1.1 – Overview

This chapter is authored by Shrehith from Ditto.

Most people in this country live on a tight budget. They don’t have a large savings corpus. They don’t have an emergency fund. They don’t have a lot to fall back on. Even those with better financial security are wholly unprepared to deal with the odd curveball life throws at you.

But this isn’t their fault per se. If anything, this isn’t a fault at all. People shouldn’t spend every waking minute of their life thinking of all the possible things that could go wrong. And they shouldn’t be living in a constant state of worry and panic. It would be a sorry way to live. However, throwing all caution to the wind wouldn’t be prudent. As any good driver would argue — “Eyes firmly planted on the street but for the occasional glance at the rearview mirror.”

You, too, would do well to check the rearview mirror every time.

Consider, for instance, a trip to the hospital. It can drain you physically. It can drain you mentally. And it can drain you financially. The prospect of healing from physical and mental trauma is already daunting. But to deal with a massive financial burden as you’re recovering from a debilitating illness can be crippling. Some would argue that this is an isolated experience. That the government aids individuals who genuinely need the money. However, reality tells a very different story. Individuals in their capacity bear two-thirds of all medical costs. In some areas, it can be as high as 90%. You don’t get much help from outside, and even when you do, you have to work hard for it.

In most cases, a single hospitalization can wipe out years of savings. In other cases, it can push people into a debt trap. And it’s not just the hospitalization you have to worry about. You’ll often have to contend with various diagnostic exams before doctors can determine what’s wrong. Post-hospitalization, you’ll have to contend with medication costs. Modern treatments are costly, and medical inflation usually peaks at 7–8% yearly.

To put it simply, falling sick can be an expensive affair. And it also has the potential to upend your life altogether. It can prevent achieving true financial independence and strike havoc at any point in your life.

Unless that is, you have a comprehensive health insurance plan.

This nifty insurance product can take care of all your pesky medical bills, and you won’t have to pay a bomb. It can stave off a crisis and help you achieve financial independence. It is a lifesaver; you’d expect most people to spend good money on a comprehensive health policy.

However, that isn’t happening. Most people don’t consider these things worthwhile, and even those who do, penny-pinch when buying a health insurance plan. And if you’re wondering why this may be the case, let me explain.

1.2 – A game of cat and mouse

The basic tenets of a health insurance contract are relatively straightforward. Of course, you pay a small fee (a premium) every year to cover all future medical expenses, subject to some reasonable restrictions.

However, despite the seeming simplicity here, there are infinitely many possibilities to consider. When you try to parse these possibilities, you’ll begin to see why people despise the prospect of buying health insurance. It’s a chore. A complicated mess of conditions and exclusions. A product that will abandon you when you need it the most.

What should have been a lifesaver is thought of as a needless distraction.

But perhaps it doesn’t have to be this way. Maybe the reason why people feel let down by health insurance products is that they’re party to an unequal contract. Think about it. When you accept the health insurance proposal, you’re signing off on an agreement you probably haven’t even read thoroughly. On the other hand, insurance companies have spent countless hours pouring through every detail and word in the document.

They have lawyers drafting policies that give them an extra edge during payouts. You don’t have that.

They have dedicated teams working on fine-tuning benefits. You don’t have that either.

They have experience on their side. You have none.

So it should be no surprise that you are at a disadvantage here.

Some would suggest that the only alternative here is to draft a custom contract with the insurer, where you can dictate terms and conditions.

But that is not feasible. Insurance contracts have to be standardized. It’s the only way insurance companies can sell policies to a large group of individuals. They will turn their back on you if you insist on a custom contract. That means your only option is to work within the confines of this standardized document. It would help if you found ways to come out of this transaction relatively unscathed even though the odds are stacked against you.

This brings us to this module.

Unlike most health insurance guides that try and walk you through the definitions, this one will be structured differently. Instead of elaborating on the terms and conditions, we will explain the logic behind imposing them in the first place. It’s like the title suggests — This is a game of cat and mouse. When the gong strikes and the claim is made, you want to extract every penny, and the insurer wants to keep every penny. The only problem — the insurer has a well-defined strategy to mitigate risk on their end, but you don’t have one.

So the objective here is to equip you with a blueprint. A blueprint that will walk you through the many ways in which insurers and their affiliates protect their interests. A blueprint that will offer you a sneak peek into their minds, so you know what to do when you have to make your purchase.

As Sun Tzu once said — The opportunity to secure ourselves against defeat lies in our own hands, but the enemy himself provides the chance of defeating the enemy.

And while insurance companies aren’t quite the enemies here, they are worthy adversaries who will not accept defeat lying down. They are prudent. They are diligent, and most importantly, they are prepared.

So it’s time you do the same.


  1. Pradeep says:

    Good to see a new module. I’ve made one blunder – subscribing to a ULIP plan, this was when I was not into personal finance and I ended up taking a bad advice. Ditto has a very vital role to play in today’s time. I hope more and more people open up to the idea of taking good insurance advice from trusted source. Thanks Varsity team.


