Health cover as a wealth-protection layer, not a product to sell you

The more useful way to think about health cover is as a layer in your overall financial plan, the same category as an emergency fund or adequate life cover, whose job is to stop a medical event from undoing years of saving and investing elsewhere.

Here's the mechanism that makes this matter more than it used to. India's medical inflation has been running at roughly 12 to 14 percent a year, according to multiple insurer and consulting surveys, well above the 9.8 to 10 percent global average and close to double the country's general consumer inflation rate (Aon and WTW surveys, cited in DSIJ, 2026; Medical Buyer, 2026). 

At that pace, a treatment that costs a given amount today roughly doubles in cost within five to six years, not the twelve or so years it would take at typical consumer inflation. A sum insured that felt adequate when you bought the policy can become functionally thin well before the policy itself expires, simply because the cost of care moved faster than the cover did.

This isn't a hypothetical strain either. Nationally, out-of-pocket spending still accounts for roughly 39 percent of total health expenditure, even after a meaningful decline from around 62 to 64 percent a decade ago, according to National Health Accounts data cited by India's Health Ministry (NITI Aayog/Union Health Ministry data, via press releases, 2024 and 2026). That's real progress, and worth acknowledging, but it also means a large share of hospital bills in India are still paid directly from savings, not from insurance, when something goes wrong.

Why this belongs in a financial plan, not just an insurance conversation

The reason to frame health cover as a wealth-protection layer rather than a product is simple: its job isn't to grow your money, it's to stop an uninsured or underinsured medical event from forcing you to liquidate the investments that are supposed to be doing that job. A serious hospitalisation, a cardiac procedure, or a cancer treatment cycle in a tier-1 city hospital can routinely generate bills in the range of ₹15 to 25 lakh (industry claims data cited in DSIJ, 2026). Without adequate cover, that bill doesn't just get paid, it typically gets paid by redeeming mutual funds at an inopportune time, breaking a fixed deposit early, or borrowing, any of which quietly derails a retirement or education goal that had nothing to do with the medical event itself.

Industry-wide claims data backs up how real the pressure on insurers themselves has become: health insurance claims rose about 21 percent in FY25 while payouts grew only around 13 percent, suggesting insurers are managing rising costs partly by tightening claim settlements (IRDAI industry data, cited in DSIJ, 2026). The incurred claim ratio for public sector insurers specifically has crossed 100 percent, meaning they're paying out more in claims than they collect in premiums for that book of business, a sign of real strain in the system rather than a stable status quo (Milliman, 2026).

The planning question, not the sales question

None of this is an argument for a specific sum insured, a specific insurer, or a specific product structure; those depend on your city, your age, your family size, and your existing employer cover, and they're worth working through individually with a qualified advisor rather than defaulting to a number from an article. 

The planning question worth asking yourself is narrower and more useful: if a serious medical event happened in your family next year, would it require you to break an investment that's earmarked for something else? If the honest answer is yes, that's less a sign you need a particular product and more a sign that health cover deserves the same periodic review you'd give any other part of your financial plan, alongside your asset allocation and your goals, not as an afterthought bought once and forgotten.

This article is for general information only and does not recommend any specific insurer, policy, or sum insured. Health insurance needs vary by individual circumstances. Please consult a qualified insurance advisor or your financial planner to assess adequate coverage for your situation.