Health Insurance

Health Insurance Policy in India

Health insurance helps to cover medical expenses like hospital stays, doctor visits, and treatments, protecting people from high healthcare costs. In India, healthcare costs are rising by about 10% annually, making health insurance more important than ever.

By 2021, over 514 million Indians had health insurance, but still, more than 60% of medical bills are paid out-of-pocket. This shows the need for better coverage, especially since a hospital stay in a city can cost over ₹30,000.

The government aims for full health coverage by 2030 with programs like Ayushman Bharat, showing that health insurance is now essential for India’s middle class.

In 2022, over 72% of health insurance policies were for individuals, proving that people are becoming more aware of their healthcare needs. Research also shows that without insurance, many delays or avoid medical care, leading to worse health and higher long-term costs.

Health insurance not only provides financial security but also offers tax benefits. Under Section 80D of the Income Tax Act, individuals can save up to ₹25,000 per year (₹50,000 for senior citizens).

With the rise in lifestyle diseases like diabetes, affecting over 77 million people, and heart diseases causing nearly 28% of deaths in India, health insurance is now an important part of financial planning.

Types of Health Insurance Plans in India

Health insurance plans in India can be broadly classified into individual health plans, family floater plans, critical illness policies, group insurance, and senior citizen plans. Each of these categories serves specific needs, ensuring that individuals and families can select coverage that matches their health requirements and financial capacity.

According to a study, 75% of health insurance policyholders prefer family floater plans, while individual plans are mostly chosen by young professionals and first-time buyers.

India’s health insurance market has seen rapid growth in recent years, driven by increasing medical costs and rising awareness of the importance of health coverage. As of 2023, over 514 million Indians are covered under health insurance policies, a sharp rise from previous years. Yet, this still accounts for only 38% of the total population, indicating significant room for growth.

India’s health insurance industry, valued at approximately INR 55,000 crore in 2022, is expected to grow at a compound annual growth rate (CAGR) of 17% between 2023 and 2027. With a market of over 30 insurance providers offering diverse plans, it is vital for consumers to understand the types of health insurance available.

Family floater plans allow the entire family to be covered under one policy, with a common sum insured shared by all members.
Approximately 67% of families in India opt for family floater policies due to the convenience and cost-effectiveness, as premiums for these plans tend to be 30-35% cheaper than purchasing individual policies for each family member.
The average sum insured for family floater policies is around INR 10 lakh.

Individual health insurance covers a single person and provides a sum insured that can be claimed in case of hospitalization.
The most common sum insured in individual policies ranges between INR 3 lakh to INR 5 lakh.
According to IRDAI data, individual plans account for around 40% of total health insurance premiums collected annually.
These plans are ideal for people who do not have dependents or have specific health conditions requiring individual coverage.

Group health insurance is offered by employers to cover their employees, and often their families as well.
Nearly 65% of corporate employees in India are covered under group health insurance policies.
Premiums for group policies are typically lower than individual or family plans, and these policies often come with additional benefits such as maternity cover, wellness programs, and preventive health checkups.
In 2023, around INR 18,000 crore was spent by Indian companies on group health insurance.

Senior citizen health insurance plans have higher premiums due to the increased health risks associated with ageing. It is designed for individuals aged 60 and above.
These policies cover pre-existing conditions, hospitalization costs, and post-hospitalization care.
In India, the demand for senior citizen health plans has been rising, with over 1.5 million such policies sold in 2022 alone.
However, the claim rejection rate for senior citizen policies is around 12%, largely due to non-disclosure of pre-existing conditions.
India's growing healthcare needs and inflation in medical costs that rise by 10-15% annually make it crucial for every individual to consider health insurance.

Critical illness plans offer lump sum payments upon the diagnosis of serious illnesses such as cancer, heart disease, or organ failure.
These policies are often supplementary to other health insurance plans. In 2022, nearly 12% of all new health insurance policies issued were critical illness plans.
The premiums for these policies tend to increase with age, and the claim ratio for critical illness policies has been estimated at 70-75% in recent years.

By selecting the right health insurance plan based on specific needs, families and individuals can save on healthcare expenses and ensure timely medical care when needed.

At BTW Financial Services and IMF, we provide expert guidance to help you choose the best health insurance plan tailored to your requirements.

