Health care costs in India have been rising significantly.
According to a study by Aon, while the general inflation rate in India stood at 4.4 per cent in 2024, the gross annual medical trend rate was 12 per cent higher. This year, inflation is expected to moderate slightly to 4.2 per cent, but medical inflation is projected to rise further to 13 per cent. In essence, health care costs in India are increasing at three times the general inflation rate.
It’s clear, then, that having a health insurance policy is no longer optional. One major health emergency without coverage could wipe out your savings.
Unfortunately, health insurance premiums have also increased sharply over the past few years—by as much as 30 per cent for some policyholders.
“Health insurance premiums have risen primarily due to medical inflation, which continues to outpace general inflation. The cost of hospitalisation, diagnostics, medicines and advanced treatments has gone up across the board. There’s also a noticeable increase in claims, especially for chronic conditions that surged post-Covid,” said Yajur Mahendru, assistant vice-president and head of product at the insuretech platform InsuranceDekho.
As more people require long-term care, insurers are recalibrating premiums to account for rising payouts, he added.
Siddharth Singhal, business head, health insurance at Policybazaar.com, noted that both the frequency and severity of claims have increased since the Covid-19 pandemic, leading to a surge in high-value claims.
Another factor is age. As you grow older, your health insurance premiums go up, based on the assumption that you are more likely to fall ill or suffer injuries. Your needs may also change—you may want higher coverage, add more family members to your plan, or include protection for more conditions. All of these lead to higher premiums.
“Pandemic-era claims triggered a shift in underwriting assumptions, leading insurers to factor in higher risk,” said Jigar Gada of Liberty General Insurance. “There’s also a broader shift in customer expectations—people are seeking more comprehensive, inclusive coverage, including pre- and post-hospitalisation benefits, daycare procedures, and mental health support. This has led to enhanced policy features, which, while necessary and welcome, come at a cost.”
Regulatory changes mandating broader coverage and product standardisation have also added to insurers’ cost burdens, often resulting in premium revisions.
With medical and lifestyle-related costs on the rise, not having health insurance is not an option. But how can you reduce the cost of your premiums?
Some people opt for a policy with a lower sum insured to reduce their premium outgo. However, this may not be enough to cover major medical expenses, which could again deplete your savings. This is where supplementary health insurance—such as top-ups and add-ons—can be helpful.
Many health policies offer a no-claim bonus (NCB). If you don’t make a claim in a given year, you may be eligible for either a premium discount or additional coverage in the following year. With an NCB safeguard add-on, you can continue to receive these benefits even if you make a claim.
Typically, insurance policies don’t cover consumables such as PPE kits, oxygen masks, gloves, bandages and syringes—items you may be asked to procure during hospitalisation. However, some add-ons cover these consumable costs. Another useful add-on covers at-home treatments prescribed by a doctor.
“It’s advisable to opt for a basic base plan to serve as the deductible and then add a super top-up for higher coverage, which comes at a significantly lower cost. A few add-ons that can help reduce premiums include choosing treatment in shared wards, selecting plans with preferred network hospitals, and opting for co-payment clauses, where you share a portion of treatment costs with the insurer,” said Singhal.
Additional add-ons include room rent waivers, maternity cover, wellness services, and even international emergency coverage. These supplementary options can help optimise premiums while ensuring stronger financial protection, said Gada.
Critical illness add-on covers are also available. These offer targeted protection against specific diseases like cancer or heart conditions, and can be valuable if you are diagnosed with one of these illnesses.
“The base health policy takes care of initial expenses, and the top-up kicks in once the deductible threshold is crossed. This layered approach ensures comprehensive protection at a fraction of the cost of a high-sum base plan,” said Gada.
For example, if you want health insurance coverage of Rs20 lakh, instead of buying a Rs20 lakh base policy, you could buy a Rs10 lakh base policy and a Rs10 lakh top-up. The premium is more manageable that way.
“Top-ups provide additional financial coverage once the base sum insured is exhausted. They are especially useful during high-cost treatments or multiple hospitalisations, offering extended protection without the need for an expensive base policy,” said Mahendru.
Add-ons should be selected based on your anticipated needs over the next few years. For instance, maternity and newborn cover is ideal for young couples, while older individuals might benefit more from critical illness cover. Your location also matters. In metropolitan areas with high treatment costs, higher-value top-ups may be necessary. In smaller towns, a wider cashless hospital network could be more important.
The goal is to customise your insurance intelligently—closing real coverage gaps without overpaying for features you may never use, said Mahendru.