The Costly Truth About Medical Insurance
Many people assume they’re well protected just because they have a health policy. But one wrong choice can undo years of savings. In India, where healthcare inflation runs at 12–14% annually, almost double the regular inflation rate, even an INR 10–15 lakh cover can feel inadequate within a few years. The key is not just buying insurance, but structuring it right.
The most common mistakes are rather easy to spot:
- Underestimating medical inflation: A surgery that costs INR 5 lakh today could cost INR 10–12 lakh a decade later. Keeping the same cover year after year means the gap comes from your pocket. The smarter solution is to combine a base health plan with a super top-up, extending cover to INR 50 lakh or even INR 1 crore without making premiums unaffordable. And from September 2025, health insurance premiums have been exempted from GST, making cover about 18% cheaper. This reform is an opportunity to upgrade protection without a higher cost burden.
- Cutting back on coverage to save premiums: Letting a policy lapse or reducing the sum insured may save in the short term, but restarting cover later brings higher premiums, waiting periods, and possible exclusions. Treat health insurance as something as essential as rent or groceries, and not something that is optional.
- Mixing insurance with investment: Endowment or savings-cum-insurance plans give neither enough protection nor attractive returns. Keep insurance pure with a term plan and comprehensive health cover. Then use mutual funds to grow your wealth and stay ahead of inflation.
- Ignoring liquidity for uncovered costs: Even with insurance, exclusions and waiting periods mean some costs are yours to bear. Maintaining 6–12 months of expenses in liquid mutual funds ensures you don’t have to sell long-term equity holdings in a crisis. If a larger need arises, a loan against securities can provide access to funds without breaking compounding.
The solution lies in a balanced approach: adequate health cover, a term plan for protection, and investment buffers that cover what insurance does not. Many families know the pieces but struggle to put them together, and there can be multiple confusions: how much cover is enough, which funds to pick, when to top up, or how to build liquidity alongside.
That’s where guidance helps. At Yudhajit Financial Services, we work with families to map healthcare inflation, select the right mix of policies, and align them with mutual fund strategies and liquidity planning. The result is simple: when a medical emergency arrives, your policy absorbs the shock, not your wealth.