Case Study: How Health Insurance Saved a Family from a ₹8 Lakh Medical Bill

In India, one of the biggest financial risks for middle-class families is unexpected medical expenses. Unlike Western countries where health care may be partially state-funded, in India a single hospitalization can wipe out years of savings.

According to IRDAI reports, the average hospitalization cost in private hospitals has risen by 150% in the last decade. For middle-income households, this can mean dipping into savings, selling assets, or even taking loans.

This is where health insurance plays a life-saving role—not just medically, but financially.

In this case study, we will look at the story of the Sharma family from Delhi, who avoided a ₹8 lakh medical debt because they had health insurance.

Background: The Sharma Family

• Family Members: Mr. Rajesh Sharma (42, IT Manager), Mrs. Priya Sharma (38, Homemaker), 2 children (ages 10 & 6)
• Monthly Household Income: ₹1.2 lakh
• Savings Pattern:
  • ₹10,000/month SIP in mutual funds
  • ₹20,000 FD for emergencies
  • No big assets except a home loan EMI of ₹30,000
• Insurance:
  • Family Floater Health Insurance of ₹10 lakhs (premium ~₹18,000/year)
  • Term Life Insurance for Rajesh

At first, Rajesh thought health insurance was just an extra cost. But his financial advisor convinced him to continue the policy.

The Incident

In 2021, during the second wave of COVID-19, Rajesh’s father (aged 68, living with them) developed severe pneumonia and had to be hospitalized in a private hospital in Delhi.

Hospital Bill Breakdown:

Without health insurance, this would have devastated their savings.

How Health Insurance Helped

Since Rajesh had a ₹10 lakh family floater health policy, the insurance company covered ₹8 lakh out of ₹8.5 lakhs directly through cashless hospitalization.

• Rajesh’s Out-of-Pocket Expense: Only ₹50,000 (non-covered consumables like gloves, PPE kits).
• Insurance Coverage: ₹8,00,000 (94% of the bill).

Financial Impact if No Insurance

Let’s compare two scenarios:

With Health Insurance:

• Savings before: ~₹6 lakhs (FD + mutual funds)
• Hospital bill: ₹8.5 lakhs
• Paid by insurance: ₹8 lakhs
• Family paid: ₹50,000
• Savings after: ~₹5.5 lakhs (intact)

Without Health Insurance:

• Savings before: ~₹6 lakhs
• Hospital bill: ₹8.5 lakhs
• Paid by family: Entire ₹8.5 lakhs
• Extra needed: ₹2.5 lakhs (borrowed from relatives/loan)
• Savings after: 0 (completely wiped out)

👉 Insurance saved them from financial disaster + loans.

Emotional Relief

Apart from money, the peace of mind was priceless:

• The family could focus on treatment instead of arranging funds.
• No stress of selling jewelry or breaking investments.
• Children’s education fund remained untouched.

Step-by-Step Timeline

1. Day 1–2: Rajesh’s father admitted → ICU charges started.
2. Day 3: Hospital asked for ₹3 lakhs deposit.
3. Rajesh contacted insurer: Within 24 hours, pre-authorization for cashless claim was approved.
4. Hospitalization: Insurance paid bills directly.
5. Discharge: Only ₹50,000 was paid by family.

Lessons from the Case

1. Family Floater is Crucial: A single ₹10 lakh cover protected the entire family.
2. Cashless Network Hospitals Help: Immediate settlement reduced stress.
3. Cover Parents Too: Elderly family members are most vulnerable.
4. Don’t Delay Insurance: Buying early keeps premiums affordable.
5. Emergency Fund Still Needed: Insurance doesn’t cover 100% (consumables, extra charges).

Expert Advice

• Minimum Cover Needed in Metro Cities: ₹10–15 lakhs family floater.
• For Tier 2 Cities: At least ₹5–7 lakhs.
• Add-on Covers Worth Buying:
  • Room Rent Waiver
  • No-Claim Bonus (NCB)
  • Critical Illness Rider
• Buy at Younger Age: Premiums rise steeply after 40.

Comparative Analysis