Managing the insurance market in India: An expert discusses the significance of disaster riders and potential pitfalls

Earthquakes occur frequently in and around India. This is because the collision of the Indian and Eurasian tectonic plates has caused seismic activity in the area. Of late, there has been an increase in the recorded number of earthquakes, especially smaller ones. India is increasingly experiencing climate extremes, such as heatwaves, cyclones, and floods, in addition to earthquakes. Despite this, riders like earthquakes and landslides are not so popular. According to Susheel Agarwal, founder and CEO of Ethika, consumers must not assume that basic policies cover disasters. He also emphasised that policyholders must purchase an extra rider or a special "natural calamity" add-on to their primary policy to secure protection against such events.

Earthquakes occur frequently in and around India. This is because the collision of the Indian and Eurasian tectonic plates has caused seismic activity in the area. Of late, there has been an increase in the recorded number of earthquakes, especially smaller ones. India is increasingly experiencing climate extremes, such as heatwaves, cyclones, and floods, in addition to earthquakes. Despite this, riders like earthquakes and landslides are not so popular. The founder and CEO of Ethika, Susheel Agarwal, says that consumers shouldn't assume that basic policies cover disasters. Additionally, he emphasized that in order to be protected against such occurrences, policyholders must buy an additional rider or a special "natural calamity" add-on to their primary policy.

Many homeowners skip disaster riders (earthquake, landslide, etc.) due to a mix of psychological and practical reasons. To put it simply, people frequently undervalue uncommon risks, find additional coverage expensive or confusing, and are unaware that these dangers aren't covered by default. Yet India’s high risk of quakes and landslides makes these riders very important. Important points:

Many of us believe that "it won't happen to me." People frequently underestimate the likelihood of disasters. This way of thinking causes owners to forego purchasing insurance against things they believe are too improbable.

Earthquake/landslide covers are sold as optional add-ons. Buyers frequently reject these riders in order to reduce premiums. Surveys find a large share of Indians regard home insurance as expensive. Even though it might only cost a few thousand rupees annually to cover a home worth Rs 1 crore, many people are still put off by the idea that it is expensive.

Most people aren’t aware that standard home/fire policies exclude quakes and landslides. For instance, unless you purchase a rider, standard fire policies expressly exclude earthquake damage. Similarly, landslides are frequently left out of basic plans. Studies show “people still have low awareness about home insurance”, and confusing fine print or jargon makes them hesitant to add cover. Many only discover the gap after a disaster has already struck.

A large part of India lies in earthquake-prone zones. NDMA reports that about 59% of India’s land faces moderate-to-severe seismic hazard. Hill regions (Himalayas, Northeast, Western/Eastern Ghats) are especially prone to quake-triggered landslides. Homes can be destroyed by landslides and floods caused by monsoon rains. For instance, the damage from the 2023 Himalayan floods and landslides alone exceeded Rs 100 billion. The risk is real and not merely a distant concern because of these frequent disasters.

A house is typically the biggest investment made by a family. A strong quake or landslide can destroy it in minutes. Buying these riders costs very little compared to that loss: under the IRDAI’s standard Bharat Griha Raksha policy, insuring a ?1 crore home costs only a few thousand rupees a year. In other words, for the price of a few extra cups of coffee per month, you safeguard years of savings and hard work.

An inexpensive layer of financial security is offered by home insurance (with disaster riders). A quality home policy is "just as critical as life or health insurance" for financial security, according to experts.

stability. If you skip these covers and a catastrophe hits, you risk total financial ruin – whereas with insurance, you get compensation to rebuild. In short, the small extra premium is a safety net against losing everything.

stability. If you skip these covers and a catastrophe hits, you risk total financial ruin – whereas with insurance, you get compensation to rebuild. In short, the small extra premium is a safety net against losing everything.

Recent regulations now mandate mental health cover on par with physical health. Under the Mental Healthcare Act, 2017 (effective May 2018) and IRDAI directives, all health insurance products must include mental illnesses without discrimination. Common covered conditions include depression, anxiety disorders, bipolar disorder, schizophrenia, OCD, and similar psychiatric illnesses. Coverage typically extends to inpatient care: if hospitalisation is required for a mental health condition, insurers pay for the cost of treatment (room, doctor’s fees, medicines, diagnostics, etc.) just as they would for a physical ailment. Standard plans also cover related expenses such as pre- and post-hospitalisation care (Follow-up consultations, therapies. Some newer policies even offer OPD (outpatient) therapy and counselling sessions under their mental health benefits.)

