If You Already Have Rs 10 Lakh in Savings, Do You Still Need That Insurance Plan?

Ritu Ahluwalia stopped paying for cover the year her fixed deposits crossed ₹12 lakh. Her reasoning was not stupid. It was arithmetic, and it was wrong by roughly a factor of eight, for a reason that has nothing to do with how much money she had.

She is 38, a dentist with her own two-chair clinic on Nakodar Road in Jalandhar, and she nets around ₹18 lakh a year. No dependants except her mother, who has a pension. She had built a genuine cushion the slow way, and one evening she did the sum everybody eventually does: if the worst happens, I have twelve lakh. What exactly am I insuring?

The answer is that "the worst" is not one event. It is at least three, they pay on three entirely different triggers, and a pile of cash in a fixed deposit substitutes for exactly one of them. The Indian insurance regulator has, in effect, already told everybody this — not in a circular anybody reads, but in the structure of the products it forced the industry to sell.

The regulator's filing cabinet is the argument

Between 2020 and 2021 the Insurance Regulatory and Development Authority of India did something unusual: it designed products itself and made insurers sell them. Not one product. Three, in three different families, each with a fixed name, fixed wording, and terms an insurer cannot vary.

Arogya Sanjeevani is the standard individual health product — indemnity-based, meaning it reimburses hospitalisation expenses actually incurred, against bills, up to a sum insured. General and standalone health insurers offering indemnity products are required to offer it.

Saral Jeevan Bima is the standard individual term life product, mandatorily offered by life insurers from January 2021. Pure risk cover. It pays a fixed sum on death and nothing otherwise.

Saral Suraksha Bima is the standard personal accident product. It is benefit-based: it pays a defined sum on death or disablement arising from an accident, and a periodic benefit during temporary total disablement, and it does so whether or not any bill exists.

Read those three side by side and the point becomes hard to miss. The regulator did not create one standard "insurance" product with variants. It created three, in three separate families, because they answer three separate questions. If they were substitutes, standardising one would have been enough.

And the word that separates them is the one almost nobody uses correctly: indemnity versus benefit.

The arithmetic Ritu did not do

Picture the specific accident her profession makes worth thinking about. Not a heart attack, not a cancer diagnosis — a scooter clipped by a tempo on the bypass, and a crush injury to her right hand.

She does not die. She is discharged in eleven days. Total hospitalisation, surgery and six months of physiotherapy come to about ₹4.2 lakh. An indemnity health policy would have paid most of that, subject to whatever room-rent limit and co-pay her policy carried. Her fixed deposits could also have paid it, which is precisely the observation that led her to cancel the cover.

Now the part the fixed deposits cannot touch. The clinic is shut for seven months. When she returns, the fine-motor work — endodontics, the procedures that carry her margin — is no longer something she can do reliably. She restructures to consultation and simple restorative work, and her net income settles at around ₹9 lakh instead of ₹18 lakh.

Nine lakh a year, for the twenty-two working years she had left. Discounted back at a conservative 7%, that stream of lost income is worth roughly ₹1 crore in today's money.

Against which she has ₹12 lakh, of which ₹4.2 lakh has already gone to the hospital. The remaining ₹7.8 lakh covers about ten months of the shortfall. Then it is finished, and she is 39, with a reduced earning capacity, no cushion, and a medical history.

Her life cover would have paid nothing, because she is alive. Her indemnity health cover would have paid the ₹4.2 lakh and correctly stopped there, because that is what indemnity means. The only instrument in the entire market that pays on this event is a benefit-based one — a personal accident policy with permanent partial disablement cover, or a critical illness policy if the trigger had been a listed illness instead.

What nobody tells you: you also threw away a clock

There is a second cost to cancelling cover, and it is invisible on the day you do it because it is not money.

Indian health insurance contains time-based protections that accrue only while a policy is continuously in force. Pre-existing conditions are covered after a waiting period served under the policy. And after a defined period of continuous coverage — the moratorium — an insurer may not repudiate a claim on grounds of non-disclosure or misrepresentation at all, except in a case of established fraud. Both periods were shortened by the regulator in the 2024 round of health insurance reform, which made them more valuable, not less.

What matters is the word continuous. Those clocks run with the policy. Cancel it, and they stop and reset. Buy again at 44 after a hand injury, and you are a new proposer with a disclosed medical history, a fresh waiting period, a fresh moratorium, and terms priced accordingly — if standard terms are offered at all.

So the honest accounting of Ritu's decision is not "she saved ₹22,000 of premium a year". It is: she saved ₹22,000 a year, and surrendered an accruing contractual position that could not be bought back at any price, only re-earned from zero.