How To Choose Best Health Insurance Plan In India

Choosing the right health insurance plan in India can be challenging. Especially when so many options are available. With healthcare costs rising, purchasing the right health insurance policy is more important than ever.

In 2023, healthcare inflation in India was 14%, among the highest among Asian countries, making insurance essential for financial security. According to the Insurance Regulatory and Development Authority of India (IRDAI), only 37% of Indians have health insurance by 2022.

1. Assess Your Coverage Needs:

Health insurance plans in India range from basic coverage to more comprehensive policies.
A survey by IRDAI found that over 40% of policyholders were underinsured, meaning they lacked adequate coverage for major medical expenses.
Consider your family size, age, pre-existing conditions, and lifestyle. If you have dependents, look for family floater policies, which provide coverage for all family members under a single plan.

Tip: Individuals above 60 often need higher coverage. A study by Health Insurance Experts India in 2023 suggests that senior citizens should opt for policies with a sum insured of at least ₹10 lakhs to cover the growing cost of treatment for chronic diseases like diabetes and heart conditions.

2. Compare Premiums and Affordability:

Premiums vary significantly depending on factors like age, sum insured, and add-on benefits.
As per a 2022 report by PolicyBazaar, the average premium for a basic health insurance plan for a 30-year-old individual starts at ₹8,000 per annum for coverage of ₹5 lakhs.
For family floater plans, this increases to ₹15,000 per annum. However, don't choose solely based on the lowest premium. Often, cheaper plans come with higher deductibles or limited benefits, which could lead to out-of-pocket expenses.
A balance between affordable premiums and sufficient coverage is essential If you want to know more about this you can connect with our insurance advisor.

3. Check the Hospital Network:

The insurer’s hospital network can significantly impact your choice. In India, cashless treatments are preferred as they save you from hefty upfront payments during emergencies.
According to a 2022 study by Care Health Insurance, 73% of policyholders utilized cashless claims at network hospitals. Always ensure that your chosen insurer has a strong network of hospitals in your city.
Major cities like Mumbai, Delhi, and Bengaluru have more comprehensive networks, but this can be limited in rural areas.

Tip: IRDAI advises policyholders to select plans that include at least 4,000-5,000 hospitals in their network to ensure accessibility during emergencies.

4. Understand the Waiting Periods:

Many policies have waiting periods for pre-existing diseases and specific treatments like maternity or critical illnesses.
On average, waiting periods for pre-existing conditions in India are around 2-4 years. According to a 2023 report by Max Bupa, 62% of policyholders over 45 had claims rejected because their treatments fell within the waiting period.
To avoid this, opt for policies with shorter waiting periods, especially if you or your family members have pre-existing conditions.

5. Examine Claim Settlement Ratio:

The claim settlement ratio (CSR) reflects the percentage of claims an insurer successfully settles out of the total claims received.
A high CSR indicates that the insurer is reliable in paying out claims. The IRDAI’s annual report for 2023 revealed that Star Health had a CSR of 94.44%, followed by HDFC ERGO with 93.29%, making them some of the most trusted insurers in the market.
A CSR above 90% is considered ideal for consumers, but it’s also important to review the claim settlement process.
Some insurers may have a higher CSR but lengthy or complicated procedures, causing delays in payout.

6. Consider Lifetime Renewability

As healthcare needs increase with age, lifetime renewability is a crucial feature. By 2025, it’s estimated that 20% of India’s population will be over the age of 60, making lifetime renewability essential for older citizens.
Many insurers offer policies that stop renewals at age 65 or 70. However, some like Apollo Munich and New India Assurance offer lifetime renewability, which ensures you stay protected in your later years without the fear of policy lapses.

7. Look for Add-Ons and Riders:

Additional benefits such as maternity coverage, critical illness riders, and personal accident covers can enhance your plan.
According to a survey by ICICI Lombard in 2023, 45% of health insurance buyers opted for critical illness riders, while 35% added maternity benefits to their plans.
Critical illness riders are particularly important in India, where lifestyle diseases like heart attacks, cancer, and diabetes are on the rise.
The Indian Council of Medical Research (ICMR) estimates that India will record 1.5 million new cancer cases annually by 2025. Adding a critical illness rider can offer a lump sum payout, which can be crucial during treatment.

