Health insurance has become a critical part of financial planning in India, especially as healthcare costs continue to climb. The prospect of unexpected medical expenses, from emergencies to routine treatments, can be overwhelming without the right coverage in place. With many Indians now recognising the importance of health insurance, there is an increased need to understand the policies they are buying.
When you’re new to health insurance, the paperwork alone can feel like a foreign language. Policies are packed with specific terms that outline exactly what kind of coverage you have, how it applies, and what it will cost you. However, without a clear understanding of these insurance terminologies, you could easily overlook essential details, resulting in unmet expectations or even rejected claims during a medical emergency.
For example, terms like deductibles, premiums, and sum insured have a significant impact on how much you’ll pay, both in terms of monthly premiums and out-of-pocket costs when you file a claim. Likewise, knowing about inclusions and exclusions ensures you know exactly what your policy covers—and more importantly, what it doesn’t. Without a solid understanding of these, you risk paying for a plan that may not fully protect you in the way you expect.
This blog explains the 12 essential terminologies used in insurance you need to know when buying health insurance in India.
Add-on covers, also known as riders or optional covers, are additional benefits you can add to your basic health insurance policy. These features offer extra coverage against specific situations like critical illness or maternity. Common add-ons include:
Critical Illness Cover: Provides a lump sum upon diagnosis of a severe illness like cancer.
Maternity Cover: Covers expenses related to maternity, from delivery to hospitalisation.
Room Rent Waiver: Increases the room rent limit or removes it altogether.
Hospital Cash Benefit: Pays a daily allowance during hospital stays.
Add-ons give you tailored coverage but often come at an additional premium.
Automatic restoration is a valuable benefit in health insurance policies. If your sum insured gets exhausted during a health insurance terminology, it automatically restores the insured amount for future claims within that same policy year. This is especially useful if multiple hospitalisations occur, as it ensures you continue to have coverage without needing to top up your policy.
Critical illnesses are serious, often life-threatening conditions such as cancer, kidney failure, and heart disease. Many health insurance plans offer separate critical illness coverage that provides a lump sum payout upon diagnosis. This payout can be used for medical treatment or any other expenses, giving financial flexibility during a challenging time.
The premium is the amount you pay to the insurance company to maintain your policy. Factors affecting premiums include:
The sum insured (total coverage amount)
The policyholder’s age
Health condition and medical history
Coverage options and any selected riders
A basic health insurance plan with a sum insured of ₹5 lakhs may have a premium of around ₹4,000, but this varies based on individual circumstances.
Inclusions refer to the expenses your health insurance policy will cover, including:
Hospitalisation costs (room rent, doctor’s fees, medicines, etc.)
Ambulance charges
Surgical expenses
It’s important to review inclusions in your policy to know what expenses will be reimbursed or paid for by the insurer.
No-Claim Bonus (NCB) is a reward given by insurers if you haven’t filed any claims in a year. It’s a discount on your renewal premium or an increase in your sum insured at no additional cost. Typically, insurers offer a 20%–100% increase in the sum insured or a discount on premiums as an incentive for not making claims.
The sum insured is the maximum amount your insurance provider will cover for medical expenses within a policy year. It can range significantly—from ₹5 lakh to several crores depending on your needs and budget. Selecting an adequate sum insured is crucial to ensure you’re well-covered for potential medical emergencies.
A deductible is a fixed amount you must pay out-of-pocket before your insurance coverage begins. Higher deductibles often result in lower premiums but mean you’ll bear more upfront costs. It’s important to consider if you’re comfortable paying a deductible and whether it fits your financial situation.
The waiting period is the time you must wait after purchasing a policy before you can file a claim. This period varies:
Pre-existing diseases may have a waiting period of 1–4 years.
Maternity coverage often has a waiting period of up to 2 years.
During this time, claims related to specified conditions won’t be eligible for coverage.
Co-morbidities, or pre-existing diseases, refer to medical conditions you had before purchasing the insurance, like diabetes or hypertension. Insurers may charge a higher premium or have specific insurance terminologies for covering these conditions due to their associated risks. A waiting period generally applies to pre-existing diseases, during which coverage is limited.
Exclusions outline the conditions or treatments not covered by your policy. These are detailed in your policy document and can include:
Cosmetic surgeries (unless medically necessary)
Pre-existing conditions (within the waiting period)
Alternative treatments, such as Ayurveda or homoeopathy, in certain cases
Understanding exclusions helps prevent misunderstandings and ensures you know when coverage won’t apply.
Network hospitals are those with which your insurer has a direct arrangement, allowing you to receive cashless treatment. In these hospitals, your insurer directly settles bills up to your coverage limit, reducing the financial burden. Reviewing an insurer’s network of hospitals can help you determine if your preferred medical facilities are included.
Understanding these health insurance terminologies can make a huge difference in your decision-making process:
Informed Decisions: Knowledge of terms like deductibles, inclusions, and sum insured helps you choose a plan that best suits your needs.
Better Financial Planning: Knowing potential out-of-pocket costs and exclusions helps manage finances.
Enhanced Coverage: Choosing add-ons based on your needs ensures you’re covered for specific situations.
Selecting the right health insurance plan is a critical step in protecting your health and finances. By understanding these insurance terminologies, you can make a more informed choice and maximise your health insurance benefits.
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