Why health insurers do not pay you the full claims amount

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Vikas Kumar got hospitalised due to a severe health emergency. He was assured his health cover of Rs 10 lakh will take care of his hospitalisation expenses. To his surprise, when the claims got approved, he still had to pay a lot from his pockets. He inquired about it. It is then he discovered the concept of room-rent limit.

Health insurance policies come up with a room-rent limit that plays a major role in how your hospital expenses are calculated. It is usually 1 percent of your health cover. So, a Rs 10 lakh policy will have a room rent limit of Rs 10,000.

What happened in Vikas’ case was the hospital ward that he got admitted to had Rs 15,000 daily room charges. His health cover did not cover the balance Rs 5,000. Moreover, other medical expenses such as doctor’s fees, medicine charges, and surgery expenses were also not paid fully by the insurer.

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You wonder why!

The hospitals charge differently for the services they offer in different wards. The same services offered in a general ward will be cheaper than those offered in a private, deluxe or a special Covid-19 ward. So, if your policy has a room rent limit but you get admitted to a room higher than the limit, the charges for all room-linked services will get deducted from the health insurance claim amount in the same proportion as your room rent limit.

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Let’s take Vikas’ example to understand it. His total medical bill came in at Rs 7 lakh. Taking into account the Rs 10,000 room rent limit, this is how the insurer would have calculated the approved claims amount:

(Approved room rent/Claimed room rent)*Amount claimed
= (10,000/15,000)*7,00,000
=Rs 4,66,666.7

If Vikas had opted for a health policy with no room rent limit, his entire claim would have got approved.

Where does and doesn’t proportionate deduction apply

The proportionate deduction applies to the entire medical bill but thanks to the recent regulation by the Insurance Regulatory Development Authority of India (Irdai), there are certain things to which proportionate deduction can’t be applied. Some are as follows-

  • Cost of pharmacy (medicines, medical supplies, etc)
  • Cost of implants and medical devices
  • Cost of diagnostics (lab tests, radiology, etc)


Rest of the expenses fall under proportionate deduction.

How to deal with room rent limits and proportionate deductions

It is clear by now that if you have a room rent limit and you have to opt for a room with higher rent, you are going to pay a lot out of your own pocket. Surgery would cost you way more than you would expect despite having insurance. Do one of the following things to avoid it:

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  • Upgrade your policy to no room-rent limit with the same insurer.
  • If the same insurer is not providing this, then port your policy with an insurer that can give you no room-rent limit policy.
  • Having a hospital cash feature is a way to manage some of the proportionate deductions. This feature gets activated the moment hospitalisation takes place.
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Room-rent and proportionate deduction is something that is not talked about or lesser-known, especially if it is your first policy. Therefore, while buying or upgrading, or porting the policy, make sure to discuss the room-rent scenario of the policy with the insurer and check how it is going to impact you.

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