What is Health Insurance?
Health insurance is a policy that helps cover eligible medical expenses such as hospitalisation, surgeries, daycare procedures, ambulance, and pre/post-hospitalisation costs, depending on the plan. You pay a premium to keep the policy active, and the insurer pays approved claims up to the sum insured through cashless treatment or reimbursement.
However, health insurance does not cover every expense automatically. Waiting periods, exclusions, co-pay, deductibles, room rent limits, and non-medical items may not be covered.
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Why Do You Need a Health Insurance in India?
Health insurance plan is important in India because:
According to article on Medical Inflation in India, medical treatment costs are increasing, and even basic hospitalisation can require ₹1 - ₹5 lakh or more.
Even one hospital stay can be expensive. For example, ICU charges in private hospitals can range from ₹15,000 to ₹30,000+ per day, and major treatments can run into lakhs (1).
According to Business Standards, India reports around 4.8 lakh road accidents every year, with thousands of injuries requiring urgent hospitalisation. In such situations, hospitals ask for upfront payments, and health insurance helps you avoid last-minute borrowing or arranging funds.
ET Health Worlds states that, nearly 2 out of 3 young adults in India are at risk of lifestyle diseases like diabetes, thyroid, and heart conditions are rising at younger ages, leading to earlier medical expenses.
Without insurance, you may delay or avoid better hospitals due to high upfront costs.
How Does Health Insurance Work in India?
Health insurance in India works on a simple principle. You pay a fixed premium, and in return, the insurer helps cover your medical expenses when needed, up to the sum insured specified in your policy. Here’s how the process works:
1. You Buy a Policy: You choose a health insurance plan based on your coverage needs. The insurer checks details like age, medical history, and coverage amount before issuing the policy. You then pay a premium (annual or instalments) to keep the policy active.
2. Coverage & Waiting Period Begins: Once the policy is active, it provides coverage related to hospitalisation, diseases, surgeries, consultations, etc. with an initial waiting period of 30 days. During this time, you cannot claim from your health policy.
3. Hospitalisation and Treatment: When you are hospitalised (planned or emergency), the hospital diagnoses and begins treatment. Costs include room rent, doctor fees, tests, medicines, and procedures.
4. Claim Processing & Settlement (Cashless or Reimbursement): There are two ways you can make a claim, by cashless claim (You visit a network hospital & get treatment, the insurer settles bills directly with the hospital) or reimbursement claim (If you go to a non-network hospital, you pay the bills first and later submit documents to the insurer for reimbursement). After reviewing, your bill is settled directly to the hospital or you.
5. Renewal & Continuity: To keep your health insurance active and continue enjoying uninterrupted coverage, it’s important to renew your policy every year on time.
What is Covered in Health Insurance?
The health insurance plans provide a wide range of coverage which varies depending on the insurance company and policy type. Most health insurance in India provides coverage for:
Health insurance covers expenses incurred when you are admitted to a hospital for at least 24 hours. This includes major cost components such as room rent, ICU charges, doctor consultation fees, and any procedures or surgeries required during your stay as per your policy.
A health insurance plan can cover pre and post-hospitalisation expenses. Pre-hospitalisation expenses include diagnosis expenses, doctors’ fees, medications, etc. Most insurance companies also reimburse post-release expenses such as medication, routine check-ups, injections, etc.
Some medical procedures no longer require a 24-hour hospital stay due to advancements in technology. Health insurance plans cover these day care treatments in health insurance, such as cataract surgery, dialysis, or chemotherapy, ensuring you are protected even for short-duration procedures.
A standard health insurance policy covers road ambulance expenses incurred during times of medical emergency. This poses a significant benefit as premium hospitals often charge substantial amounts for transportation.
Comprehensive health insurance policies cover all expenses incurred for domiciliary hospitalisation expenses. This includes medication, nurse fees, injections, etc., payable for a patient's treatment at home.
There is no room rent cap on the type of bed you choose. Health insurance policies also cover ICU bed charges. An insured individual can also choose to stay in a private room, the costs of which can be billed against the respective insurance provider up to a total insured amount.
Hospitalisation in due course for mental treatment is also covered under health insurance policies. With rising rates of mental health issues in India and globally, this coverage allows individuals to seek professional help for a well-rounded life.
Refill sum insured is a feature that restores your insurance coverage during the same policy year if you’ve already used it for a claim. For example, if you exhaust your sum insured for one illness, the policy can refill the amount, so you can use it again for a different, unrelated medical condition within the same year.
For every non-claim year, insured individuals are extended discounts or a higher sum insured (at no additional cost) in the succeeding years, which can help to reduce their premium charges payable annually or to extend their sum insured coverage.
Note: Health insurance in India covers hospitalisation, pre- and post-treatment costs, day care procedures, ambulance charges, and in some cases home treatment, preventive check-ups, and advanced treatments, along with optional benefits like maternity cover. However, the coverage can change from policy to policy and depending on the insurer you choose.
What is Not Covered in Health Insurance?
While health insurance covers many medical expenses, there are certain situations and treatments that are usually not included. Knowing these exclusions helps you avoid surprises at the time of claim.
