Summary of this article
Average health insurance cover rose 31 per cent to Rs 19 lakh post GST removal.
Higher sum insured policies (Rs 10–25 lakh) see strongest demand growth.
Existing policyholders upgrading covers faster during renewals after tax relief.
Longer-tenure health insurance policies gaining traction across metro and non-metro areas.
Health insurance policies do not provide you coverage from Day 1. The Insurance Regulatory Development Authority of India (Irdai) has mandated that the waiting period for pre-existing diseases (PEDs) can be a maximum of three years. Let us say that a person has diabetes. He will not get covered for any high sugar complications within the first three years; the insurer won’t pay because diabetes was declared as a PED, and he is still within the waiting period.
Set Aside A Medical Fund
“The waiting period for PEDs is a reality that policyholders must plan around rather than be surprised by. The first step is awareness; many buyers underestimate how common this clause is and overestimate immediate coverage,” says Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).
To estimate how much they will spend on probable medical expenses associated with their stay on the waiting list, individuals should set aside funds for medical expenses in a designated healthcare savings account instead of their general emergency funds.
“This will provide them with quicker access to funds during an emergency and help ensure that individuals have enough funds to meet any unforeseen medical costs during that time,” says Arun Ramamurthy, co-founder, Staywell.Health.
Where To Put Your Money
While liquid mutual funds and fixed deposits both have advantages to investors, there are several benefits to fixed deposit accounts: they offer safety of principal, provide reliable returns, and are easy to understand; therefore, they are great for investors with planned medical costs or financial commitments expected to occur during their waiting period.
Conversely, liquid mutual funds provide greater flexibility and provide investors with the ability to get to their funds quickly; both are essential during a medical emergency. “Also, liquid funds typically have a slightly higher post-tax return for most taxpayers in the higher income brackets. Therefore, a combination of both account types, flexibility from a panelled mutual fund account and surplus capital from a short-term fixed deposit account, is most effective,” says Ramamurthy.
Should You Consider Plans That Cover PEDs From Day 1?
Day-one coverage plans serve a specific purpose and are not meant for everyone. The higher premium reflects the insurer taking on immediate risk, which makes sense only if the policyholder has a known condition and anticipates near-term treatment.
Such plans can be justified for individuals who are newly diagnosed, cannot afford to self-fund treatment during the waiting period, or for whom delaying care could worsen health outcomes. They are also relevant for older buyers entering insurance later in life.
“However, for younger individuals or those whose conditions are stable and manageable, paying a significantly higher premium may not be cost-effective. In these cases, combining a standard health policy with disciplined self-funding during the waiting period often works out better financially,” says Ramamurthy.
The key is alignment between health needs, cash-flow capacity, and insurance design, rather than assuming one option is universally superior.
