Health insurance or medical corpus: which is the smarter choice?

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Healthcare costs are rising every year, and one big question for families is whether to rely on health insurance or simply build a medical emergency fund. Both approaches have their place, but they work differently, and the decision often depends on your income, age, and comfort with risk.

Why health insurance matters

Health insurance transfers the risk of high medical expenses to the insurer. You pay an annual premium, and in return the insurer covers hospitalisation, surgeries, medicines, and more, up to the sum insured. For major illnesses or accidents, a ₹5–10 lakh policy can save you from draining your savings. Without insurance, such bills can wipe out years of hard work in days.

The case for a medical corpus

Some people prefer to skip insurance and build their own emergency medical fund. The advantage is liquidity — your money is always with you, and there’s no fine print or exclusions. Over time, a disciplined saver can build a solid corpus that can be used for any expense, not just hospital bills. But this requires patience, high savings ability, and a good run of health in the meantime.

The drawbacks of each

Health insurance comes with exclusions, waiting periods, and rising premiums as you age. On the other hand, a medical corpus may not grow fast enough to keep pace with big-ticket hospital costs, especially in the early years. One surgery costing ₹5-7 lakh can deplete your savings in a single blow if you haven’t built a big enough fund.

A balanced approach

For most people, the smart strategy is not choosing one over the other but combining both. Health insurance provides immediate protection against catastrophic bills, while a parallel medical corpus offers flexibility for smaller expenses or uncovered treatments. Together, they give both security and control.

FAQs

Q1. Is health insurance always necessary if I have good savings?

Yes, because a sudden major illness can cost more than what you’ve saved, especially early on. Insurance covers that risk.

Q2. How much should I keep in a medical corpus?

At least 6–12 months of expenses to start with, and ideally enough to cover routine health needs and deductibles not paid by insurance.

Q3. Can I reduce insurance cover if my medical corpus grows large?

Yes, you can opt for a lower cover later, but most advisors recommend keeping at least a base policy active for emergencies.