Why Your Employer’s Health Insurance Might Not Be Enough, According to Nithin Kamath

In a recent LinkedIn post, Nithin Kamath explores critical considerations regarding employer-provided health insurance and the often-overlooked necessity of personal health policies. Kamath, founder of Zerodha, shared insights from a conversation with Shreihth Karkera of Ditto Insurance, highlighting several reasons why relying solely on group coverage could leave individuals vulnerable.

Employer Health Plans: Cost vs. Comprehensiveness

Kamath points out that a primary concern with employer health insurance is that these plans are frequently negotiated based on cost rather than the breadth of coverage. This cost-centric approach can lead to limitations that may not be immediately apparent.

“Most employer plans are negotiated on cost, not comprehensiveness. Room rent sub-limits, for example, don’t just cap the room cost, they proportionally reduce surgeon fees, procedure costs, and everything else in the claim.”

As Nithin Kamath elaborates, these sub-limits can have a cascading effect, impacting not just the accommodation but also the core medical expenses associated with a claim. This means that while the total sum insured might appear adequate, the practical payout during a significant medical event could be substantially less than expected.

The Long-Term Implications of Group Coverage

Another crucial point raised by Kamath concerns the long-term implications of developing a health condition while under an employer’s group plan. He emphasizes the difficulty of transitioning to a personal policy later on.

According to Nithin Kamath, insurers view individuals seeking a personal policy after being covered by a group plan as having a pre-existing condition. This can lead to significantly higher premiums and potentially limited coverage.

“If you develop a condition under group cover and then try to buy retail, insurers will treat it as pre-existing. Someone who bought a personal policy at 25 has already passed the required checks, has 10 years of history, and will probably pay a smaller premium at renewal. Buying a new policy with pre-existing conditions would be a lot more expensive.”

Kamath stresses the importance of securing a personal policy at a younger age, when health checks are less stringent and premiums are lower. This early action builds a history that benefits the policyholder in the long run.

Addressing Medical Inflation and Policy Upgrades

The issue of medical inflation is another significant factor highlighted in Kamath’s post. He notes that what might seem like a sufficient sum insured in one’s twenties can quickly become inadequate due to rising healthcare costs.

In Nithin Kamath’s view, the fixed nature of corporate cover exacerbates this problem.

“₹5–10L sum insured feels fine at 26. With medical inflation running at ~14% annually in India, it really isn’t at 36. Corporate cover usually stays flat. Personal policies can be upgraded.”

Kamath explains that personal health policies offer the flexibility to increase the sum insured over time, a crucial feature for keeping pace with medical inflation. This adaptability is often missing in employer-provided plans.

Tax Benefits and Policy Ownership

Beyond the coverage aspects, Kamath also touches upon the financial benefits of owning a personal health policy. He points out that premiums paid for employer-sponsored plans do not typically qualify for tax deductions, unlike those for a personal policy.

As Nithin Kamath advises, maintaining a personal policy allows individuals to claim annual tax deductions, adding another layer of financial advantage.

The Ultimate Protection: Owning Your Policy

Ultimately, Kamath’s central message is about control and long-term security. He suggests a strategic approach to using employer cover for immediate claims while safeguarding a personal policy.

“Use the corporate cover for claims, keep your personal policy clean and let the no-claim bonus build. But the policy that protects you when it actually matters is the one you own.”

This strategy, according to Nithin Kamath, ensures that the personal policy remains pristine, allowing its no-claim bonus to grow. This ‘owned’ policy, he concludes, is the true safety net when major health events occur, especially after leaving an employer.