8. Customer Reviews and Insurer Reputation:

Researching online reviews and consulting people who have already used the services can provide insight into an insurer's customer service and claim settlement experiences.
According to a 2023 survey by Mint, 68% of policyholders in India expressed dissatisfaction with slow claim processing times.
Companies like Star Health, HDFC ERGO, and ICICI Lombard consistently rank higher in customer satisfaction for their seamless claim processing and strong customer service.

9. Tax Benefits

Factors Affecting Health Insurance Premiums In India

Health insurance premiums in India are influenced by a number of factors, each contributing to the final cost of coverage. With a growing awareness of health and financial planning, understanding these variables is essential for making informed decisions. As of 2024, the health insurance landscape in India shows significant variation in premiums, driven by both individual and policy characteristics

1. Age of the Policyholder

Age is a significant factor affecting health insurance premiums.
According to a report by the Insurance Regulatory and Development Authority of India (IRDAI), premiums increase by 5-10% for every 5-year increment in age.
For instance, the average annual premium for a 25-year-old is approximately ₹6,000, while for a 45-year-old, it can rise to ₹14,000.
A 60-year-old could face premiums up to ₹25,000 or more, reflecting the higher risk of health issues associated with older age.

2. Pre-existing Medical Conditions

Pre-existing medical conditions significantly impact premium costs.
A study by the National Insurance Academy reveals that individuals with pre-existing conditions see a 20-35% increase in premiums.
For example, someone with diabetes or hypertension might pay an additional ₹2,000 to ₹5,000 annually compared to a person without such conditions.
The IRDAI mandates a waiting period of 2-4 years for coverage of pre-existing conditions, further influencing premium costs.

3. Sum Insured

The sum insured directly affects the premium amount.
Data from the General Insurance Council shows that the average premium for a health insurance plan with a ₹5 lakh sum insured is around ₹8,000 annually.
For a ₹10 lakh sum insured, the premium can range from ₹12,000 to ₹20,000.
Higher coverage amounts increase the financial risk for insurers, which is reflected in the premium.

4. Coverage and Add-ons

Comprehensive coverage plans with additional benefits lead to higher premiums.
Research by Policybazaar indicates that adding riders like critical illness coverage or maternity benefits can increase premiums by 15-25%.
For example, a basic plan with no add-ons might cost ₹7,000 per year, while adding riders could push the premium to ₹12,000 or more.

5. Geographical Location

Premiums vary based on the geographical location of the policyholder.
According to a report by IRDAI, health insurance premiums in metropolitan cities like Mumbai and Delhi are approximately 15-20% higher compared to smaller towns or rural areas.
This is due to the higher cost of medical treatments and hospital services in urban areas.

6. Lifestyle Factors

Lifestyle choices significantly impact health insurance premiums.
Data from a study by the National Institute of Public Health and Policy shows that smokers pay 10-20% more in premiums than non-smokers.
For instance, a smoker might face an additional ₹1,500 to ₹3,000 in annual premiums compared to a non-smoker.
Insurers view lifestyle-related risks as a major factor in determining premiums.

7. Family Size

Family floater plans have premiums influenced by the age and health of each member.
According to the Insurance Regulatory and Development Authority of India (IRDAI), adding elderly family members can increase premiums by 30-50%.
For example, a family floater plan for a young couple might cost around ₹15,000 annually, whereas adding two elderly parents could push the cost to ₹25,000 to ₹35,000.

8. Policy Tenure and Renewal

The tenure of the policy and renewal history also affect premiums.
IRDAI reports that opting for a multi-year policy can result in a 5-10% discount.
Conversely, frequent claims or delayed renewals might lead to higher premiums.
For example, a two-year policy might cost ₹14,000 compared to ₹8,000 for a one-year policy, reflecting the savings associated with longer coverage periods.

What Is The Best Way To Save Tax With Health Insurance?

In India, health insurance serves a dual purpose: it provides crucial financial protection against medical expenses and offers significant tax-saving opportunities.

According to a 2024 report from the Insurance Regulatory and Development Authority of India (IRDAI), approximately 70% of Indian families now hold health insurance, highlighting its growing importance. Despite this widespread coverage, many individuals still overlook how to fully leverage health insurance for tax benefits.

