How to Buy Health Insurance in India: The Clauses That Decide Your Claim
Two policies with the same sum insured can pay very different amounts on the same hospital bill. The difference lies in a handful of clauses. Here is what to check, with a worked claim example.
By Pradeep RawalNISM-certified (Series XV & VIII) · Updated · 5 min read
Key takeaways
- Buy your own family floater even if your employer covers you; group cover ends when the job does, often when you are older and costlier to insure.
- For a family in a large city, a base cover of ₹10 lakh to ₹15 lakh plus a super top-up of ₹50 lakh or more is a cost-efficient structure.
- A room-rent cap can shrink the whole claim through "proportionate deduction", not just the room charge. Prefer policies with no room-rent limit.
- Since IRDAI's 2024 master circular, waiting periods for pre-existing diseases cannot exceed 3 years, and the moratorium after which claims cannot be contested for non-disclosure is 5 years.
- Premiums for individual and family health policies are exempt from GST from 22 September 2025; the Section 80D deduction is available only in the old tax regime.
Medical inflation in India runs well ahead of general inflation, and a single hospitalisation for a heart procedure or a major surgery in a city hospital can cost several lakh rupees. Health insurance is what stops such a bill from emptying an emergency fund or a retirement corpus. But health policies are not interchangeable: their fine print decides how much of a bill is actually paid.
Step 1: decide the structure and amount
Your own policy, not just your employer's
Group health cover from an employer is valuable while it lasts, but it ends when you change jobs, are laid off or retire, which is usually when you are older and more likely to have conditions that raise premiums or trigger waiting periods. A personal family floater bought while young and healthy keeps your waiting periods running and your cover continuous.
How much cover
For a family of four in a metro, a sum insured of ₹10 lakh to ₹15 lakh is a sensible base today; ₹5 lakh can be exhausted by one serious episode. Senior parents are best covered by a separate policy rather than being added to your floater, because their claims would erode the shared cover and raise the floater premium.
Base plus super top-up
Large covers are expensive as a single policy. A cheaper structure is a base policy of, say, ₹10 lakh plus a super top-up of ₹50 lakh with a ₹10 lakh deductible. The super top-up pays only after total claims in the year cross ₹10 lakh, so it is priced much lower, yet together they protect you up to ₹60 lakh.
Step 2: check the clauses that cut claims
Room-rent limits and proportionate deduction
This is the clause that surprises most policyholders. Many policies cap the room rent they pay, for example at 1% of the sum insured per day. If you choose a room above the cap, the insurer does not just refuse the extra room charge: it reduces many other charges (doctor fees, procedures, investigations) in the same proportion, because hospitals price these by room category.
Example: a policy with a ₹5 lakh sum insured and a room-rent cap of ₹5,000 a day. The patient stays 4 days in a ₹10,000-a-day room, so the insurer applies a ratio of 5,000 ÷ 10,000 = 0.50 to the linked charges:
| Item | Billed | Paid by the policy |
|---|---|---|
| Room rent (4 days × ₹10,000) | ₹40,000 | ₹20,000 |
| Surgeon and doctor fees | ₹1,20,000 | ₹60,000 |
| ICU, nursing and procedures | ₹90,000 | ₹45,000 |
| Investigations | ₹40,000 | ₹20,000 |
| Medicines and consumables | ₹60,000 | ₹60,000 |
| Total | ₹3,50,000 | ₹2,05,000 |
On a bill of ₹3,50,000, the policy pays ₹2,05,000, leaving the family to pay ₹1,45,000, although the bill was well within the sum insured. Prefer policies with no room-rent limit or a single private room allowed.
Co-payment
A co-pay clause makes you pay a fixed percentage (often 10% to 30%) of every claim. It lowers the premium, and is common in senior-citizen policies, but makes large claims expensive. Avoid it where you can.
