Health insurance premiums are climbing in India and worldwide, driven by rising medical costs, lifestyle diseases, and inflation. Health insurance premiums depend heavily on a policyholder’s base sum insured, making careful selection crucial for managing affordability and ensuring adequate protection.
Understanding the Base Sum Insured
The base sum insured is the fundamental coverage amount offered by an insurance policy. It dictates the maximum claimable amount before additional top-up or super top-up plans apply. According to the Insurance Regulatory and Development Authority of India (IRDAI), premiums increase proportionally with higher sums insured, as insurers face greater potential liability.
Experts say many households over-insure, paying unnecessarily high premiums, while others under-insure, leaving themselves financially exposed. “Finding the right balance between affordability and protection is critical,” said Sharad Mathur, Managing Director of Universal Sompo General Insurance, in a recent industry statement.
Key Factors Influencing Health Insurance Premiums
Age and Demographics
Premiums rise with age, as older individuals are statistically more likely to need medical care. Urban residents often face higher costs due to elevated hospital charges in metropolitan areas.
Medical History and Lifestyle
Pre-existing conditions such as diabetes, hypertension, and heart disease can sharply raise premiums. Lifestyle habits, including smoking and sedentary routines, also weigh heavily. The Economic Times reported in February 2025 that lifestyle diseases are a primary driver of premium hikes across India.
Medical Inflation and Broader Cost Trends
Global healthcare costs have been rising by around 6% annually, according to a Mercer survey published in September 2025. In India, factors such as increased pollution-related illnesses in cities like Delhi have further strained insurers, Reuters reported in February 2025.
Strategies to Keep Base Sum Insured in Check
Opting for Top-Up and Super Top-Up Plans
Policyholders may reduce their base sum insured and use top-up plans to cover catastrophic medical events. According to PolicyBazaar, this approach provides robust coverage at significantly lower premiums.
Cost-Sharing Through Deductibles and Co-Payments
Plans with higher deductibles or co-pay clauses offer lower premiums, though policyholders must pay a portion of expenses. Experts caution that this option suits healthier individuals with stable incomes.
Long-Term and Early Enrollment Benefits
Buying policies at a younger age and opting for multi-year coverage can lock in lower premiums. Industry data suggest long-term policies reduce per-year premium costs by up to 15%.
Regulatory and Tax Considerations
The Government of India is reviewing proposals to exempt health insurance from Goods and Services Tax (GST), currently set at 18%. Even with a full exemption, analysts warn that insurers may not pass on the entire benefit to consumers, as noted by the Times of India in July 2025.
The Global Context
India’s challenges mirror international trends. In the United States, employer health insurance premiums are projected to rise 6% in 2025, according to Mercer. Similarly, insurers in Europe face increasing claims linked to ageing populations and advanced medical treatments.
Conclusion
Health insurance premiums are set to remain under pressure in India and globally. Policyholders can control costs by carefully managing their base sum insured, leveraging top-up covers, and adopting preventive healthcare. Regulators and insurers will need to strike a balance between affordability and sustainability as medical costs continue to rise.
