Decoding Healthcare in India: Part IV

Part IV: Insurance — Your Single Most Important Financial Protection

UdaipurTimes, Oct 14, 2026 - Health insurance offers financial protection against unexpected medical expenses, ensuring access to quality healthcare without putting excessive pressure on savings. Having insurance offers peace of mind especially when you are feeling distresed, and safeguards you against rising healthcare costs.

To read Part III, click here

Upto Upper Middle Class: Why Insurance Is Not Optional

The instinct of many Indians is to see insurance premiums as money lost when no claim is made. This thinking is a dangerous error in understanding. Insurance is not an investment it is protection. You do not expect your house to catch fire every year, but you insure it anyway. Your health deserves the same logic. Rich people may take insurance policy or may not, as anyway they can afford the best treatment when needed. But up to the middle class all persons should take medical insurance as for them affordability is always in question.

Medical costs in good hospitals today are staggering. A single bypass surgery, a complex oncology treatment course, or a serious accident can easily cost Rs 15 to Rs 50 lakhs or even more. Even families with reasonable savings find themselves completely wiped out, forced to sell assets, borrow from relatives or compromise on the quality of treatment or run towards unproven treatment through superstitions and wrong beliefs because they had no coverage. If the claim never comes, count yourself fortunate.

If one cannot afford the premium, then go for government schemes.

How to Choose the Right Insurance Company

Not all insurance companies are equal and the difference is most visible precisely when you need them most: at the time of a large claim.

The real test of an insurance company is not how smoothly it sells you a policy but how fairly and efficiently it settles a claim of Rs 25 to Rs 50 lakhs and more. Ask around. Speak to people who have filed large claims not just small ones. A company that processes Rs 2 lakh claims quickly may behave very differently when the bill is Rs 40 lakhs. The company which was good once upon a time may not be good always. So do current market research thoroughly. Ask your friends and family and insurance brokers who have experience of big claims recently.

Be cautious about:

• Small companies that lack the financial capacity to absorb large losses
• Government companies that have historically struggled with claim fund availability but otherwise are not bad
• Marginally lower premiums from companies that are known to reject or delay high-value claims

One revealing test: look at how the company communicates claim rejections. A professional company provides detailed, reasoned explanations. An unprofessional one sends a one-line rejection with no substance.

Choose a company where claim processing is handled by named individuals, not anonymous "processing teams." Accountability matters. Ask your broker or the salesperson of the insurance company to show a  draft claim rejection letter of one of their patient. Companies whose officers refuse to show you  the draft rejection letter on the pretext of confidentiality should be eliminated from your shortlisting. Ask the insurance company whether at the time of claim, a specific claim officer will be allocated and with whom can you talk over phone and correspond on mail. If not then reject that company. Get in writing from the insurance company that once a judgement of Bima Lokpal/High Court/Consumer Court comes out it should be honoured for future similar drug or treatment, unless they have appealed against it.

Choosing a Broker/Agent and Why You Must Be Very Careful

The insurance broker/agent is the person who guides you through policy selection and, critically, should support you through the claim process. In practice, many brokers have very limited knowledge, make verbal promises which they cannot keep, and disappear or become unhelpful precisely when a complex claim needs to be processed or when the insurance firm is not behaving rationally.

A few key principles apply here. First, never use your bank as your insurance broker. Bank officers rotate every three to four years, there is no continuity of relationship and the policies banks typically sell are group policies with significant limitations.

Second, insist on a full-time broker who represents multiple insurance companies not a part-time agent or one tied exclusively to a single insurer. Third, demand that everything a broker promises be put in writing on mail by the insurance company. If they bring a company sales representative to explain the policy rather than explaining it themselves, that tells you they lack independent knowledge.

Ask your broker for five to eight references of clients whose claims exceeded Rs 30 lakhs and who were satisfied with the support received. If they cannot provide this, be cautious.

If you are confident and well-informed, you can manage the claim process yourself. The broker's value is most visible for complex cases so choose one who will genuinely be there when it counts. Generally, an insurance broker gets 15-25% of the premium as commission from the insurance firm from the premium you pay, so they are duty bound to give you the service. Insurance companies normally do not allow a change in your broker in most cases, which is not correct. So, choose your broker right as it is a long-term association,

When to Take Coverage

Insurance should begin from birth. There is no minimum age for coverage. In fact, policies taken early carry lower premiums and have fewer pre-existing condition exclusions. Even children can get into medical issues and accidents like any adult.

How Much Coverage To Take

As for the coverage amount, the guiding question is this: what is the amount you genuinely cannot afford to pay from your own savings at a good hospital for a serious illness? That is your minimum. Take the insurance policy for the amount which you cannot afford or if you spend then it will be a major strain on you financially.

Those who are economically challenged can rely comfortably on government medical schemes which, however, should be renewed annually without fail. People below the middle class can take Rs 10 lakh to Rs 20 lakh floating policy and also register with government medical schemes.

Most middle class people are currently found to have taken policies worth Rs 5 lakh to Rs 10 lakh. This should anyway be affordable for them for a medical purpose if the need arises. So they should go for at least Rs 25 lakh to Rs 50 lakh floating policy.

