What is Health Insurance and Why is it Important in 2025?

As per studies, there has been an increase in the number of people taking health Insurance has been increased with a constant rate especially post covid pandemic. We can see inflation of 10-15% every year. Health Insurance is now a necessity for every Indian family. Individuals including young professionals, parents, or elderly citizens are realizing that a single medical emergency can derail years of savings. In this context, understanding and investing in health insurance is not just a smart financial decision, but a necessary step toward ensuring peace of mind and a stable future.

 

What is Health Insurance? 

Health insurance is a type of insurance product which offers the payment for the medical bills which can arise due to the reasons like injury, sickness or hospitalization. It works on the concept of Risk pooling, where many people (policy holders) holding this policy with the help of the insurer employ those funds to settle the bills (medical bills) of individuals when needed for the healthcare services. 

 

Health Insurance in India (Types) 

1. Health Insurance for the individual 

As the name says, it is a type of health insurance that covers one individual at a time that offers age-based premiums, coverage value and health status. This type of insurance suits the adults who are young and the working professionals. 

2. Floater plans for Family 

This insurance plan covers the whole family under one single policy. The sum insured under this policy helps all the family members. This insurance is pocket friendly for families large in size. 

3. Health Insurance for senior citizens 

This insurance policy aims at targeting individuals above the age of 60 years, and it ensures age-related ailments that are beneficial for them; they have higher premiums but wider cover. 

4.  Insurance for Critical Illness 

This Insurance insures illness like heart attack, cancer and stroke which are certainly critical. Companies pay a lump sum amount on diagnosis and this is a standard health insurance. 

 

Health Insurance Importance 

1. Rising of Healthcare Costs 

In countries like India, medical expenses have increased over the past years. As we can see, a simple surgical procedure usually costs anywhere between Rs 50,000 to Rs. 2,00,000 in private hospitals, these expenses can impact your emergency funds and financial stability severely. 

2. Provides Financial Protection 

Health insurance provides us financial safety, and safeguards our savings and investments from erosion that can occur due to medical crises that can occur suddenly. It saves us from compromising on quality health care due to lack of funds. 

3. Tax Benefits 

Under the Section 80D of the Income Tax Act, A person can claim deductions of up to ₹25,000 for premium that has been paid for health insurance by you or your dependents. The maximum amount for the senior citizen is Rs. 50, 000 which makes it a tax saving insurance. 

4. Cashless Treatment 

Today making cashless payments is a feature that is very much common under most of the health insurance policies, as it removes the necessity to make the arrangement for the physical money whenever there is a medical emergency. This gives an easy access to quality healthcare and removes the pressure from finances. 

5. Hospitalization Coverage Pre and Post period 

Health ensures schemes include the coverage for the pre-hospitalization treatment expenses like consultations and investigations and for post-hospitalization treatments also like consultations (medicines, follow up consultations). 

 

Features to Consider While Selection of a Health Insurance 

Coverage Amount 

You should opt for a sum insured that is sufficient as per the size of your family. Opinion of the experts says that you should go with taking at least 5-10 times your annual income as coverage amount. 

Network Hospitals 

You should always make sure that the network of hospitals that the insurer has is good and broad in your city and the places you travel oftenly. 

Waiting Periods 

You should clarify the waiting periods for the various conditions,particularly maternity, pre existing illness and certain treatments. 

Room Rent Limits 

You should verify whether there are any limits on the room rent, as it may affect your settlement of the claim as a whole. 

 

How Health Insurance Fits into Your Overall Financial Planning 

Health insurance is not the whole, it is only one piece of your overall financial planning. As you safeguard your dream home with suitable financial instruments and insurance, your family health is as important as other important things in life. 

Same as for the people who have invested in property it's crucial to diversify your portfolio of investment and sips with suitable and sufficient health insurance. Medical emergencies can lead you to sell your valuable assets or take a loan which can be costly if you are not well covered. 
 

Myths Regarding Health Insurance 

Myth 1: "I am very Young and Healthy, I Don't Need  to take a Health Insurance" 

Health problems can occur at any age. So when you purchase the insurance when young it translates to protection against future ailments and lower costs.

Myth 2: "Employer Insurance is Sufficient" 

Insurance that is provided to you by your employer depends on your job and is typically restricted. But you get guaranteed coverage continuity when an individual health insurance is opted. 

Myth 3: "Health Insurance is Too Costly" 

The premium that we pay for health insurance is low when we compare it to the possible cost that can come from the medical treatment. The Per annum cost of a family health insurance may be as low as Rs10,000-15000 

Myth 4: "Insurance Companies Don't Pay Claims" 

Ratios of the claim settlement is good when we talk about the Legitimate insurance companies. You should select and compare with good records.

 

Conclusion

Health insurance is not a regular cost, it is an investment in the financial security and peace of mind of your family. Having proper health care insurance protection is important than ever, as health care costs are rising and lifestyle linked health concerns are also accelerating.

So, you should never leave your family’s financial security. You should begin by assessing your present coverage and also determine the requirements of your family’s health insurance and select a ranging policy that is wide and provides protection as well as value.

Remember that the optimal time to purchase health insurance was yesterday; the next-best time is today.