Pre-natal and post-natal medical expenses are not covered unless they lead to hospitalisation.
A claim for a pre-existing disease or illness cannot be made until the specified waiting period is over.
Hospitalisation for any condition that doesn’t match the doctor’s prescription is not covered.
Who Should Buy Health Insurance?
Young adults, families, senior citizens, self-employed individuals, or people with lifestyle risks, should buy health insurance to protect themselves from high medical costs and ensure financial stability during health emergencies.
How to Choose the Right Health Insurance Plan?
Choosing the best health insurance plan is about selecting coverage that actually protects you when a real medical need arises. Here’s a structured way to choose the best for yourself:
Start with the Right Sum Insured: Don’t choose a plan just because it offers a low premium. Always prioritise enough sum insured and comprehensive coverage. For example: Minimum ₹10–15L for individuals and ₹15–25L+ for families (especially in metros).
Pick the Right Plan Type (Individual vs Family Floater): Always choose a plan based on your life stage and health needs. For example: choose an individual plan if you are unmarried or have a high health risk while a family floater plan suits those who are newly married or have a young family.
Check Waiting Periods Carefully: Every plan has waiting periods for pre-existing diseases or specific illnesses/procedures. It ranges from 1 to 4 years depending on the plan. Always prefer plans with shorter waiting periods, especially if you already have medical conditions.
Review What’s Covered and What’s Not: Don’t just look at the inclusions in your plan. Also review the exclusions carefully. For example, your plan may have room rent limits, co-payment clauses, or exclusions on non-payable items.
Evaluate Add-ons Based on Real Needs: Don’t choose an add-on that doesn’t add real value to your coverage. Opt for one that can actually be beneficial, such as consumables cover or add-ons that reduce waiting periods for pre-existing diseases (PED), where available.
Look at Network Hospitals: Make sure there are good hospitals near you in the insurer’s network. A wide network ensures easy cashless treatment when it matters.
Check Claim Process and Support: A good plan is also about how easy it is to make a cashless claim, the quality of claim support and transparency in communication. An easy claim experience is often more valuable than a slightly lower premium.
Balance Premium vs Long-Term Value: Low premiums may mean lower coverage or higher out-of-pocket costs, while a higher premium offers better protection with fewer restrictions.
Simple Decision Rule: Choose a plan that offers sufficient coverage, minimal restrictions, and a smooth claim experience, rather than the lowest premium. A policy with a low premium may seem cost-effective at first, but it often comes with limitations such as lower sum insured, room rent caps, co-payments, or exclusions, which can increase your out-of-pocket expenses. Instead, focus on selecting a plan that provides enough coverage for your needs, and has fewer conditions.
What are the Types of Health Insurance Policies in India?
What are the Eligibility Criteria for Buying Health Insurance in India?
To buy health insurance in India, you typically need to meet age criteria, disclose medical history, submit KYC documents, and accept policy terms like waiting periods. The following requirements should be fulfilled to be eligible for the majority of plans:
Digit Health Insurance Plans in India
Why Choose Digit Health Insurance?
Simple Online Processes - From the process of buying health insurance to making claims is paperless, easy, quick and hassle-free! No hard copies, even for claims!
No Age-based or Zone-Based Co-payment - Our health insurance comes with no age-based or zone-based copayment. This means, during health insurance claims, you need not pay anything from your pocket.
No Room Rent Restriction - We understand that everyone has different preferences. That’s why we have no room rent restrictions in health insurance. Choose any hospital room you prefer.
SI Wallet Benefit - If you exhaust your sum insured in health insurance during the policy period, we will refill it for you.
Get Treated at Any Network Hospital - Choose from 9000+ network hospitals in India for a cashless treatment or opt for a reimbursement.
Wellness Benefits - Get exclusive wellness benefits on the Digit App in collaboration with top-rated health and wellness partners.
Tax Benefits of Health Insurance in India
If you avail of a health insurance policy, you can avail of tax benefits in health insurance under Section 80D of the Income Tax Act, 1961. The table below illustrates the break-up of tax exemptions on your health insurance policy:
Disclaimer: You can only claim these tax deductions under 80D with the Old Tax Regime. The New Tax Regime of FY 2023-2024 does not offer any tax deduction under 80D.
What is the Difference Between Health Insurance vs Life Insurance?
A life insurance policy aims to secure the financial requirements of an insured’s dependent family members in the event of untimely death, whereas a health insurance scheme gives an individual access to quality health care and treatment facilities. Here is the major differences between a health insurance and life insurance policy.
Note: Health insurance covers your medical expenses when you are alive, while life insurance provides a financial payout to your family in case of your death. Both serve different purposes and are important for complete financial protection.
Common Myths About Health Insurance Explained
There are many misconceptions around health insurance that can lead to poor decisions or delayed buying. Here are some of them.
Myth 1 - Young people don't need health insurance
Fact: Health risks can arise at any age, even if you are fit and healthy
Accidents and sudden illnesses can happen anytime. Buying health insurance early not only protects you financially but also helps you lock in lower premiums and complete waiting periods in advance.