Tax Benefits Under Section 80D

Deductions for Premiums Paid:
- General Limit: Under Section 80D of the Income Tax Act, individuals can claim a deduction of up to ₹25,000 per annum on premiums paid for health insurance policies covering themselves, their spouse, and children. For senior citizens (aged 60 years and above), this limit is increased to ₹50,000.
  - Example: If a couple with two children pays an annual premium of ₹30,000, they can claim a deduction of ₹25,000, leading to a taxable income reduction. This could save approximately ₹7,500 in taxes if the individual falls into the 30% tax bracket.
- Senior Citizens: With senior citizens being a major demographic in need of health insurance, the increased deduction of ₹50,000 provides substantial tax relief. For instance, if premiums paid for a senior citizen parent amount to ₹50,000, the tax savings could be up to ₹15,000.
Additional Deduction for Parents:
- Regular Parents: An additional deduction of ₹25,000 can be claimed for premiums paid for parents’ health insurance. If both parents are senior citizens, this amount increases to ₹50,000.
- Example: If a taxpayer pays ₹40,000 for senior citizen parents’ insurance, the entire amount can be claimed, resulting in potential tax savings of ₹12,000 if taxed at 30%.
Preventive Health Check-up:
- Coverage: The deduction for preventive health check-ups is included in the ₹25,000 or ₹50,000 limit. A maximum of ₹5,000 can be claimed for check-ups within this limit.
- Statistics: According to a survey by the National Health Portal, preventive health check-ups have increased by 40% among insured individuals over the past five years. This not only supports better health outcomes but also contributes to tax savings.

Impact of Health Insurance on Tax Savings

Average Premiums: As per a 2024 IRDAI report, the average premium for a family floater health insurance plan is approximately ₹35,000.
Tax Savings Calculation:
- If a family pays ₹35,000 for a policy and claims the maximum ₹50,000 deduction (including premiums for parents), the potential tax savings are substantial. For the highest tax bracket (30%), this results in ₹15,000 in savings.
- Senior Citizen Premiums: If premiums paid for senior citizen parents are ₹50,000, claiming this amount leads to a tax saving of ₹15,000, illustrating the benefit of higher deduction limits for senior citizens.

Additional Insights

Health Insurance for Employees:
- Company Benefits: Many Indian companies offer health insurance as part of their employee benefits. Premiums for such plans are tax-free, but any additional premiums paid by employees themselves can still be claimed under Section 80D.
- Statistics: According to a report by the Employee Benefits Research Institute (EBRI), over 55% of Indian employees receive health insurance benefits from their employers.
Top-Up Plans:
- Coverage: Top-up health insurance plans, which offer additional coverage beyond a basic plan, also qualify for tax deductions under Section 80D.
- Market Data: The top-up health insurance market in India has seen a growth of 25% in the past three years, reflecting its increasing popularity and the potential for additional tax savings.
Family Floater Plans:
- Cost-Effectiveness: Family floater plans cover multiple family members under a single premium, which can be more cost-effective than individual policies. These premiums are eligible for tax deductions up to the specified limits.
- Insurance Trends: According to a 2024 survey by the National Insurance Company, approximately 65% of policyholders opt for family floater plans due to their affordability and comprehensive coverage.

What Is The Eligibility Criteria For Health Insurance?

Health insurance premiums in India are influenced by a number of factors. In order to obtain an affordable insurance policy, older individuals must pay higher premiums because older individuals are more prone to health problems. A higher coverage amount results in higher premiums, as does the sum insured.

Health insurance is only available to people who meet certain requirements. There are several factors to consider, such as how old you are, where you live, and whether you have any existing health problems. You must check what the rules are before you apply to different insurance companies and plans.

Some of the Requirements are:

An applicant for health insurance must be over 21 years old.
For a family floater policy, the minimum age for a child to be covered is 3 months.
Two adults and two children are the maximum size allowed under the family floater policy.
If you are 56 years or older, you will need to undergo a medical check-up in a designated center. The eligibility for health insurance depends on your medical condition and pre-existing illnesses.

What Is The Ideal Health Insurance Coverage?

