Start with your team's actual needs
The most common mistake businesses make when buying group health insurance is starting with a budget and working backwards. The right approach is the inverse: understand what your employees need, design a plan that meets those needs, then validate it against your budget.
Conduct a quick anonymous survey asking employees about family structure (dependants, parents), any known health conditions, maternity plans in the next 12–24 months, and how frequently they use outpatient care. This data shapes every subsequent decision.
Step 1 — Choose the right sum insured
The sum insured (SI) is the maximum amount the insurer will pay per employee per policy year. In India's metro cities, a three-day hospitalisation with surgery can easily cross ₹3–4 lakh. In tier-2 cities, costs are lower but rising fast.
Recommended benchmarks:
- ₹3 lakh SI — adequate for individual cover in tier-2/3 cities
- ₹5 lakh SI — the market standard for individual+spouse+children in metros
- ₹7–10 lakh SI — appropriate for senior employees or when covering parents
Resist the temptation to under-insure. The premium difference between ₹3 lakh and ₹5 lakh SI is often less than ₹500 per employee per year, but the protection difference is significant.
Step 2 — Decide who to cover
Group policies can cover employees only, or extend to their family members. Typical configurations are:
- Employee only (E) — lowest premium, limited value signal
- Employee + spouse (E+S) — common for unmarried-heavy teams
- Employee + spouse + children (E+S+C) — the market standard
- Employee + spouse + children + parents (E+S+C+P) — highest premium but most valued by employees
Adding parents increases premium substantially (often 40–60% more) because their age and risk profile is higher. A practical middle ground is to offer parent cover as an optional voluntary top-up that employees can pay for themselves at group rates.
Step 3 — Evaluate network hospital coverage
Cashless hospitalisation — where the insurer settles the bill directly with the hospital — only works at network hospitals. Before choosing an insurer, verify that their network includes the hospitals your employees actually use in their residential localities.
Ask your shortlisted insurer for a network hospital list filtered by your key employee pin codes. A plan with 10,000 network hospitals nationwide is far less useful than one with 500 hospitals that include the five hospitals within 5 km of where most of your team lives.
Step 4 — Select relevant add-ons
Most policies have a base plan plus optional riders. Evaluate each add-on against your team's survey data:
- Maternity cover — essential if more than 20% of your team is in the 25–35 age bracket
- OPD cover — high-value for teams with young families who visit doctors frequently
- Mental health rider — increasingly expected by tech and professional services employees
- Critical illness lump sum — valuable for senior employees as income replacement
- Dental and vision — lower premium add-ons with high employee visibility
Step 5 — Check claim settlement ratios and process
A policy is only as good as the claims it actually pays. Before committing to an insurer, review:
- Claim settlement ratio (CSR) — target above 95% for group health claims
- Cashless approval time — best-in-class is under 2 hours for planned procedures
- Claim support channel — is there a dedicated helpline? An app? A human TPA manager?
- Reimbursement TAT — target under 10 working days from document submission
Step 6 — Total cost of ownership, not just premium
The quoted premium is only part of the cost. Factor in:
- 18% GST on the premium (not deductible for the employer)
- Administration fees if the insurer charges separately
- Time cost of your HR team managing additions, deletions, and claims
A slightly higher premium from a provider with excellent digital tooling and a dedicated account manager will often cost less in total HR time than a cheaper policy that requires manual paperwork for every endorsement.
Revisit your group health policy every renewal cycle. As your team grows and your demographics change, the right plan configuration will evolve too. Treat it as a living programme, not a one-time purchase.