Think a bigger health insurance cover means better protection? Think again—and watch out for hidden clauses
Experts warn that a very high health insurance coverage can become unaffordable as you age. A ₹10–15 lakh plan often offers better value and long-term protection.
Is bigger always better when it comes to health insurance? Not necessarily. Extremely high coverage can become unaffordable as you age, forcing some policyholders to drop their plan just when they need it most.
So what’s a sensible cover? Shrehith Karkera, co-founder of Ditto Insurance, suggests ₹10-15 lakh for most people, even though Ditto’s claims data shows the average payout is only ₹2.8 lakh.
“Say you incurred ₹25 lakh of expense due to a terrible accident. You need extensive care, possibly even recurring. Health insurance is meant for such catastrophic and recurring events," Karkera explained at the Mint Money Festival while talking about some of the pain points of health insurance.
High cover may impact renewability
Karkera stressed the importance of balancing value and expense. “With restoration benefits and a no-claims bonus, you can reach an aggregate cover of ₹30 lakh within two–three years. Anything above that may be overkill in terms of value," he added.
This balance matters because the goal is to make health insurance sustainable for life. Persistency in the industry is low, as many discontinue policies when premiums become unaffordable. For someone over 50, maintaining a ₹50 lakh to ₹1 crore cover can be extremely costly.
Top-up plans can hurt at claim time
Karkera cautioned against relying heavily on top-up plans as a cheap way to boost cover. Top-ups work like regular insurance but with a deductible—you pay medical costs up to a set limit, after which the top-up kicks in. While your base policy covers the deductible, the top-up handles expenses beyond it.
“I have never seen a super top-up cashless claim go through smoothly," he said, noting that low-priced products face much stricter claims scrutiny. “The required due diligence the industry performs for a base ₹10 lakh cover where the premium is say ₹40,000 vs a super top-up where the premium is ₹2,000 is vastly different," he explained.
Proposal form: the hidden devil
When it comes to exclusions, Karkera said the real problem lies in how people buy policies. Improper disclosures, especially about health conditions, often cause claim issues.
“When filling out the application form, there are lots of medical questions and usually what happens is that there is a select all button. So when you say you don’t have any past medical history without looking at the sub-questions you could end up in trouble," he warned.
Clauses that can bite
Karkera warned about two clauses that often trip up policyholders: reasonable and customary charges and unjustified hospitalization.
“If you have a plan with no room rent limit please take my advice and don’t book yourself a presidential suite or deluxe room at the hospitals. It’s going to bite back," he said.
This is because, under the reasonable and customary clause, insurers can deny part of a claim if expenses are deemed excessive. “This clause basically means that all the expenses must be deemed customary and reasonable so if you take a presidential suite and the surgeon charges three times the amount they charge for a single private room the insurer will typically pay the package rate considering a single private room and deduct the rest," he explained.
Unjustified hospitalization is another common trap. Karkera noted this often arises in dengue cases, where insurers may deny claims if the hospitalization isn’t clinically justified.
Rising premiums and unfriendly customer practices
Addressing audience questions on rising premiums, especially for older policyholders, Karkera explained that the issue goes beyond actuarial science and stems from unfriendly customer practices.
“Group health insurance and motor insurance don’t make a lot of money for insurers, so the only product that makes money is retail health," he said, highlighting why costs are high. “The second problem is distribution costs, which are way too high," he added.
Karkera also criticized the industry’s practice of performing due diligence at claim time rather than at the point of sale, adding that this encourages short-term gains, compelling insurers to prioritize their own interests over those of customers.
Pricing is also shaped by hospital payments. “So you have a situation where insurance companies want low rates, hospitals want high rates and customers have to suffer, This is where having a healthcare regulator for hospitals will help," he said.
Health insurance is one of the most important financial products, yet uptake remains low. According to data from the Insurance Regulatory and Development Authority of India (Irdai), as of FY24, only about 56 million Indians held retail health insurance plans in a population exceeding 1.4 billion. For wider adoption, policies need to be sustainable over the long term and free from clauses that can spring surprises at time of claim.
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