In 2024, a staggering ₹26,000 crores worth of health insurance claims were rejected in India. While many believe this is a sign of a flawed system, the truth is often much more subtle: the devil is in the details of your policy document. Buried within the pages of fine print are hidden clauses that can lead to partial or complete claim rejections.
We've broken down nine of the most common and "awful" clauses you need to be aware of.
1. The Sub-Limit: Your ₹10 Lakh Policy Isn't a ₹10 Lakh Policy
You bought a health insurance policy with a sum assured of ₹10 lakhs, thinking you are fully covered. But a closer look may reveal a sub-limit clause. This caps the maximum amount payable for a specific disease or procedure. For example, if the sub-limit is ₹2 lakhs but your surgery costs ₹5 lakhs, the insurer pays only ₹2 lakhs, leaving you to cover ₹3 lakhs.
2. Room Rent Capping & Proportionate Deduction
Many policies cap room rent, either as a fixed amount (e.g., ₹5,000/day) or as a percentage of the sum assured. If you choose a room above this cap, the insurer applies a proportionate deduction to the entire hospital bill, not just room rent.
Example: If your room is double the allowed limit, they may cut your whole bill in half, even if you were covered for more.
3. No Claim Bonus (NCB) Trap
The No Claim Bonus increases your sum assured every claim-free year. But many policies still calculate key benefits like room rent capping on your original sum assured, not the enhanced one. This reduces its actual value.
4. Same Disease Restoration Benefit
The Restoration Benefit restores your sum assured once it's used up. However, in many policies, it cannot be used for the same disease that exhausted your initial coverage. This makes it ineffective for recurring conditions.
5. Co-payment and Deductibles
A co-payment forces you to pay a percentage of every claim, while a deductible is a fixed amount you must pay before coverage starts. Though these reduce premiums, they weaken financial protection during emergencies.
6. Zonal Co-payment
Some insurers charge lower premiums in smaller cities but apply a zonal co-payment if treatment happens in a metro. This can mean paying a large chunk of your hospital bill out-of-pocket if you travel for treatment.
7. Waiting Periods
All policies have a waiting period. The initial waiting period is about 30 days, but pre-existing conditions or specific illnesses can have 2–4 years waiting. During this time, claims can be denied, even for complications arising from those conditions.
8. Top-Up vs. Super Top-Up
A top-up policy applies a deductible per claim, while a super top-up applies it only once per year. If you have multiple smaller claims, a regular top-up may give you no benefit at all, unlike a super top-up.
9. Cashless vs. Reimbursement
A cashless claim means the insurer pays the hospital directly. But if the hospital is not in the insurer’s network, you must pay first and then claim reimbursement, which is slow and stressful. Limited network coverage can be dangerous in emergencies.
The Most Evil Clause: "Reasonable and Customary"
This clause allows the insurer to decide what costs are “reasonable and customary.” Since India has no standard medical rates, insurers can reject or reduce claims by labeling charges as excessive. This open-ended power often works against policyholders.
How to Safeguard Yourself
- Read the fine print carefully—especially clauses on sub-limits, room rent, and waiting periods.
- Opt for a super top-up instead of a regular top-up.
- Check for a wide cashless network of hospitals near you.
- Avoid co-payment and zonal clauses even if premiums are cheaper.
A health insurance policy should protect you, not trap you. Stay informed, read the fine print, and choose wisely to avoid financial shocks when you need coverage most.