In a developing country like India, where people’s disposable income is limited as compared to some other parts of the world, health insurance often takes a backseat. So, in an environment where spending on insurance premiums is not people's first priority, how do we emphasize the critical role health coverage plays in financial security?
Perhaps the answer lies in starting small. After all, some cover is exponentially better than no cover. Could a ₹5 lakh health insurance plan be the first step toward building that safety net? What kind of coverage does it provide? Where might it fall short? Let’s explore.
We’ll also list the top 5 best 5 lakh health insurance plans in 2025, so you’re protected when it matters most.
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What Does Having a 5 Lakh Health Insurance Plan Mean?
A 5 lakh health insurance plan covers medical expenses up to ₹5 lakh per claim every policy year. This coverage acts as a financial cushion against high healthcare costs, but only for the expenses outlined in your policy. Generally, you’ll be covered for the circumstances listed below:
1. Hospitalization Expenses:
A health insurance policy covers the cost of hospitalization due to accidents, severe illnesses, or planned surgeries. This includes expenses like room rent, doctor consultations, nursing care, and ICU charges. Depending on the policy, consumables like bandages, syringes, and PPE kits may also be included by default, or they can be included separately as an add-on.
However, you need to keep an eye on room rent caps, co-payment clauses, and disease-wise sub-limits. All of these are cost-sharing features, which may lead you to pay out-of-pocket.
2. Pre and Post-Hospitalization Costs:
Health insurance doesn’t just cover your hospital bills. The coverage often extends to medical expenses incurred before and after hospitalization. This includes diagnostic tests, scans, bloodwork, and specialist consultations leading up to your hospital visit. Other than that, post-discharge expenses, like follow-up appointments and medications, are also typically covered for a specific period.
For example, some policies cover pre- and post-hospitalization expenses 30 days before and 60 days after hospitalization; While other, more comprehensive policies may cover expenses 90 days before and 180 days after hospitalization. This coverage helps manage the full treatment cycle, reducing out-of-pocket costs beyond the time you spend hospitalized.
3. Daycare Procedures:
Not all treatments require you to spend the night at a hospital. Many policies cover day care procedures, i.e., treatments completed within 24 hours. Some examples include treatments like chemotherapy, dialysis, cataract surgery, or tonsillectomy. These procedures might not involve extended hospital stays but can raise significant costs. Essentially, day care coverage ensures you don't have to worry about footing the bill for essential, shorter-duration treatments.
4. Domiciliary Hospitalization:
Health insurance may cover home-based hospitalization if a patient can't be moved to a hospital or if no beds are available in their vicinity. This benefit can be a lifesaver during crises, especially in cases of severe illness, when hospital capacity is stretched, or when you encounter a room rent restriction in your policy. However, it's crucial to understand the terms and limitations to avoid surprises during claim settlement. Some limitations include that a doctor must recommend domiciliary care, and the patient must need continuous treatment for at least 72 hours.
5. AYUSH Coverage:
Many insurers now cover treatments from traditional and alternative medicine schools under AYUSH (Ayurveda, Yoga, Unani, Siddha, and Homeopathy). These treatments can be effective for chronic conditions, holistic wellness, or for people seeking non-allopathic solutions. For example, Ayurvedic therapies for arthritis or homeopathic remedies for allergies are common and might be covered, depending on your policy. This broadens your healthcare options, giving you access to time-tested treatments outside conventional medicine. Although AYUSH is a great benefit to have, it is important to note that it’s difficult to get AYUSH claims approved as meeting the burden of proof is rare.
The Advantages of Having a 5 Lakh Health Insurance Plan
Opting for a 5 lakh health insurance plan comes with several practical benefits that can make quality healthcare more accessible and affordable. Here’s what you get:
Affordable Premiums
The premium you pay for health insurance increases with a higher sum insured. While opting for a ₹5 lakh cover keeps your premiums affordable, that alone shouldn’t be the deciding factor for choosing a lower coverage amount.
Tax Benefits
Under Section 80(D) of the Income Tax Act, the insured can avail tax benefits of up to ₹1,00,000. This benefit is only available to the proposer if they’re paying for themself, their spouse, their kids, and their parents.
