How much health insurance is good

Smarty.

Can you explain the second part, didn't get it.

Let me answer in a different order:

1. When to take an insurance - life insurance is a way to protect your dependents from an income loss due to death. So ideal time to take a life insurance cover is when you have dependents - parents, spouse / kids, others. The earlier you take the better it is - lower premium and better protection.

2. How much it costs per year - function of how old one is and how much cover one takes. Younger one is, cheaper it is.

3. What policy and how much coverage to take - get only a pure term insurance / protection plan. Steer clear from endowment / ulips / traditional / money back kind of policies. A scientific basis to calculate how much coverage is to figure out your earning potential till you retire and work backwards. The alternate is to evaluate how much annual expenses / liabilities your dependents will have to pay off in your absence, factor for inflation and also other loans / large spends like kids education and then calculate present value of value. The rule of thumb that people keep talking about is 10X of your current annual income. I think while that may simplify the answer, may not be accurate. Alternatively you can take a policy now and then get another after a few years as the income / expenses increase or there are lifestqge changes- getting married, having kids etc.

4. How long should the policy cover - only take till your working age - let’s say from now to when you are 55 / 60. That’s the protection on income your family might need. Let me give an example - let’s say your savings and investments at 55 reaches 25 cr, a 1 cr policy won’t change any outcome materially. Also the probability of death event (and premium) increases when the coverage is for longer - so stick to working years and think of it as income protection.

5. What addons to take - some to consider - add on for disability, critical illness etc.

If you can afford it go for a health insurance with as high a sum insured - say at least 1 Cr. Refer the above image. Expenses / medical inflation are hard to predict and plan for. Better to be prepared.