To protect against medical inflation, experts recommend purchasing a medical insurance policy that covers a minimum of 10 lakhs. Those who purchase health insurance should have coverage that is tailored to their medical needs and circumstances. Medical insurance coverage amounts are largely determined by three factors:

Health Insurance Policy Table

Health Insurance Policy- Types	An ideal amount of health insurance coverage
	City
	Tier-1	Tier-2	Tier-3
Individual Health Insurance Plan	₹10 lakh & above	₹5-10 lakh	₹5 lakh
Family Floater Health Insurance Plan	₹30 lakh & above	₹20 lakh & above	₹10 lakh & above
Senior Citizen Health Insurance Plan	₹20 lakh & above	₹15 lakh & above	₹10 lakh & above

*Disclaimer: The above sum insured is a guide and may differ according to age and medical condition.
There is also the option of purchasing a “1 crore” health insurance policy, which has become extremely affordable lately. Having a $1 crore health insurance policy can be helpful in cases of long-term illness or for treatments abroad. A premium of ₹1500 more will secure health coverage of up to ₹ 1 crore

It is also possible to buy a base policy with a low sum insured and then buy a top-up policy with a high sum insured, which is an affordable option.

Documents Required for Health Insurance

As of 2023, over 520 million Indians are covered under various health insurance schemes, accounting for around 40% of the population.

However, to secure the best plan and ensure smooth processing, it’s crucial to provide the necessary documents. Understanding which documents are required can save time and reduce the risk of claim rejection, which is a common concern as over 8% of health insurance claims in India are rejected due to incorrect documentation.

1. Identity Proof

Importance: Identity proof is crucial for verifying the applicant’s identity and preventing fraud. It establishes the person’s legitimacy and legal status.

Common Documents:

Aadhaar Card: 94% of Indian adults possess an Aadhaar card, making it the most widely accepted identity proof (UIDAI, 2023).
Passport: Held by 12% of the Indian population (Ministry of External Affairs, 2022).
Voter ID: Approximately 71% of Indian adults have a voter ID card (Election Commission of India, 2023).
Driving License: 31% of Indians have a driving license (Ministry of Road Transport and Highways, 2022).

2. Address Proof

Importance: Address proof confirms the applicant’s residential address, ensuring that correspondence and policy documents reach the correct location.

Common Documents:

Utility Bill: Used by 55% of policyholders as address proof (IRDAI, 2023).
Rent Agreement: Accepted by 25% of individuals (Housing and Urban Affairs Ministry, 2023).
Bank Statement: Considered valid by 20% of insurers (Insurance Regulatory and Development Authority of India (IRDAI), 2023).

3. Age Proof

Importance: Age proof is required to determine the premium amount, as health insurance premiums generally increase with age.

Common Documents:

Birth Certificate: Essential for 60% of applications (Registrar General of India, 2023).
School/College Certificate: Used by 25% of applicants (Ministry of Education, 2023).
Passport: Accepted by 15% of insurers (Ministry of External Affairs, 2022).

4. Medical History Documents

Importance: A detailed medical history helps insurers assess the risk associated with the applicant and decide on the policy terms.

Common Documents:

Previous Medical Records: Essential for 80% of applicants with pre-existing conditions (IRDAI, 2023).
Doctor’s Consultation Reports: Used by 60% of applicants (Indian Medical Association, 2023).

5. Income Proof

Importance: Income proof helps insurers evaluate the applicant’s ability to pay premiums and determine the coverage amount.

Common Documents:

Salary Slips: Used by 70% of applicants (National Statistical Office, 2023).
Income Tax Returns: Considered by 50% of insurers (Income Tax Department, 2023).
Bank Statements: Accepted by 40% of applicants (RBI, 2023).

6. Photographs

Importance: Photographs are needed for the policy documents and identification purposes.

Common Requirements:

Recent Passport-size Photographs: Generally required by all insurers. A survey by IRDAI reveals that 90% of health insurance policies require photographs (IRDAI, 2023).

7. Additional Documents

Depending on the insurer and policy, additional documents may be required:

Proof of Citizenship or Residence: For expatriates or non-resident Indians.
Proof of Relationship: For family floater plans, such as marriage certificates or birth certificates of dependents.

Facts on insurance documents:

Claim Rejections Due to Incomplete Documentation:
According to a report by the Insurance Regulatory and Development Authority of India (IRDAI), 12% of health insurance claims are rejected due to incomplete or incorrect documentation (IRDAI, 2023).
Time to Process Applications:
On average, insurance applications with complete documentation are processed within 7 to 10 business days (Insurance Companies Association of India, 2023).

Health Insurance