A common scenario during health insurance claims process is the customer anger and dismay when they see their health insurance company, even after accepting the claim, has reimbursed only a part of their sum insured. They thought they had bought the best health insurance policy for their family. Their agent had assured them that they were buying from the best health insurance company in India. And yet, their health insurance claim is not being paid in full. Surely something is wrong and they are being cheated, right?

And therein lies an important lesson on understanding your insurance policy. A health insurance policy, or any insurance policy for that matter, is essentially a legal contract which specifies what risks it will cover, under what conditions, and what are the risks it does not cover. One of the most important aspects to consider in case of health insurance is Sublimits. Now, what are Sublimits in a health insurance policy? While there are many technical definitions, a simple way to understand is that Sublimits are the restrictions that a health insurance company places on various expenses that go into a hospital bill. The insurer in the contract specifies what is the maximum amount they will pay for services & facilities like Ambulance, Surgery fee, Room Rent, and Consumables like surgery gowns, gloves etc.

These sub-limits in a health insurance policy are kept to disincentivise the customer and hospital from spending more than what is considered feasible by the insurer and leading to increased overall expense. An example of this would be that often in the same hospital, same surgery costs by the same surgeon varies by the room category. Sublimits are thus a double-edged sword. On one hand they do prevent the cost of treatment from increasing beyond what is reasonable, but at the same time they also inconvenience the patient and his family as they get to know about these terms and conditions at end of the hospitalisation when they have no other option but to pay up the difference between the health insurance claim received and the hospital bill.

What are common sub limits in a health insurance policy?

While there can be a sublimit on any expense, in our experience these are the three categories which cause the most amount of misunderstanding during health insurance claims process.

First is the room rent sublimit under which your insurance company places restriction on the maximum amount that they will pay for room rent under your policy. This is normally expressed as a percentage of the policy sum assured ranging from 1% to 10% of the policy sum assured. Sometimes the insurer also places restriction on the type of room the customer can avail in the policy. For example, there are policies which will also state what type of hospital room (General ward, Twin Sharing, Private, Deluxe etc) can be availed by the customer. A very common misconception is that if a patient gets admitted to higher category rooms which are not covered under the policy his family will have to pay only the difference in the room rent. That is not true. With type of room, expense of many services goes up.

Example if surgery cost of general ward is INR 100,000 the same surgery for a deluxe room in the same hospital might cost Rs 200,000. In such a case if the sublimit of the policy states that it covers only general ward, not only will the insurer not pay for deluxe room, they will also not pay for the surgery cost associated with the deluxe room. The insurer will pay only for the general ward and the surgery costs associated with general ward. The patient and his family will have to pay the difference. This is a very important point that we advise our customers to be aware of. Room type impacts not only room rent but the entire cost.

Second sublimit that causes a lot of issues are sub limits for specific surgeries. An example could be, say a customer has a Rs 20 lac sum assured policy. However, the policy states that for an OPD procedure like cataract the maximum payment will be Rs 50,000. In such a case, irrespective of the policy sum assured and actual amount spent, the insurer is liable to pay only Rs 50,000 in claims.

Third type of sublimit refers to expenses made pre and post hospitalisation. There are some illnesses particularly related to cancer, muscle and bones where the expenses are made outside of normal hospitalisation. In such cases the insurance company places limits on how much will they pay for such treatment. This is typically expressed as a percentage of sum assured. In case the expense is higher than what policy allows for then the customer needs to pay out of his own pocket.

So, what should a health insurance customer do?

First is if they can afford it to buy a policy with lowest possible sublimit. Many insurers claim that their policy is best health insurance policy and customer will not be troubles with sub limits. However, some form of sub limits is present in almost all health insurance policy. So be careful when you purchase and get response from your health insurance company about what are the sub limits and when do they come into play with proper examples. And do not hesitate to keep asking detailed questions. Don’t take your agents word for it. Insist on a formal response from customer service of the insurer. And store this response carefully for use later on when you need it.

The other is to understand your policy sub limits and be clear with your hospital at time of hospitalisation about the cost heads. Often there are emergencies and it might not be possible to do this in detail but we advise that this be done to make sure that hospital does not , wittingly or unwittingly, overcharge and put the burden on patient and their families. It is in this stage a good agent/insurance distributor can add value by being available for the customer. This is something we take very seriously in Carepal Secure and assist our customers. This is why we have in short span of two years gained love and affection of thousands of customers.

Sub limits are not bad or good. They are just a market reality and tools to price an insurance contract. A customer should understand them and make sure that they are not taken by surprise.