Planning smartly for the future and for unexpected situations is essential. Notably, when saving for your healthcare and related medical expenses, it is important to identify your goals, health status, family health history, and possible devaluation of assets due to inflation and other factors.
The next step is to assess your current savings capacity in order to accumulate the required . It is best to start as early as possible so that you can take advantage of the power of compounding — no matter your choice of investment.
Chartered Accountant Nitin Kaushik in a post on social media platform X (formerly Twitter) noted that even when it comes to retirement, there are two key factors that blindside most — healthcare and longevity. He pointed that while general inflation is currently at 5%, medical inflation between 12-14% and these numbers are only likely to rise in the future.
Breaking this down, Kaushik noted that a medical procedure costing ₹5 lakh in 2026, could cost around ₹27 lakh in 2041 — a scary prospect where a single major situation could “liquidate” your capital.
Health fund vs health insurance: What’s the difference?
Every individual, whether a salaried , businessperson or freelancer, has to budget for medical and health related expenses. A decent individual life insurance policy costs between ₹12,000-25,000 per year in premiums, depending on the provider and insurance plan.
However, most financial advisors note that even with a plan it is important to build a separate medical reserve or health fund. This is because all insurance plans do not cover diagnostics, medicines, recovery gaps, parents’ emergencies and income loss during illness.
It is advisable to build your / health fund to beat sector inflation. In case of dependents (parents or children) you may also need bigger buffers based on their health requirements and medical status.
Health fund and insurance: Why you may need both
An insurance policy is a good buffer in most cases and it’s best to invest in one based on your specific individual and / or family needs. But your health insurance policy may not cover 100% of your in all cases and there have been instances where cashless claims are rejected. Further, as a customer you have no control over the rise in cost of health insurance premiums.
It is in such circumstances that a separate health fund or medical fund comes into play. This would be earmarked for the specific purpose and separate from your other savings / funds, to be used in case of medical or health emergencies.
How much and where to invest for medical / health fund?
Axis Bank recommends calculating your to be 50% over your chosen health insurance cover. For example, if you have ₹10 lakh insurance, your health fund works out to an additional ₹5 lakh. In case of dependents, the fund can be expanded to 55-60% of your insurance cover — ₹6-7 lakh.
Similar to your , your medical or health fund should also be accessible in case of urgency. It further recommended, a dedicated savings bank account (separate from your regular account), and / or bank fixed deposits and / or debt mutual funds as good options that provide returns without sacrificing safety or liquidity.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
- Medical inflation significantly outpaces general inflation, necessitating a separate health fund.
- Health insurance alone may not cover all medical expenses; building a health fund is essential.
- Starting to save early and leveraging the power of compounding can help mitigate future healthcare costs.