Tier-3 Cities Drive Demand For Unlimited Health Insurance Cover; Surat Leads Premium Growth

Health insurance buying is no longer concentrated in the country’s biggest cities. Tier-3 markets are increasingly driving demand for policies with unlimited sum insured, reflecting a sharper focus on medical costs and the financial impact of a serious hospitalisation.

Data released by Policybazaar shows that Tier-3 cities accounted for 41.71 per cent of unlimited sum insured health insurance purchases in FY 2026-27. This was higher than the 33.28 per cent share of Tier-1 cities, which had accounted for 51.31 per cent of such purchases in FY 2024-25.

Tier-2 cities too expanded their share to 25.01 per cent, from 16.99 per cent in the same period. Together, Tier-2 and Tier-3 locations now contribute close to two-thirds of purchases of unlimited-cover health insurance plans.

Smaller Cities Move Beyond Basic Health Cover

The trend suggests that health insurance is increasingly being viewed as a financial necessity rather than an urban product bought largely by salaried workers in metros. Families in smaller cities are also looking beyond low-ticket policies and choosing covers that can offer stronger protection against a prolonged illness or expensive treatment, according to a recent report by Business Today.

The shift has been shaped by growing awareness after the Covid-19 pandemic, easier access to online insurance platforms and the steady rise in hospital costs outside metros as well. Private treatment is no longer limited to large cities, while specialised care often requires patients to travel to a bigger centre.

A policy with a modest fixed sum insured may prove inadequate in case of cancer treatment, cardiac surgery, organ-related complications or multiple hospital admissions. This is prompting buyers to consider higher sums insured, restoration benefits and unlimited cover options, despite the higher premium.

However, a large cover alone should not determine the choice. Buyers should examine room-rent restrictions, co-payment clauses, disease-specific sub-limits, waiting periods, exclusions and the insurer’s network of hospitals. A plan that looks comprehensive on paper may still leave a policyholder paying a substantial portion of the bill if these terms are restrictive.

Surat, Hyderabad See Sharp Rise In Premium Spend

Surat recorded the highest growth in average premium paid for unlimited sum insured policies, with the average ticket size increasing 45 per cent. Hyderabad followed with a 43 per cent rise, while Mangalore recorded growth of 41 per cent.

The increase indicates that policyholders in these cities are willing to spend more for broader covers and additional benefits. In the larger markets, NCR saw a 36 per cent rise in average ticket size, followed by Bengaluru at 30 per cent and Pune at 29 per cent.

According to Siddharth Singhal, business head – health insurance at Policybazaar, consumers are increasingly recognising that traditional covers may not keep pace with medical inflation. The demand for consumables cover and day-one benefits also points to an effort by buyers to reduce out-of-pocket costs during treatment.

For first-time buyers, the lesson is not necessarily to opt for the most expensive plan. The priority should be to buy adequate cover early, when premiums are lower and medical underwriting is usually easier. A base policy, supported by a super top-up plan, may be a more cost-effective way to build a higher health cover.

FAQs

Why are Tier-3 cities buying more unlimited health insurance plans?

Rising hospital costs, greater awareness after Covid-19 and easier online access are encouraging families in smaller cities to seek stronger protection against major medical expenses.

Does unlimited sum insured mean every hospital expense will be paid?

Not necessarily. Buyers should still check room-rent caps, co-payments, exclusions, waiting periods and disease-specific limits before choosing a policy.

Is an unlimited cover policy the best option for first-time buyers?

It depends on affordability and health needs. A suitable base cover combined with a super top-up plan can offer high protection at a lower cost.