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  • Writer's pictureKranthi Pachipala, CFP®,CTEP®, CREP®

"Rising Health Insurance Premiums in India: What Can You Do?"

Inflation is the biggest enemy of your savings. Many individuals don't realise it yet and don't gives as much importance as it deserves. Take the example of medical inflation in India.

Medical inflation in India is almost 14% and growing fastest in the world. have you factored medical inflation in your retirement planning? Picture this.

If you are in 30+ age group today, After 20 years many of you will be retired from corporate work and won't have access to the company sponsored free health insurance benefits. Already health insurance premiums are pinching for senior citizens even today. A 10 lakh health insurance premium for 71 year aged couple is running into Rs 1 lakhs plus. 

What do you think will be the premium for the same 10 lakhs coverage for the same 71 years age couple after 20 years from now?

Obviously with increasing treatment costs, insurance companies are bound to increase premiums. They may not increase every year. but once in a while they increase 20-30%. we have seen the drastic rise in the health insurance premiums by almost all companies post covid.

with a very conservative 5% inflationary increase in premiums, premium for the same 10 lakh cover for the same 71 years age couple could be anywhere between 2.5 lakh to 3 lakhs!!

But, The bigger question is, is 10 lakh coverage sufficient after 20 years?

A treatment which costs 10 lakhs today will cost 46 lakhs in 20 years with just 8% medical inflation 🙄 . Medical inflation will be remaining high for next few years due to advancement in Technology and rise in demand.

-You need at least 50 lakhs to 1 crore cover if you don't want to wipe out all your retirement savings with just one hospitalisation.

What will be the premium for 1 crore cover after 20 years?

  • 10 lakhs cover itself will run into 3 lakhs. Imagine the premium for 1 crore.

One cost effective technique to reduce the premium burden for high coverage is opting for a Base + Super Top Up combination rather than going for a 1 crore base policy. For example, 10 lakhs base cover + 90 lakhs super Top up cover. Super Top Up polices cost a fraction of base policy. A 90 lakh super top up policy with 10 lakh deductible cost around 10k to 15k for 70+ years.

Most important thing is preparing in advance for higher medical costs and insurance premiums. Factoring the medical inflation and increasing health insurance premiums in every retirement planning.

What can you do about it?

You can build a dedicated corpus for health insurance premiums before you retire. And this corpus should last for at least till your 85 years age(assuming the life span till 85 years)

So, if you retire at 60, what will be the corpus needed?

Based on above assumption, Roughly it will cost 3 lakhs annual premium for 1 crore cover (Base + super top up) after 20 years for 71 years aged. if you work backward with 5% inflation, the premium at 60 years works to be around 2 lakhs.

If you put these numbers into perspective, you need a corpus of roughly 25 lakhs to pay premiums for your entire 25 years retirement life (assuming the rate of return on the corpus in a conservative 10% p.a)

How much you need to invest today to get a corpus of 25 lakhs in 20 years?

assuming a 12% CAGR,

you need a monthly SIP of 2,500 in a diversified mutual fund OR Just 2.3 Lakhs one time investment.

It is as simple as that. Financial planning becomes very easy if you plan in advance and put things into an executable plan. 

25 years Health Insurance  premium payment chart
25 years Health Insurance premium payment chart


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