Myth 2 - My health insurance will cover all my expenses
Fact: Every policy has specific limits, exclusions, and conditions
Every health insurance plan has a list of exclusions and limitations as per IRDAI regulations. It is recommended that you review all of the policy information and the coverage that your insurance provides.
Myth 3 - You get full coverage immediately after buying a policy
Fact: Many benefits come with a waiting period
Health insurance usually have waiting periods for specific illnesses and pre-existing conditions. This means coverage for certain treatments starts only after a defined time, making early purchase important.
Myth 4 - Online health insurance plans are fraud
Fact: Buying health insurance online is secure and widely used
Online health insurance is regulated and commonly used across India. In fact, buying online often gives you better price comparisons, transparency, and access to suitable plans without intermediaries.
Myth 5 - I do not need to discuss my pre-existing disease with my insurer
Fact: Non-disclosure can lead to claim rejection or policy cancellation
When purchasing health insurance coverage, it is crucial to disclose your pre-existing conditions. Insufficient details or failure to disclose pre-existing conditions may result in the claim being denied and the policy being cancelled.
Myth 6 - People who smoke and drink are not covered under health insurance
Fact: They can get covered, but with higher premiums and checks
Some health insurance providers provide coverage to smokers & drinkers. Given the hazards, smokers and drinkers would have to pay a higher premium and go through a rigorous pre-medical screening to obtain health insurance coverage.
What are Some Common Mistakes While Buying Health Insurance?
Buying health insurance is a long-term financial decision, but many people make choices based on price or incomplete information. Avoiding these common mistakes can help you choose a plan that actually works when you need it most:
- Choosing a plan only because it has a low premium can leave you underinsured during major medical emergencies.
- Opting for a low sum insured to save money can result in high out-of-pocket expenses later.
- Ignoring waiting periods can lead to claim rejections when you need coverage the most.
- Not checking exclusions may mean key expenses like consumables or room rent are not fully covered.
- Buying unnecessary add-ons increases your premium without adding real value.
- Skipping important add-ons can lead to avoidable out-of-pocket costs during treatment.
- Delaying the purchase increases premiums and may add more restrictions or waiting periods.
- Hiding or misreporting medical history can lead to claim rejection.
- Depending only on employer-provided insurance can leave you without coverage during job changes.
- Not understanding the claim process can cause delays and confusion during emergencies.
FAQs about Health Insurance Meaning
What is the claim process for health insurance policies?
You can opt for reimbursement or cashless claims under your health insurance policy. For cashless claims, the insurance provider settles your claim directly with the network hospital where you or your family members undergo treatment.
For reimbursement, you pay first and submit bills later. The insurer verifies documents and settles the claim as per policy terms.
What is the waiting period in health insurance?
A waiting period is the time during which certain illnesses or treatments are not covered after buying the policy. Common waiting periods include initial 30 days, pre-existing diseases (1 - 4 years), and specific treatments.
What is a network hospital in health insurance?
In the context of health insurance, a network hospital is a hospital that has partnered with the insurance provider to offer consumers cashless care. Policyholders can receive cashless care without paying for it if they seek medical attention at a network facility.
Can existing health insurance policies be ported from one insurance provider to another?
Yes, you can switch your health insurance provider during renewal while retaining benefits like waiting period credits and no-claim bonus, subject to approval. This process is called portability in health insurance and must be initiated before your existing policy expires.
Can I increase my insurance sum if I already have a health insurance?
Yes, increasing your sum insured at the time of policy renewal is possible. If your current insurance does not increase your sum insured, you can purchase a top-up plan or another health policy to increase the coverage.
What happens if I miss my health insurance premium payment?
If you miss your premium payment, you usually get a grace period (15 - 30 days) to renew the policy. During this time, coverage may lapse for claims. If you don’t renew within the grace period, the policy can expire, and you may lose continuity benefits.
Can I add family members to my existing health insurance?
Yes, you can add your family member to your existing health insurance or obtain a family or individual floater health insurance policy to protect your family financially in an emergency.
Can I have multiple health insurance policies?
Yes, you can have more than one insurance policy. This will help you have a higher sum insured and provide you with wide coverage for your health.
Is it mandatory to undergo diagnostic tests before buying a health insurance policy?
No, not in all cases. Medical testing is not required before purchasing health insurance coverage. However, if an applicant is older than 45, most Indian health insurance providers require medical test results.
What is the best age to buy health insurance in India?
Buying health insurance in your 20s or early 30s ensures lower premiums, fewer medical tests, and completion of waiting periods early. It also protects you from rising healthcare costs as you age.
How much health insurance cover do I need in India?
Ideally, you should have at least ₹10 lakh coverage for individuals and higher (₹10–20 lakh) for families, especially in metro cities. The right amount depends on your city, lifestyle, medical inflation, and family size.
Can I use health insurance immediately after buying it?
You can use the policy immediately for accidents, but most illnesses are covered only after the initial 30-day waiting period. Pre-existing diseases and specific treatments have longer waiting periods.
Are there any extra costs involved in health insurance except the premium?
Yes, you may have to pay deductibles, co-payment, room rent differences, or non-covered charges. It’s important to check your policy terms to understand these out-of-pocket costs.