Why Affordable Health Insurance Isn’t Always Affordable

When buying health insurance, cheaper premiums may seem attractive, but they may not be a wise choice, as medical bills can bite later.

“A lower premium does not automatically translate into lower overall cost at the time of claim. Many affordable health insurance plans achieve reduced premiums by incorporating cost-sharing features such as co-payments, room-rent limits, deductibles, or disease-wise sub-limits,” says Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).

While these may help make insurance accessible at the point of purchase, they can result in significantly higher out-of-pocket expenditure during hospitalization—especially in urban tertiary care settings where treatment costs are rising steadily.

In several instances, policyholders discover at the time of claim that admissible expenses are restricted due to these limits, and the balance must be borne by them. “Therefore, the true cost of a policy is best assessed not by its premium alone, but by the extent of financial protection it actually delivers when a medical contingency arises,” says Bharindwal.

What Looks Cheap Can Cost Lakhs

A lower premium can look attractive, but often comes with conditions like co-payments, room rent caps, disease-specific sub-limits, or deductibles. “These may not feel significant at the time of purchase, but they can substantially increase out-of-pocket expenses during a claim. So while the policy looks affordable upfront, the actual cost during hospitalization can be much higher,” says Sarita Joshi, head, health and life insurance, Probus.

In many cases, lower-priced plans may carry tighter underwriting terms, longer waiting periods for pre-existing diseases, capping on specific procedures, or restrictions linked to hospital room categories. These features are usually disclosed in policy wordings but may not always be fully appreciated at the time of purchase, particularly when the buying decision is driven primarily by price comparison.

Such structural limitations can affect claim admissibility or quantum, thereby diluting the effectiveness of coverage when it is needed the most. “It is therefore important for consumers to look beyond headline premiums and understand the scope of coverage, exclusions, and conditionalities before finalizing a plan,” says Bharindwal.

Premium Savings Can Inflate Hospital Expenses

Reducing the sum insured, opting for high co-pay, or accepting multiple sub-limits can significantly dilute protection, especially in high-cost urban hospitalizations. “Saving a few thousand rupees in premium could mean paying lakhs during a medical emergency. The key is to balance affordability with adequate coverage rather than choosing purely on price,” says Joshi.

Saving on premiums often involves a trade-off between affordability today and adequacy of protection tomorrow. Opting for a smaller sum insured, higher deductibles, or mandatory co-payment may reduce upfront cost but increase financial exposure during illness. With healthcare inflation in India estimated at high single digits annually, even a moderate hospitalisation can strain a policy with limited coverage or restrictive terms.

A more balanced approach is to treat health insurance as a long-term risk-transfer mechanism rather than a short-term expense. Consumers should aim for coverage that meaningfully offsets potential medical costs, even if it entails a slightly higher premium, as under-insurance may undermine the very purpose of buying health insurance.