Protection against common medical emergencies
Having a 5 lakh health insurance plan keeps you protected from medical emergencies like surgeries, accidents, and severe illnesses. Although you may have to serve a waiting period before you can make a claim, it is still worth it to have delayed protection instead of having no protection.
Cashless treatment at network hospitals
Network hospitals are medical facilities that an insurer has partnered with to offer cashless treatment to the insured. It’s important for the policyholder to check if the insurance company’s network is vast enough and has enough hospitals in the policyholder’s vicinity. If you’re admitted to a network hospital, the insurer can directly settle the bills with the hospital without having to pay anything out of pocket.
The Disadvantages of Having a 5 Lakh Health Insurance Plan
While a ₹5 lakh health insurance plan offers essential protection, it’s not without limitations. Understanding where your coverage might fall short can help you make informed decisions and avoid unexpected financial burdens during a medical emergency. Let’s break down the potential drawbacks of relying solely on a 5 lakh sum insured:
Inadequate coverage for major treatments
A 5 lakh health insurance plan may not provide comprehensive coverage for all medical expenses. For example, a liver transplant in a Tier-1 city could easily cost between ₹15,00,000 to ₹25,00,000. Your health insurance will definitely fall short if you need to go through a major surgery like this or face prolonged hospitalization.
Limited long-term security
With medical inflation in India being the highest ever (10%-14%), a 5 lakh health insurance policy may not be a wise choice in the long run. A treatment that costs ₹4,00,000 in 2025 may easily cost over ₹5,00,000 in the next five years. Therefore, a 5 lakh health insurance plan is not future-proof.
Out-of-pocket expenses
Even with a 5 lakh health insurance plan, you might still face out-of-pocket expenses. For example, room rent limits can force you to cover the difference in hospital bills if you choose a higher-cost room, and co-payment clauses might require you to pay a percentage of the bill as per policy terms. Sub-limits on specific treatments, like cataract surgery, could cap your coverage, leaving you to pay the excess. Plus, non-medical expenses and consumables might not always be covered.
Shared sum insured for family floaters
The sum insured in a family floater plan is shared by all the members insured by the plan. A 5 lakh health insurance can quickly dwindle if multiple family members face hospitalization or require treatment in the same year.
Premium Comparison for 5 Lakh Health Insurance Plans Vs 10 Lakh Health Insurance Plans
While a ₹5 lakh cover is a good starting point, it may not be enough to fully protect you from large medical bills, especially in case of major surgeries or long-term treatments. Given the rising cost of healthcare, is it worth considering a plan with a higher sum insured? Let’s compare the premiums for ₹5 lakh vs. ₹10 lakh coverage to see whether upgrading is a viable option.
| Particulars | Premium for 5 Lakh Plan* | Premium for 10 Lakh Plan* | Price Difference |
|---|---|---|---|
| Single Person (aged 30) | ₹8,835 | ₹10,476 | ₹1,641 |
| Couple (both 30 years old) | ₹12,404 | ₹14,514 | ₹2,110 |
| Couple (both 30 years old + 5 year old child) | ₹15,795 | ₹18,269 | ₹2,474 |
| Senior citizen couple (both aged 60) | ₹34,519 | ₹41,122 | ₹6,603 |
Note: These premiums are the average of the top 5 comprehensive plans in the market and calculated based on a tier 2 location.
It’s clear from the table that the price difference between a 5 lakh health insurance plan and a 10 lakh health insurance plan is quite small. Despite the minimal price difference, if you have difficulty affording the premiums for a higher sum insured, a 5 lakh plan isn’t a bad option. Keep reading to discover how you can reap the full benefits of your 5 lakh health insurance plan.
