Health Insurance

Health insurance became one of the most critical components of financial planning in India as healthcare costs rose sharply across the country. Medical inflation, running at 10–14% per annum historically — significantly above general consumer inflation — meant that the cost of a hospitalisation event could easily wipe out years of savings without adequate cover. A serious illness or surgical procedure at a private hospital in a metro city could cost Rs 5–20 lakh or more, making an adequate health insurance policy a financial necessity rather than an option.

Health insurance policies in India were regulated by IRDAI and distributed by both standalone health insurers (like Star Health and Care Health) and general insurers offering health products alongside motor and property lines. Group health insurance through employers was also extremely common, though the coverage limits were often insufficient and tied to employment, meaning individuals lost cover between jobs or after retirement.

The sum insured under a health policy determined the maximum reimbursement for any single policy year. Selecting an adequate sum insured required considering the healthcare costs at the quality of hospital the insured expected to use, their city of residence (tier-1 cities had significantly higher hospital rates), the insured's age and pre-existing health conditions, and the family size. A single coverage of Rs 5 lakh was often considered minimal for urban families given the rate of medical inflation.

Key features to evaluate when comparing health policies included: the waiting period for pre-existing diseases (PED), which determined when conditions that existed before policy purchase would be covered — typically ranging from 2 to 4 years; the list of exclusions; the claim settlement mechanism — either cashless settlement directly with the hospital network or reimbursement after self-payment; the network of empanelled hospitals; and the No-Claim Bonus (NCB), which increased the sum insured or reduced the premium in claim-free years.

The Ayushman Bharat PM-JAY government scheme provided coverage of up to Rs 5 lakh per family per year for Below Poverty Line (BPL) households, representing one of the world's largest government-funded health coverage programmes. However, for the middle class, private health insurance remained essential as the government schemes were means-tested and the network hospitals for government schemes often did not include premium private hospitals.