parents to your plan require a higher sum insured, as more members share the coverage and seniors have higher medical risks.

Relocation to a Metro City

Moving to a Tier-1 city increases room rents and procedure costs. Upgrade your sum insured to avoid proportionate deductions due to room rent limits.

Lifestyle Habits

Personal habits like smoking, drinking, or a sedentary lifestyle can raise future health risks. While they may not affect your initial sum insured, choosing a higher coverage provides stronger financial protection against lifestyle-related illnesses.

Rising Medical Inflation

Healthcare costs rise faster than general inflation. If your sum insured hasn’t been increased in years, its real value in use has likely reduced. Reviewing and upgrading your coverage every 3–5 years helps maintain its effectiveness against rising medical expenses.

Career Transitions

Leaving a corporate job or starting a business removes group insurance coverage. You need a higher personal sum insured to protect your finances from unexpected medical costs.

Health Insurance Premium Comparison by Sum Insured

Health Insurance Policy	₹10 Lakh	₹15 Lakh	₹20 Lakh	₹25 Lakh
HDFC Optima Secure	₹ 13,300	₹ 14,060	₹ 14,725	₹ 15,342
Care Supreme	₹ 10,839	₹ 12,896	NA	₹ 15,218
Aditya Birla Activ One Max	₹ 7,964	₹ 10,148	₹ 10,791	₹ 11,214
Niva Bupa Reassure 2.0 Platinum +	₹ 9,093	₹ 11,616	₹ 12,734	₹ 13,195

Note: Premiums shown above are indicative and for an individual aged 25 years, residing in Delhi, with no pre-existing conditions. As seen above, increasing the sum insured from ₹10 lakh to ₹25 lakh does not increase premiums proportionately.

These plans are part of Ditto’s recommended picks, shortlisted using our internal evaluation framework.

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Choosing the Right Health Insurance Sum Insured: Ditto’s Take

Choosing the right sum insured amount depends on age, family size, location, lifestyle, health and budget. As a guideline, Ditto advisors recommend a minimum coverage of ₹15 lakh for individuals living in Tier-1 cities, while families with multiple members and adequate financial resources may consider ₹25–50 lakh for comprehensive protection.

Checking features like cumulative bonus and restoration benefits ensures your coverage remains adequate when you need it most. Regular reviews and timely upgrades help maintain protection against rising medical costs.

Frequently Asked Questions

How do I decide the right sum insured in health insurance for my family?

You should factor in your city of residence, number of family members, age, existing health conditions, budget, and hospital preferences.

Does a higher sum insured mean double the premium?

No. Increasing your sum insured in health insurance doesn’t lead to a proportional rise in premium. For example, upgrading from ₹5L to ₹10L may only raise your premium by 20–30%, not 100%. This makes it a smart financial move.

What happens if my medical expenses exceed the sum insured in health insurance?

If your expenses go beyond the available sum insured, you will need to pay the remaining amount out of your pocket. However, if your policy includes features like restoration/bonus or you hold a super top-up plan, you may still get additional coverage beyond the base limit.

If my policy has unlimited restoration, do I still need a high sum insured?

Yes. Unlimited restoration supports but doesn’t replace a high base sum insured. It mainly helps with multiple hospitalisations and often has conditions (e.g., it may trigger only after full exhaustion, apply only to later claims, or have limits for the same illness). A single large bill beyond your base cover will still be out of pocket.

Last updated on: 4 Jan, 2026