What the calculator settles

The argument in a family sitting room is never won by whoever is right. It is won by whoever produces a number first.

What to actually do

Write down, in rupees, what each risk would cost you personally. Not a rule of thumb, not a multiple of income — the actual number. For most working people the death number is smaller than they fear and the disability number is far larger than they have ever considered, because nobody sells a product that forces them to think about it.

Then match instrument to trigger. Death of a person others depend on: pure term cover, and only if someone is actually dependent. Hospital bills: an indemnity policy, kept continuously in force. Loss of earning capacity while alive: a benefit-based policy, which is the family almost every "I have savings now" argument silently ignores.

Use the standard products as a measuring stick even if you do not buy them. Because the wording is fixed by the regulator, the standard product in each family is the one honest baseline in a market full of bespoke bundles. Quote it, then ask an insurer to justify the difference between it and whatever is being pitched. That conversation goes very differently from the usual one.

And if you already hold cover and are about to cancel it because your savings have grown, cost the elapsed continuous-coverage period before you do, not after.

What this does not mean

It does not mean everybody needs all three. Someone with no dependants genuinely may not need life cover, and saying so is the honest answer even though it costs the industry a sale. The original instinct — that a large corpus reduces the need for some insurance — is correct. It just does not generalise across the families.

It does not mean benefit-based policies are unambiguously good buys. They pay on defined events with defined wordings, and the definitions matter enormously: a critical illness policy that lists a condition at a specific severity does not pay for a milder presentation of the same disease, and disablement scales in personal accident policies are precise and unsentimental. Read the definitions, not the brochure. A policy you do not understand the trigger of is not protection, it is a subscription.

It does not mean ₹10 lakh is a meaningless threshold. It is a real and valuable achievement, and it does genuinely retire some risks — a ₹30,000 dental emergency, a month without income, a car repair. Those are exactly the risks you should self-insure, and paying premium for them is waste.

And it does not mean Ritu was careless. She reasoned from the only risk she had ever been sold a product for. The gap in her thinking was put there by an industry that finds death easy to sell and disability almost impossible to, because one makes a good story at a wedding and the other makes everybody uncomfortable.

Frequently asked questions

If I have no dependants, do I need life cover at all?

Often not. Life insurance replaces income for people who would otherwise lose it, and if nobody is in that position the product is solving a problem you do not have. The exceptions worth checking are a loan someone else has guaranteed or co-signed, and a parent whose living costs you actually fund. Those create real dependency even without a spouse or children.

Is a critical illness policy the same as health insurance?

No, and conflating them is the most expensive misunderstanding in this whole area. A health policy is indemnity: it reimburses hospitalisation costs incurred, against bills. A critical illness policy is benefit-based: it pays a fixed lump sum on diagnosis of a specifically defined condition at a specified severity, regardless of what was spent, and the money is yours to use for income replacement, home modification or anything else. They can both be in force at the same time and both pay on the same event.

Does my employer's group cover replace all of this?

Only while you are employed there, which is precisely the condition most likely to fail at the same moment you need to claim. Group cover also typically ends on the last working day, carries no accrued continuous-coverage benefit you can take with you unless it is formally ported, and is sized for a workforce rather than for you. Treat it as a useful supplement and a bad foundation.

Why does the regulator publish standard products at all?

Because comparison had become impossible. When every insurer sells a differently constructed bundle, a buyer cannot tell whether a higher premium buys better cover or just more features they will never use. A standard product with wording fixed across the market gives everyone one identical reference point in each family, which is useful even to a buyer who ultimately purchases something else entirely.

Should I cancel an existing health policy once my savings are large?

Consider what the elapsed continuous coverage is worth before deciding. Waiting periods served and the moratorium after which claims can no longer be contested on disclosure grounds accrue only while cover is unbroken, and they reset if you lapse and repurchase later. That accrued position may be worth considerably more than the premium you would save, particularly once you are past forty.

Regulatory source: the standard individual health product Arogya Sanjeevani, the standard individual term life product Saral Jeevan Bima and the standard personal accident product Saral Suraksha Bima are all mandated products with wording specified by IRDAI, which also publishes the health insurance regulations governing waiting periods and the moratorium after which claims cannot be contested on disclosure grounds. Those periods were revised in 2024 — verify the current position. The three-triggers framing, the disablement arithmetic and the character of Ritu Ahluwalia are this article's own.

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Disclaimer: General information, not financial or insurance advice. “Ritu Ahluwalia” is a composite character, not a real individual. Policy definitions, waiting periods, disablement scales and standard-product terms change and vary by insurer — read the policy wording and verify the current position with IRDAI or a qualified adviser who is not paid commission on what they recommend.