For the upper middle class, in today's environment an individual coverage of Rs 30 lakh to Rs 50 lakh per person is a sensible baseline. For a couple, a floating policy of Rs 50 lakhs to Rs 1 crore deserves serious consideration. The good thing is that beyond a certain coverage level, the premium does not increase proportionately so the incremental cost of higher coverage is often surprisingly reasonable.

As for the rich, the decision to take an insurance is their prerogative because they can afford medical cost whenever needed.

A critical practical note: premiums rise steeply with age and with existing medical conditions. The cheapest time to buy comprehensive coverage is when you are young and healthy. Waiting is always more expensive.

Understanding Your Policy — Key Features to Know

There are many types of insurance policies in the market, like normal medical policy, personal accident policy, critical illness policy, etc, etc. Ask your insurance broker the details of all such policies.

Several policy features rip up policy-holders who do not read carefully. Below are some of the features explained. So, check for all.

Sub-limits cap is what the insurer will pay for specific treatments, regardless of the total coverage. A policy with a Rs 25 lakh cover but a Rs 2 lakh sub-limit on room charge can leave you with a very large out-of-pocket bill. Or a Rs 5 lakh sub-limit on modern treatment can deprive you of your genuine claims when you really expect them to pay. Policy with sub-limit is slightly cheap.

Co-payment clauses require you to pay a percentage of every claim yourself - often 10 to 20 per cent - which can add up significantly for expensive treatments and recurring treatments, particularly in cancer treatments. Policy with co-payment clause is also significantly cheap.

Top-up plans work on a similar principle to super top-ups, kicking in once a threshold is crossed, but usually apply that threshold per illness or hospitalisation event rather than cumulatively over the year, which is why super top-up plans, discussed below, are generally the better choice for most families.

Super top-up plans are underused but powerful. They kick in after your base policy limit is exhausted and can dramatically increase your total coverage at a modest additional premium. But it needs to be understood well vis-a-vis a normal policy of same value. Super top-up policies most of the time do not give No Claim Bonus by doubling the value of policy. Also they may not give automatic restoration value on finishing the original value .These super top-up policies also many times have limits on room charge. So, understand in detail as what is good for you.

Inflation protection is essential. A policy that does not automatically adjust its cover for inflation will effectively lose value every year. Ensure your policy has a built-in escalation clause.

Modern treatments  inclusion— robotic surgery, targeted therapy, immunotherapy — may not be covered by older or budget policies. Verify coverage for these before selecting.

Floating Insurance Policy

A floating policy covers the entire family under a single, shared sum insured, rather than allotting each member a separate, fixed amount. This is usually more cost-efficient than buying individual policies for each family member, since the full cover is available to whichever member needs it in a given year. The trade-off is that if two or more family members require large hospitalisations in the same policy year, the shared cover can get exhausted faster than it would under separate individual policies. So, it is worth weighing your family's health history before choosing floating over individual cover.

Annual travel internationally policy is worth considering if you travel internationally frequently. This will covers treatment abroad.

Declarations and Delay in Premium Payment: The Point of No Return

One of the most common and most avoidable causes of claim rejection or policy cancellation is incorrect declaration at the time of policy purchase. Do not hide pre-existing conditions in the proposal form. Do not allow your broker to fill the form on your behalf without your careful review. Do not sign a blank form.

Keep a copy of your proposal form permanently accessible. When you are unwell and explaining your medical history to a treating doctor, your description of your pre-existing conditions must align exactly with what you declared to your insurer. A contradiction between the two, even an inadvertent one, can result in the entire claim being denied or even the whole policy can be cancelled by the insurance company.

Similarly, if there is a delay in payment of premium, especially when you have a running claim, then the insurance firm will be very prompt to cancel your policy.

Honesty at the time of purchase and payment of premium in time protects you from any cancellation of policy.

Claim Processing — Know the Rules Before You Need Them

Cashless hospitalisation at network hospitals is almost always preferable to reimbursement. Deductions are lower, paperwork is simpler and the financial burden in the moment is greatly reduced. However, be aware that the insurance company may send a representative to verify the patient, which can introduce delays in approval so initiate the process as early as possible.

For non-network hospitals, insurers frequently disallow certain charges, resulting in significant deductions from the reimbursed amount. Keep all original documents. Understand that claims can cover pre-hospitalisation, hospitalisation and post-hospitalisation costs. There are normally days limit for claiming these costs under these three categories. It may vary from policy to policy or insurance company to company.

If your claim is wrongly rejected, you have a structured escalation path: first, the same claims processing department; then the company's Grievance Redressal Officer; then the Bima Lokpal (Insurance Ombudsman); then Consumer Court; and, if necessary, Civil Court or High Court. Time-bound deadlines apply at each stage, so act promptly.

In case you are not confident of handling the insurance claim effectively and your insurance company is harassing you then you may take the help of some professional companies in India who give this service with a charge based on success fee.

Tomorrow read Part V: The Indian Medical System — A Balanced View

Rajesh Chaplot is the recipient of:

• Pravasi Bhartiya Samman Award 2019, the highest Non-Resident Indian Award, conferred upon him by the President of India
• Golden Jubilee Award 2020, the highest Civilian Award, conferred upon him by the President of Uganda