Recent regulations now mandate mental health cover on par with physical health. Under the Mental Healthcare Act, 2017 (effective May 2018) and IRDAI directives, all health insurance products must include mental illnesses without discrimination. Common covered conditions include depression, anxiety disorders, bipolar disorder, schizophrenia, OCD, and similar psychiatric illnesses. Coverage typically extends to inpatient care: if hospitalisation is required for a mental health condition, insurers pay for the cost of treatment (room, doctor’s fees, medicines, diagnostics, etc.) just as they would for a physical ailment. Pre- and post-hospitalization care (follow-up consultations, therapies; some more recent policies even offer OPD (outpatient) therapy and counseling sessions under their mental health benefits) is also covered by standard plans.

Health insurers increasingly cover alternative (AYUSH) therapies as well. In 2013, IRDAI recognized Ayurveda, Yoga & Naturopathy, Unani, Siddha, and Homeopathy as eligible treatment systems and started to permit AYUSH coverage. Nowadays, inpatient AYUSH treatment on par with traditional care is included in the majority of general and health plans. This means that your policy will cover the expenses (procedures, room fees, medications, etc.) if you are admitted to a government-approved AYUSH hospital for an AYUSH therapy.

To claim AYUSH benefits, treatment must be in a government-approved AYUSH hospital or institute, with a minimum 24-hour hospital stay. (Standalone AYUSH clinics or short “wellness” visits are usually not eligible.)

Usually, AYUSH costs are reimbursed up to the sum insured under the policy. However, some insurers impose a sub-limit for AYUSH – e.g. a fixed cap or percentage of the sum insured. Always check your policy for any AYUSH claim limit.

Insurers are now required by IRDAI guidelines to formally include AYUSH coverage on an equal basis with other treatments. In practice, this means no extra premium for AYUSH (it’s part of the standard health cover), although the exact terms (limits, approved hospitals, etc.) are defined in each plan’s policy wordings.

In summary, insurance in India now broadly covers both mental health and AYUSH care. Mental illnesses are insured like any other disease (hospitalisation costs, etc.), and alternative-system hospital treatments are reimbursable if done in licensed AYUSH facilities. Policyholders should, however, review their plan details for specifics such as covered disorders, hospital networks, and any AYUSH sub-limits.

Your unique circumstances should be taken into consideration when choosing health insurance, not just cost. Key factors include your age/family stage, income, and where you live. Young, healthy adults can typically begin with modest coverage, but seniors and growing families require much larger plans. Below is guidance by life stage, income level, and geography, with expert sources:

You have lower premiums and fewer medical claims when you're young and healthy. To protect against rising healthcare costs, it is advisable to purchase at least a basic plan with a moderate sum insured (experts suggest roughly Rs 10 lakh minimum). Additionally, starting early completes waiting periods while you're still young and accumulates no-claim bonuses. (For example, PolicyBazaar notes that in Tier-3 cities Rs 5 lakh may suffice but in Tier-1 one might need Rs 10–20 lakh.)

A family floater policy, which covers both you and your spouse under a single sum insured, is typically the most economical option after marriage. Such plans save premiums by sharing coverage. Include a maternity rider before becoming pregnant if you intend to have children; these riders have waiting periods. Delivery and infant care expenses can be covered by a floater with maternity and newborn coverage. Make sure the floater's insurance coverage is sufficient for two people and any future children.

Health needs increase with the number of dependents. Increase your family floater cover significantly – e.g. to Rs 20–25 lakh or more – and consider a super top-up policy. A super top-up only pays once your base sum insured is used up, giving very high cover at a low extra premium. For a family of four, experts often recommend at least ?10 lakh cover (and realistically much more). Stacking a top-up on your base plan ensures high protection for major surgeries without breaking the bank.

In your 50s and beyond, illness risk climbs sharply. Seek out a comprehensive plan with robust add-ons for serious illnesses and a very high sum insured (Rs 25 lakh or more). The greatest medical care is frequently needed during these years. To reduce your out-of-pocket expenses, select policies with lifetime renewability and no or minimal co-payments. In fact, seniors are advised to avoid plans with co-pay clauses, since they’re more likely to claim. A policy tailored for older adults (or a floater including parents) should cover major treatments fully and include things like annual health check-ups.

