GST reduction on insurance premiums: How to choose right health insurance now? – Personal Finance
Updated Sep 30, 2025 09:13 IST
GST reduction on insurance premiums: How to choose right health insurance now? (Image: iStock)
The GST cut makes this the perfect time to invest in health insurance. Experts agree that choosing sufficient coverage, at least Rs 25 lakh in metros, higher if possible, is important. Alongside, maintaining a separate liquid health emergency fund ensures complete preparedness. Health insurance is not just an expense but a safeguard for your lifetime savings.
How to choose right health insurance?
How much coverage is sufficient?
To decide on how much coverage is sufficient. One must consider these factors for a firm decision:
Siddharth Singhal explains that health insurance coverage should depend on:
- Family size
- Age
- City of residence
For example, a family of four in metropolitan cities like Delhi, Mumbai, or Bengaluru should have a minimum of Rs 25 lakh coverage. Healthcare costs in big private hospitals can easily cross Rs 8-10 lakh for a week’s treatment.
Smart option: Super top-up plans
While many policies offer coverage up to Rs 1 crore, the premium differences between Rs 25 lakh, Rs 50 lakh, and Rs 1 crore plans are minimal. Singhal recommends opting for higher coverage or adding a super top-up plan for maximum protection at a low cost.
How much coverage is enough?
Vaibhav Kardjoo points out that medical inflation in India is 14-16 per cent, much higher than regular inflation or salary growth. This means that healthcare costs will continue to rise. Hence, young buyers should opt for larger coverage early in their careers, as upgrading later may not be affordable or possible due to health conditions.
Importance of health emergency fund
Health insurance alone may not cover every situation. Kardjoo stresses that, along with six months’ salary in a financial emergency fund, individuals should also maintain a separate health fund of Rs 2-5 lakh.
Why build a separate health fund?
- Some hospitals may not provide cashless service immediately.
- Initial deposits and non-covered expenses need quick cash.
- Claims may take time to process.
This health emergency fund should always be kept in liquid assets like fixed deposits, savings accounts, or liquid mutual funds to ensure immediate access.
GST Rate Change: The GST rate on health and life insurance premiums has been reduced from 18% to 0%, aiming to make insurance more affordable and increase penetration.
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