    I’ll be more happy, if varsity adds a module on different types of frauds/ scams that are running in the market through various means, as it saves a lot of time ,effort or money of the newcomers. It took me 6 months time and a lot of money and now i have started learning .

    • Karthik Rangappa says:

      Another way of looking at it that Varsity has all the modules which you can go through and which will eventually help you avoid getting scammed 🙂

  3. Boniface says:

    My problem is that zerodha doesn’t work in Nigeria here, work on it please

  4. Simran Ark says:

    Upload this module on APP too along with financial modeling.
    It’s quite hard to read this on web on mobile

  5. Abhishek Bhowal says:

    Hello Karthik Sir,
    I have a LIC ULIP plan which my Father took for me around 9 years back, my father first then I have been paying the yearly premiums since then, but now after studying personal finance it’s quite clear that ULIP is nothing compared to a TERM insurance plan. Should I stop my ULIP plan and get a TERM plan, or do I continue both together?

    • Karthik Rangappa says:

      Abhishek, I’m not authorized to advice. But now that you know what it is, why don’t you meet the advisor who sold these instruments and ask these questions, and on what basis these ULIPs were sold to you?

  6. muthu kishor says:

    Hi Abhishek,

    I’m a licensed Insurance advisor from IRDAI.
    As far as your concern goes, any proper advisor, may need some more information to tell you whether to quit an already running insurance policy.
    So you can ask your advisor.

    But in general, I’ll also not advise anyone to buy any kind of savings policy from any insurance company. Rather just buy term insurance from them & invest through mutual funds & direct stocks.

    Also, even if you’re stopping ulip or not, you can purchase a term insurance whose cost will be much cheaper when compared to a policy covered through any savings policy.

    all the best.


  7. Vikram says:

    Sir ye module Hindi me kab aye ge

  8. Bvs Rajeev says:

    Will be very helpfull if varsity is available in regional languages.

  9. Rao says:

    This Module should have been named HEALTH INSURANCE instead of INSURANCE.
    Topics related to Health Insurance only were covered,
    Term Insurance and general insurance were not even touched. As such above.

  10. Akshay says:

    Are you planning Hindi version of Insurance Module?

  11. Raghu ram says:

    Hi karthik sir,

    The content is tricky to understand in a layman form as compared to other modules.

    Request to refine the content, so everyone can easily get the essence.


  12. Raghu Ram says:

    Sir, is this module applicable for only health insurance


  13. Praveen says:

    Hey Karthik. I’m a big fan of your work. It’s really helpful to me as a market participant.

    I just have one small suggestion. Could you please add a “Next” button at the end of the chapters so that readers can move to the next one. It’ll be much easier to continue reading.

    Thank you.


    hindi me jaankari uplabdh karaye

  15. Swarnava Addya says:


    I am from Kolkata and Our West Bengal government has provided a ‘Swasthya Sathi’ card, which entitles every family to receive 5 lakh rupees in health insurance. My family possesses this card.

    I have reviewed the terms and conditions, but my question is, if the government is offering 5 lakh rupees in health insurance for free, is it necessary to acquire additional health insurance?


    Here is the link, I will be glad if you gone through the link and share your opinion.

    • Karthik Rangappa says:

      I’m positing this reply on behalf of the author –

      Hi there, thanks for reaching out.

      The Swasthya Sathi initiative launched by the Hon’ble CM of West Bengal is certainly a great initiative. It assures medical assistance of up to 5L per family, irrespective of their current medical conditions.

      Although not much information has been provided about the minute details of this scheme, there are certain pros and cons to it.

      This scheme covers members irrespective of their health conditions and medical profiles. This is a big deal, especially for people with critical conditions because retail insurance might not get issued in such cases. Apart from this, it also claims to be cashless.

      But it certainly has its fair share of problems, as we see it.

      1. The cover amount offered is only 5L. It is a decent amount, to begin with, but it is not sufficient to take care of an entire family. Any critical illness related to the heart or brain can easily cost you beyond 5L in good private hospitals.

      2. As it is a government-operated scheme, we are not sure how smooth the overall operation is. For example, per the website that talks about this scheme, it is mentioned that various districts have been distributed to different vendors. Hence one vendor might offer a smooth experience, whereas the other vendor might not. Usually, such schemes tend to offer delayed resolution to queries.

      3. This plan covers hospitals within the state, but the majority of the good hospitals across the country are not covered under this policy.

      4. Lastly, since there’s not much transparency about the room restrictions, sub-limits, pre and post-hospitalisation coverage, we feel it is risky to depend entirely on this plan.

      No doubt it is good to have this as a backup. But to ensure that major medical bills are covered without any delays and denials, retail plans are still the best choice. Private insurers usually cover most of the good hospitals across the country. If you are not happy with the insurer and its services, you can port to a different insurer without losing benefits. Mostly these insurances offer good benefits like no room restrictions, no copayment, no sub-limits, coverage for robotic and modern treatments, decent pre and post-hospitalisation coverage, and most of all, there’s a private business running all this, with an incentive to offer good services otherwise they might lose out on further business.

  16. K Saravanakumar says:

    Please add pdf for downloading this module, like other ones. It will be helpful. Thanks.

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