How to Maximise the Benefits of a 5 Lakh Health Insurance Plan
A ₹5 lakh health insurance plan may have limitations, but with a few smart tweaks, you can stretch its value much further. By leveraging key features, add-ons, and strategic upgrades, you can enhance your coverage and reduce out-of-pocket costs. Let’s explore some practical ways to maximize the benefits of your plan:
Restoration benefit
The restoration benefit refills your sum insured after you exhaust it by making a claim. This feature comes with certain clauses. Restoration can happen for partial exhaustion of your sum insured or complete exhaustion. It can get triggered an unlimited number of times per year or only once a year. Lastly, it can be used for any illness or only for a different condition unrelated to the previous hospitalization in the same year. To make the most out of the restoration feature, opt for a plan that offers unlimited restoration upon partial exhaustion for any illness.
No-claim bonus and renewal bonus
Insurance companies often reward their customers with a no-claim bonus if they go an entire year without making a claim. Some other plans offer a loyalty bonus during renewal regardless of whether the policyholder has made a claim. These bonuses increase your coverage yearly but are capped at a certain percentage of the insured sum.
Super top-ups
Super top-ups are independent, separate policies that you can use along with your base policy to receive extensive coverage at low premiums. However, they often come with a component known as 'deductible,' which is the financial threshold you should spend out of pocket before your super top-up starts covering the rest. These plans are a great way to increase coverage without paying exorbitant premiums, but they work best when paired with a base policy ideally from the same insurer.
Add-ons
Add-ons are additional benefits that you can attach to address coverage gaps in your base 5 lakh health insurance plan. Think of add-ons as unique benefits that your base policy does not provide. You must remember your unique medical needs while opting for add-ons. For example, a free annual health check-up add-on is perfect if you're keen on preventative health care.
Top 5 Health Insurance Plans with a 5 Lakh Cover
| Top Plans | Waiting Periods | Features | Insurer Metrics |
|---|---|---|---|
| HDFC ERGO Optima Secure | PED WP: 3 years SI WP: 2 years |
Pre & post hospitalisation cover: 60 & 180 days Restoration: 100% of base SI, once a year (Cost-effective addon to make it unlimited) Renewal Bonus: 50% pa, up to 100% (irrespective of claims) Secure benefit - 2X Coverage from day 1 |
Network Hospitals: 13k + CSR: 98% ICR: 86% |
| Care Supreme | PED WP: 3 years (add-ons can reduce it) SI WP: 2 years |
Pre & post hospitalisation cover: 60 & 180 days Restoration: Up to Base SI, unlimited times Renewal Bonus: 50% pa, up to 100% (add-on can increase it to 100% pa, up to 500%) |
Network Hospitals: 11.4k+ CSR: 90% ICR: 59% |
| Aditya Birla Activ One Max | PED WP: 3 years (add-ons can reduce it) SI WP: 2 years |
Pre & post hospitalisation cover: 90 & 180 days Restoration: 100% of base SI, unlimited times Renewal Bonus: 100% pa, up to 500% (irrespective of claims) |
Network Hospitals: 12k+ CSR: 95% ICR: 68% |
| Niva Bupa Aspire Titanium + | SI WP: 2 years PED WP: 3 years |
Pre & Post hospitalisation cover- 60 & 180 days Restoration: ReAssure+ - Triggers after 1st claim. Unlimited times for the same and different illness. Can use base + Restoration both for a single claim after 1st claim. Renewal Bonus: Booster+ (Carry forward unutilized cover as per entry age up to 10x) |
Network Hospitals: 10k+ CSR: 91% ICR: 58% |
| ICICI Lombard Elevate | PED WP: 3 years SI WP: 2 years (both can be reduced with add-ons) |
Pre & post hospitalisation cover: 90 & 180 days Restoration: 100% restoration of the base cover, unlimited times (with a 45-day cooling period for the same ailments) Renewal Bonus: 20% pa, up to 100% (Add-on can make it 100% per year with no capping on maximum amount) |
Network Hospitals: 10.8K+ CSR: 85% ICR: 83% |
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Conclusion
A 5 lakh health insurance may not cover all your medical expenses, but it is an important safety net. However, most insurers have a minimum sum insured requirement depending on the location of policy purchase. Tier-1 cities like Mumbai and New Delhi may not have the option of availing a 5 lakh sum insured health insurance plan. That is why we recommend paying slightly higher premiums and opting for a 10 lakh health insurance cover instead.
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