In your 50s and beyond, illness risk climbs sharply. Seek out a comprehensive plan with robust add-ons for serious illnesses and a very high sum insured (Rs 25 lakh or more). The greatest medical care is frequently needed during these years. To reduce your out-of-pocket expenses, select policies with lifetime renewability and no or minimal co-payments. In fact, seniors are advised to avoid plans with co-pay clauses, since they’re more likely to claim. Major treatments, such as yearly physicals, should be fully covered by a policy designed for older adults (or a floater including parents).

The IRDAI's Arogya Sanjeevani policy is a good place to start for consumers on a tight budget. This standardized health cover (with sums insured from Rs 1–5 lakh) is designed to be affordable and essential, making basic protection accessible to many income levels. It covers hospitalisation, pre/post-care, and daycare procedures, helping secure essential coverage without complex add-ons. Its low-premium structure makes it suitable for moderate budgets.

Choose high-sum policies if you can afford higher premiums. Experts note that Rs 1 crore health plans are now quite affordable and practical for major care or international treatment. A large family floater (or individual) plan of at least Rs 50 lakh plus a super top-up to reach Rs 1 crore or more is a common strategy. Even extremely expensive procedures are covered by this without depleting your savings. In effect, higher income allows buying top-tier protection so that no major claim drains your wealth.

Living in a major city means higher hospital and doctor fees. In metros like Mumbai, Delhi or Bengaluru, it’s advisable to aim for at least Rs 15–20 lakh (and ideally more) in cover. According to one analysis, you might need to increase coverage to Rs 10–20 lakh for adequate protection in Tier-1 areas. In reality, a lot of urban families opt for floater plans that cost more than Rs 30 lakh in order to feel secure. In these cities, a single hospital stay can quickly deplete insufficient coverage.

Costs are lower outside big metros, but medical inflation is nationwide. Even in smaller cities, a sum insured of at least Rs 5–10 lakh is recommended. This may be adequate for routine care locally, but if a serious condition develops, you should prepare to require care at a major center. To put it briefly, get as much high coverage as you can afford. Policies recommend a Rs 10 lakh floor to protect against unexpected large bills, even if you live in a small town.

A single hospitalisation without insurance is a financial tsunami. The ripple effects are devastating and long-lasting, pushing families back by years.

The first casualty is your savings. People are forced to liquidate fixed deposits, mutual funds, and even sell family gold and property. This wipes out funds set aside for crucial life goals like children's education or retirement.

When savings are exhausted, people turn to loans. This frequently entails taking out high-interest personal loans or, worse, taking out loans from unofficial moneylenders. The burden of repaying this debt can cripple a family's finances for a decade or more.

Families are forced to make terrible compromises because of the financial strain. Retirement plans may be permanently delayed, long-term investments may be stopped, and children may be transferred from private to public schools.

The family's mental and physical well-being is negatively impacted by the extreme financial strain, which frequently results in additional health issues.

In short, it's a vicious cycle that can trap a family in poverty for generations. The only defense against this financial disaster is health insurance.

Prioritizing low premiums or depending solely on employer coverage are the main mistakes made when purchasing health insurance. These are a few errors people make:

Selecting the least expensive plan can be dangerous. Lower-cost policies frequently have high co-payments, other limitations, or hidden sub-limits (like on room rent). In other words, a bargain premium today can mean big out-of-pocket costs later when you claim.

Picking a sum insured that's too small (e.g., Rs 5–10 lakh) may leave you underinsured. Healthcare costs in India have risen sharply, so low coverage may not cover the cost of serious treatments. When selecting your coverage, experts advise taking inflation and family medical needs into consideration.

It is extremely risky to conceal medical conditions like diabetes or hypertension in order to lower premiums. The insurer may later reject or cancel your claim if you conceal a pre-existing condition (PED). It’s much safer to disclose all health issues up front, since most plans will cover PEDs after the specified waiting period.

Many buyers skip reading the policy’s detailed terms and conditions. Overlooking key clauses – such as waiting periods, exclusions or coverage sub-limits – can lead to unpleasant surprises when you file a claim. Always read the policy document carefully before you buy.

Assuming your company’s group insurance is enough can backfire. Group policies often exclude some family members, and they cease if you change jobs. As a long-term safety net, it is prudent to have your own unique plan.