Health Insurance for Startups

Choosing the Right Health Insurance for Startups and SMEs

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Startups and SMEs offer group health insurance as a part of employee benefits to retain talented employees and attract new talent. Group health insurance covers the medical treatment costs of the employees in the event of hospitalization. This is an important employee benefit due to the rising costs of medical treatment. 

There are some factors that should be considered prior to buy health insurance for startups and SMEs. Some of the major factors are as follows –

Factors to Consider when Purchasing Health Insurance for Startups


Eligibility requirements for group health insurance for startups and SMEs are based on IRDAI rules. As per IRDAI rules, a business, enterprise, or organization must have a minimum of 7 employees to be eligible for group health insurance. Thus, a startup or SME can apply for group health insurance only if it employs at least 7 people.

Furthermore, the startup or SME must be registered and possess a GST number to be eligible for group health insurance. The enterprise must also be engaged in economic activity when purchasing group health insurance

Comprehensive Coverage

There are many types of group health insurance plans offered by multiple insurers. The startup owner can either opt for a plan providing minimum benefits at an optimum cost or choose a plan providing extensive coverage with many options to benefit the employees with various needs. Many insurers also offer tailor-made group health insurance for startups and SMEs. 

In-hospitalization coverage is the minimum benefit provided by group health insurance. It includes the room rent, doctor’s fees, cost of medicines, etc. Ambulance charges can also be covered depending upon the policy.

Many group health insurance plans also cover pre and post-hospitalization expenses. It is up to the discretion of the startup owner to opt for such a plan or not. Knowledge of the types of expenses covered under pre and post-hospitalization is necessary to make an informed decision.

  • Pre-hospitalization coverage mainly compensates for the expenses incurred on medical tests before hospitalization. Blood tests, X-rays, ultrasound, and other diagnostic tests are covered under the pre-hospitalization category. Usually, the charges incurred up to 30 days before hospitalization are covered, although the duration can vary as per the insurer. 
  • Post-hospitalization coverage compensates for the expenses incurred after discharge from the hospital, such as tests to determine the extent of recovery, costs of medicines to aid in the recovery, and doctor’s consultation fees. 

Most group health insurance plans cover pre-existing diseases. Owners of startups and SMEs can opt for pre-existing disease coverage if the staff includes many individuals of advanced age. 

Maternity coverage is usually present as an add-on benefit in a group health insurance plan. Maternity coverage compensates for the expenses incurred on both normal and C-section deliveries. Newborn baby cover for about 90 days from the delivery date can also be included in the maternity coverage. Startups and SMEs employing young female employees can opt for maternity coverage.

Family Cover

The families of the employees can also be covered under group health insurance. It is true for group health insurance for startups and SMEs as well. A family cover group health insurance policy includes every employee’s parents, spouse, and children. Family cover is particularly beneficial for the employees’ parents as they are more likely to get hospitalized. A large part of the financial burden imposed on an employee by medical treatment of his/her family members is removed by family coverage.

It must be remembered that group health insurance plans with family coverage cost more than those without family coverage plans. Thus, the startup owner needs to ensure that purchasing such a plan is within the budget.

Waiting Period

The waiting period is a certain period starting from the date of purchase of the group health insurance policy, during which the employees covered under it cannot raise a claim. The policy becomes active once the waiting period expires.

Group health insurance plans usually carry a 30-90 day waiting period. In the case of pre-existing diseases, the waiting period is usually 4 years. For specific diseases, the waiting period is 2-4 years. In the case of maternity cover, the waiting period is usually between 1 and 4 years.

Group health insurance plans, including group health insurance for startups and SMEs, allow the facility to waive off the waiting period on paying an extra premium amount. It is up to the startup owner to decide whether or not to waive off the waiting period.


The premiums of group health insurance for startups and SMEs cost less than individual health insurance plans. This is because the risk to the insurer is spread over a group of people. 

More is the coverage, more is the premium amount. Add-ons increase the premium. However, even if the employer chooses a basic group health insurance plan at a minimum premium, the employees can select add-ons by paying more premium.

Tax Benefits

Group health insurance for startups and SMEs comes with tax benefits. Under Section 80D of the Income Tax Act, the employer can claim tax deductions on the premium paid for the group health insurance for the employees. An employee can claim tax deductions if a part or full premium amount of the group health insurance policy is borne by him/her. The limit of tax deductions for group health insurance in a financial year is Rs. 1 lakh.


A common sub-limit imposed by insurers is on room rent. If the daily room rent exceeds the sub-limit, the balance amount is required to be paid by the insured. Sub-limits should also be considered when purchasing group health insurance for startups and SMEs.

It is better to ensure that the policy has a high sub-limit or does not carry any sub-limit clause.


Group health insurance plans are renewed on an annual basis. Addition or deletion of members, increasing the sum insured and inserting add-ons are done during the renewal process.


Group health insurance for startups and SMEs enable such entities to reduce turnover rate, enhance job satisfaction, and help a company grow in the long run.

If you are running a startup or SME and want to opt for a group health cover, then you must check out Vital. It offers the option of paying your subscriptions monthly while the self-service dashboard increases the productivity of HRs by offering single-click addition/removal of employees, making payments, tracking coverage and usage, issuing policies, and more. All this starts from just Rs. 299 per month.

So, what are you waiting for? Visit and get your group health cover today.


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