Disease-wise sub-limits
Some policies cap payouts for specific treatments, such as cataract, knee replacement or certain surgeries, regardless of the sum insured. Read the list.
Waiting periods
- Initial waiting period: usually 30 days, during which only accidents are covered.
- Specific diseases (hernia, cataract, joint replacement and others): often one to two years.
- Pre-existing diseases: under IRDAI's 2024 master circular, the waiting period cannot exceed 3 years. Some policies offer a shorter period for an extra premium.
- Moratorium: after 5 continuous years of cover (60 months), an insurer cannot reject a claim for non-disclosure, except in cases of proven fraud.
Restoration and no-claim bonus
Restoration refills the sum insured once it is used up in a year, which helps families on a floater. A no-claim bonus raises the sum insured for every claim-free year, often by 10% to 50% a year up to a cap. Both are useful; neither is a substitute for adequate base cover.
Step 3: compare insurers, not just premiums
- Network hospitals near your home for cashless treatment.
- Claim settlement record and complaint data, published by IRDAI.
- Exclusions listed in the policy wording, which matter more than the brochure.
- Renewal terms: policies must be renewable for life; check how premiums rise with age bands.
Tax and GST
- GST: premiums on individual and family floater health policies have been exempt from GST since 22 September 2025, removing the earlier 18%.
- Section 80D (old regime only): up to ₹25,000 a year for yourself, spouse and children (₹50,000 if you are a senior citizen), plus up to ₹25,000 for parents (₹50,000 if they are senior citizens). A preventive health check-up of up to ₹5,000 counts within these limits.
- New regime: no deduction for health premiums. The cover is still essential; the tax break was never the reason to buy it.
For planned treatment, ask the hospital's insurance desk to request cashless pre-authorisation a few days before admission. Keep every bill, prescription and discharge summary. If a claim is rejected or under-paid, complain to the insurer's grievance cell first, then through IRDAI's Bima Bharosa portal or the Insurance Ombudsman.
The bottom line
Buy a personal family floater early, aim for a base of ₹10 lakh to ₹15 lakh in a big city, add a super top-up for large risks, and choose a policy without room-rent caps, co-pay or long sub-limit lists. Read the policy wording once, disclose your health honestly, and renew without breaks.
Frequently asked questions
What is the difference between a top-up and a super top-up?
Both pay above a deductible (the amount you or your base policy cover first). A top-up applies the deductible to each hospitalisation separately; a super top-up applies it to the total of all claims in the year, so several smaller bills can together cross it. Super top-ups are usually the better choice.
Should I buy critical illness cover instead?
Critical illness policies pay a lump sum on diagnosis of listed illnesses, regardless of the bill. They complement health insurance (for example, replacing income during recovery) but do not replace it.
Can I switch insurers without losing waiting-period credit?
Yes. Under portability rules you can move to another insurer at renewal and carry over the waiting periods you have already served, up to your previous sum insured. Apply before your renewal date.
Is there an age limit to buy health insurance?
IRDAI removed the upper age limit for buying health insurance in 2024, so insurers must offer policies to people of all ages, though premiums and underwriting for seniors are higher.
How fast must a cashless claim be approved?
IRDAI's 2024 rules require insurers to decide on cashless authorisation within one hour of the request and to give final discharge authorisation within three hours of the hospital's request.
Sources and further reading
About the author
Pradeep Rawal is an NISM-certified market professional (Series XV Research Analyst and Series VIII Equity Derivatives) with more than 15 years in personal finance and stock market education. He founded Financial Nirvana, wrote the book From Cubicles to Wealth Creation, teaches money and investing workshops, builds quantitative tools and backtesting systems, and writes about personal finance with the working shown.
This article is for education only and is not investment, tax or legal advice. Tax rules quoted are for the tax year 2026-27 (FY 2026-27) unless stated, and can change; check the latest position with the Income Tax Department or a qualified professional before acting. Examples use assumed returns that are not guaranteed.
