What is Health Insurance? Types, Benefits & How to Choose a Plan

Health insurance is a contract that covers medical expenses incurred due to illness, injury, or hospitalisation. It reduces the financial burden of healthcare costs for individuals and families.

Let’s understand through an example - In April 2023, Rajeev, a 35-year-old marketing executive in Pune, was hospitalised for dengue. The 5-day stay cost him ₹95,000. Fortunately, his health insurance covered ₹87,000. Had he not bought a ₹7,000/year plan from a private insurer, he would have emptied his savings.

This blog explores the concept, importance, types, and selection process of health insurance, with real-life examples and data, to help individuals, students, and families make informed decisions.

Understanding Health Insurance: The Basics

Health insurance provides coverage for medical expenses, including doctor consultations, hospitalisation, surgery, and sometimes even OPD (Outpatient Department, which refers to a section in a hospital or clinic where patients get medical care without being admitted for overnight stays) and maternity care. Policyholders pay a premium, and in return, insurers cover part or full the costs of medical treatments.

The main objective is to ensure access to quality healthcare without draining personal finances. In India, rising treatment costs make health insurance increasingly critical. Let’s understand with approximate data if we take health insurance:
 

Example: Rajeev’s total hospital bill was ₹95,000. His policy with a 10% co-pay meant he paid ₹9,500, and the insurer paid ₹85,500. His out-of-pocket cost was just 10%.

Types of Health Insurance Plans in India

Different types of health insurance cater to varied needs, including families, seniors, and critical illnesses. Choosing the right plan depends on your age, medical history, and budget.
 

Rajeev had an individual plan of ₹5,00,000. After hospitalisation worth ₹4,80,000, he realised a top-up plan of ₹5,00,000 for ₹2,000 more could've covered additional costs in future.

Why is Health Insurance Important?

Rising Cost - Healthcare expenses in India have been rising consistently. According to a 2022 report by the National Health Profile, private hospitalisation costs have increased by over 150% in the last decade. A simple surgery that once cost ₹70,000 can now easily go up to ₹1,50,000 -₹2,00,000. Critical care, like ICU charges, ventilator support, or specialised diagnostics, can drain even the best savings plans.

Financial Protection- Health insurance is not just a backup; it's a financial shield. It helps policyholders avoid the burden of massive out-of-pocket payments during medical emergencies. In a country where nearly 63 million people fall below the poverty line each year due to healthcare expenses (as per a NITI Aayog study), health insurance becomes a must-have, not a luxury.

No health insurance, no financial protection- Families without coverage often end up liquidating fixed deposits, breaking mutual funds, or taking personal loans at high interest rates. 

While insured individuals get access to quality treatment in private hospitals without worrying about costs, it ensures better outcomes and timely interventions.

Expense Comparison in Private Healthcare

The table given below will give you an idea of how much expenses are being covered for different surgeries and treatments: 
 

These are average figures and can vary by city and hospital tier. For example, a Tier-1 hospital in Delhi or Mumbai might charge 20–30% more than a hospital in a Tier-2 city.

Example:

Rajeev and his colleague Ramesh faced similar health issues in 2023. Both were diagnosed with gallstones and required immediate surgery. Ramesh, who didn’t have health insurance, underwent surgery at a reputed hospital and received a bill of ₹2,40,000. He had to dip into his savings and still needed a personal loan of ₹1,00,000 to cover the expense.

Rajeev, on the other hand, had a comprehensive health insurance plan with ₹5 lakh coverage and 90% co-payment. His total bill was ₹2,20,000, of which his insurer covered ₹2,10,000. Rajeev only paid ₹10,000 from his pocket, saving his family from financial stress.

How to Choose the Right Health Insurance Plan?

Choosing a plan depends on age, medical needs, family size, and affordability. Comparing plans is essential to ensure comprehensive coverage without overspending.

Focus on claim settlement ratio, hospital network, inclusions, exclusions, and premium increases with age.
 

Rajeev shortlisted three policies. Policy A offered ₹10 lakh cover at ₹9,000 with 96% claim settlement and 6 network hospitals. He chose it over cheaper options with fewer benefits.

Note- Higher coverage leads to higher premiums, but reduces the medical expenses.

Government vs Private Health Insurance

Public schemes like Ayushman Bharat for low-income families, while private insurers offer more flexible and comprehensive policies. Depending on income level and healthcare needs, one can opt for either or combine both.
 

Rajeev’s father is under Ayushman Bharat (free). For himself, Rajeev uses private insurance. Together, they are protected across the public and private sectors.

Conclusion: Health Insurance is a Safety Net for Every Indian

Health insurance protects you and your family from unpredictable medical costs. With policies available for as low as ₹500/month, it’s no longer a luxury; it’s a necessity. A smart plan today can prevent financial stress tomorrow.

Just like Rajeev, every individual, whether salaried, self-employed, or a student, should explore the right insurance plan. Aapki sehat aur savings dono safe honi chahiye.

Start comparing plans, check your eligibility, and invest in a cover that secures your future.

FAQs on Health Insurance

Q1. Is health insurance mandatory in India?
No, but it is strongly recommended due to rising healthcare costs.

Q2. Can I claim multiple health insurance policies?
Yes. You can split or claim sequentially from multiple insurers.

Q3. Can I increase my health insurance coverage later?

Yes, you can increase the amount insured or get a top-up/super top-up policy. However, increasing the base coverage may necessitate medical testing or result in higher rates, particularly if your age or health status has changed.

Q.4 Is maternity care covered by standard health insurance?

By default, most ordinary plans exclude maternity coverage. You can either purchase a maternity-specific insurance or add it as a rider. There is also a 9-month to 2-year waiting period before maternity benefits become effective.

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