What it is
Four clauses in a health insurance policy decide how much of a hospital bill the insurer pays and how much falls on you. They are co-payment, deductibles, room-rent limits and sub-limits.
- Co-payment is a fixed share of every admissible claim that you pay yourself, such as 10% of the claim amount.
- Deductible is an amount you bear first. The insurer pays only what is above it.
- Room-rent limit is a cap on the room charges the policy will cover for each day in hospital.
- Sub-limit is a cap on what the policy pays for a particular illness, treatment or expense, even when the overall sum insured is much larger.
IRDAI, the insurance regulator, has issued guidelines that standardise 42 of the most commonly used definitions, terms and conditions in health insurance policies. The same guidelines define 22 common critical illnesses. The aim, in IRDAI's framing, is better service standards in the sector.
How it works
These clauses act at different points of a claim. The examples below use made-up numbers purely to show the arithmetic.
Co-payment
Say your policy has a 10% co-payment and the admissible claim is ₹2,00,000. You pay ₹20,000 and the insurer pays ₹1,80,000. The share applies each time you claim.
Deductible
Say your policy has a deductible of ₹50,000 and the admissible bill is ₹2,00,000. You bear the first ₹50,000 and the insurer pays the remaining ₹1,50,000.
The two differ in a simple way. A co-payment is a percentage of the claim, so it grows with the bill. A deductible is a fixed amount, so its weight shrinks on larger bills.
Room-rent limit
If your policy caps room rent at ₹5,000 a day and you take a room costing ₹8,000 a day, the ₹3,000 daily gap is an obvious cost to you. Some policies go further and also scale down other charges linked to the room category. Whether yours does is something to confirm in the policy wording, because it can change the final payout noticeably.
Sub-limit
Suppose a policy has a ₹5 lakh sum insured but a sub-limit of ₹40,000 for a specific procedure. If that procedure costs ₹70,000, the insurer pays up to ₹40,000 and the remaining ₹30,000 is yours, regardless of the unused sum insured.
What it means for you
These clauses rarely change the premium headline, but they change what you pay when you are actually in hospital. A policy with a low premium may carry a co-payment or tight sub-limits that a costlier one does not.
Before buying or renewing, check these points in the policy document:
- Whether a co-payment applies, at what percentage, and whether it applies to all claims or only in some situations such as certain ages.
- Whether there is a deductible, and whether it applies per claim or across a year.
- The room-rent limit, and how the insurer treats other charges if you choose a costlier room.
- Every sub-limit, and which illnesses or treatments it covers.
Compare these clauses across policies, not just the sum insured and premium. If a term in the document is unclear, ask the insurer or intermediary to explain it in writing. IRDAI's standardised definitions are published on its policyholder website, and you can use them to check that a term in your policy means what you think it means.
Common mistakes to avoid
- Looking only at the sum insured. A large cover with several sub-limits can pay less than a smaller cover without them.
- Ignoring the room-rent clause. Upgrading to a costlier room than the policy allows can reduce the payout on other items as well, depending on the terms.
- Confusing co-payment with deductible. One is a share of each claim, the other is a fixed amount you bear first.
- Skipping the policy wording. Brochures summarise; the document governs the claim.
- Assuming terms are identical across insurers. Limits, percentages and conditions differ by policy even when the names match.
