Why disaster add-ons matter: Insurance expert outlines key benefits and common errors

India faces frequent natural disasters like earthquakes, landslides, floods, and cyclones. Despite this, many homeowners skip disaster riders for their insurance policies. These riders, such as earthquake or landslide cover, are optional add-ons but provide important protection that standard policies often exclude. Susheel Agarwal, founder and CEO of Ethika, stresses that relying only on a basic policy can leave homes and finances vulnerable. He advises policyholders to add a natural calamity rider to ensure protection against these unpredictable events.

Disaster riders are often overlooked for several reasons. People tend to underestimate rare risks, assuming disasters won’t happen to them. This “optimism bias” leads them to skip coverage. Another reason is cost perception. Though insuring a home worth Rs 1 crore may only cost a few thousand rupees annually, many consider it expensive. Lastly, lack of awareness and confusing policy language discourages people from buying extra cover. Standard home insurance policies usually do not include earthquakes or landslides unless a rider is added. Many homeowners realize the gap only after a disaster occurs, which can cause serious financial loss.

The importance of disaster riders cannot be overstated. Around 59% of India’s land is at moderate-to-severe seismic risk, especially hill regions like the Himalayas, Northeast India, and the Western and Eastern Ghats. Landslides triggered by monsoon rains often cause widespread damage. For example, the 2023 Himalayan floods and landslides caused over Rs 100 billion in losses. Since a home is often the largest investment a family makes, spending a small extra amount for disaster coverage can protect years of savings. Disaster riders act as a financial safety net. Without them, a catastrophe could lead to total financial ruin, while insurance helps families rebuild without losing everything.

Mental health coverage is also now mandatory in India. Following the Mental Healthcare Act, 2017, and IRDAI directives, all health insurance products must cover mental illnesses equally with physical conditions. Commonly covered conditions include depression, anxiety, bipolar disorder, schizophrenia, OCD, and similar psychiatric illnesses. Insurance typically pays for hospitalisation costs, including room, doctor fees, medicines, and diagnostics. Pre- and post-hospitalisation care, including follow-up consultations and therapies, may also be covered. IRDAI has instructed insurers to remove any blanket exclusions for mental illnesses, ensuring comprehensive care.

Alternative treatments, or AYUSH therapies (Ayurveda, Yoga & Naturopathy, Unani, Siddha, Homeopathy), are increasingly included in insurance policies. If inpatient treatment is provided in a government-recognized AYUSH hospital for at least 24 hours, costs such as room, procedures, and medicines are reimbursed. Some policies may have limits on AYUSH coverage, so checking policy terms is essential. IRDAI requires insurers to treat AYUSH therapies on par with conventional medical treatments, usually at no extra premium.

How to choose the right policy and avoid mistakes

Selecting health insurance depends on age, family stage, income, and city of residence. Young adults can start with a basic plan covering at least Rs 10 lakh to secure healthcare protection at low premiums. Newly married couples often benefit from family floater plans that cover both partners, with the option to add maternity riders early if children are planned. Families with children should increase coverage, often adding a super top-up policy for major treatments. Seniors approaching retirement need comprehensive plans with high coverage (Rs 25 lakh or more), lifelong renewability, and minimal co-payments.

Income level influences coverage choice. Moderate-income families can consider the Arogya Sanjeevani policy, offering essential coverage from Rs 1–5 lakh at low premiums. Higher-income households may opt for larger policies, including individual or family floaters of Rs 50 lakh or more, possibly combined with super top-ups to reach Rs 1 crore. This ensures protection against high medical costs without draining savings. Geography matters too. In Tier-1 cities like Delhi, Mumbai, and Bengaluru, hospital costs are higher, so policies should have coverage of Rs 15–20 lakh or more. In Tier-2 and Tier-3 cities, a minimum coverage of Rs 5–10 lakh is recommended, though families should plan for treatment in bigger cities if needed.

Buying insurance also protects against the financial shock of hospitalisation. Without coverage, a single hospital stay can wipe out savings, force families to take high-interest loans, and compromise long-term plans such as children’s education or retirement. The resulting financial stress can also affect health and emotional wellbeing, creating a vicious cycle.

Common mistakes when buying insurance include focusing only on the cheapest plan, choosing inadequate coverage, hiding pre-existing conditions, ignoring policy fine print, and relying solely on employer-provided insurance. Low-cost policies may have hidden restrictions, while insufficient coverage can leave families underinsured. Concealing pre-existing illnesses can lead to denied claims, and group insurance often stops if the employee changes jobs. Carefully reading the policy and choosing the right coverage is crucial.

In summary, disaster riders, mental health coverage, and alternative therapies are important additions to insurance policies in India. They protect families against financial loss due to disasters, mental illness, or hospitalization. Choosing the right policy requires evaluating age, income, family size, and location, and avoiding common mistakes like underinsurance or ignoring fine print. Spending a little extra on comprehensive coverage today can prevent major financial hardship tomorrow.