One of the most common questions asked by High-Net-Worth Individuals (HNIs) is, “If I have a net worth of Rs 40 Crores or more, do I really need health insurance?”

After all, if a person can comfortably pay hospital bills from their own wealth, why pay annual premiums year after year? At first glance, self-insurance may seem like the smarter option, however, health insurance is not merely about paying hospital bills. It is about transferring financial risk, protection liquidity, preserving future insurability and creating a buffer against rising healthcare costs and uncertainty.

Understand Self-Insurance

Let’s use a simple analogy. Imagine you need to travel by local train every day for a month. A monthly pass costs Rs 800. You decide not to purchase the pass and instead think,

a) “I am smart enough to travel without a ticket and won’t get caught.” As a result, you save Rs 800

b) “Even if you get caught a few times, I can afford the penalty.” For example, even if the penalty is Rs 500, and you get caught 8 times, the total penalty is Rs 4,000/-

If your monthly income is Rs 80,000 or more, you may still comfortably absorb the loss. Many wealthy individuals apply similar thinking to health insurance. They believe “Even if a hospitalization occurs, I can easily pay the bill myself.” This approach is known as self-insurance.

The Real Question is Not Whether You Can Pay

Most HNIs can afford a Rs 5 lakh or Rs 10 lakh hospital bill. The real question is,

·       Should you retain a risk yourself when you have the option to transfer it to an insurance company?

Insurance is not designed only for people who cannot afford treatment. It is also designed for people who prefer transferring uncertainty to a specialized institution.

Why Many Wealthy Individuals Still Purchase Health Insurance?

a) Health Insurance Protects Liquidity

Net worth and liquidity are two different things. A person may have,

·       Real estate assets

·       Business ownership

·       Equity investments

·       Long-term investments

But medical emergencies require immediate cash. Health insurance helps preserve liquidity while allowing long-term investments to remain undisturbed.

b) Future Insurability Matters

Many people assume they can purchase health insurance later if required. Unfortunately, insurance does not work that way. Future eligibility depends upon

·       Age

·       Medical history

·       Existing illness

·       Underwriting assessments

If a serious medical condition develops in the future, obtaining fresh health insurance may become difficult, expensive or even impossible. Insurance is usually easiest to obtain before it is needed.

c) Health Insurance creates a Secondary Layer of Protection

Even if you can comfortably pay medical expenses, insurance creates an additional financial safety net. Instead of drawing form your personal wealth, eligible medical expenses can be transferred to the insurer as per policy terms and conditions. This allows your personal assets to continue working towards your long-term financial goals.

d) Medical Inflation is Rising Faster Than General Inflation

One factor many people underestimate is medical inflation. Healthcare costs in India have increased much faster than general inflation annually depending on the treatment, city and healthcare provider. A procedure costing Rs 5 lakh today may cost substantially more after 10 or 15 years. Medical advancements improve survival rates, but they also increase treatment costs. Planning only for today’s hospital bills may not be sufficient for future healthcare realities.

e) Hospital Billing risks and Healthcare Cost uncertainty

Healthcare costs are not standardized. For the same procedure,

·       Hospital A may charge Rs 3 lakh

·       Hospital B may charge Rs 5 lakh

·       Hospital C may charge significantly more

Insurance companies continuously monitor hospitals for unusual billing patterns, excessive charges and claim irregularities.

This is one reason some hospitals may eventually be placed under restricted, excluded or blacklisted categories based on insurer’s internal risk assessment and fraud management processes. When you are self-insured, there is no insurer acting as an additional layer of scrutiny. The entire financial burden falls directly on you. Health insurance not only transfers medical risk but also provides access to

·       Network hospital arrangements

·       Negotiated treatment rates

·       Claims review mechanism

·       Cost-control framework

The question therefore becomes, “Can you confidently predict healthcare costs, medical inflation, hospital pricing practices and treatment expenses over the next 20 to 30 years.”

What about HNIs with Pre-Existing Diseases?

This is where the discussion becomes even more important. Individuals with pre-existing disease often face

·       Medical underwriting

·       Additional Documentation

·       Waiting periods

·       Premium Loadings

·       Coverage restrictions

Because of these challenges, many conclude that self-insurance is a better option. However, the most important question is “Can you still obtain and maintain health insurance coverage today?”

If the answer is YES, preserving that coverage may prove valuable in the future when healthcare needs become more complex.

If Self-Insurance Ever Appropriate?

For some ultra-high-net-worth individuals, partial self-insurance may form part of a broader wealth management strategy. However, self-insurance should be a conscious and informed decision based upon

·       Net worth

·       Liquidity

·       Cash flow

·       Medical history

·       Family responsibilities

·       Risk tolerance

It should never be based solely on the assumption that “Nothing serious will happen to me.”

The smarter question instead of asking “Can I afford a hospital bill?”

Ask “Do I want to retain this risk myself or transfer it to an insurance company?” because that is the true purpose of insurance.

Final Thought

Health insurance is not an investment. The premium is not paid to generate returns. It is paid to transfer financial risk. Even a wealthy individuals purchase insurance because they understand a simple principle, “Being able to absorb a loss does not mean you should absorb it.”

Wealth can absorb a medical bill; insurance can absorb uncertainty. Whether you choose health insurance, self-insurance or a combination of both, make the decision after understanding the risks, not after experiencing them.

INSURANCE AWARENESS > INSURANCE IGNORANCE

Helping individuals and families make informed insurance decisions through education, transparency, and awareness.

Last Updated – 12/05/2026
Author Name - Abhishek Borkar

Disclaimer
This article is intended solely for educational and awareness purposes and should not be considered financial, legal, tax, investment, or insurance advice.

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