Health insurance is fast emerging as an important mechanism to finance health care needs of the people. The need for an insurance system that works on the basic principle of pooling of risks of unexpected costs of persons falling ill and needing hospitalization by charging premium from a wider population base of the same community. In the present scenario the annual expenditure on health in India amounts to about $7.00 in rural areas and $10.00 in urban areas per person, majority of care being provided by the private sector.