Introduction
Health insurance is essential, but let’s face it—understanding the terms used in health insurance policies can feel like decoding a secret language. If you’ve ever opened your health insurance document only to be bombarded with phrases like “sum insured,” “deductible,” “co-payment,” and “network hospitals,” you’re not alone. Many people buy insurance without truly understanding what these terms mean, which can lead to unpleasant surprises when it’s time to make a claim.
This article will explain the most commonly used health insurance jargon in a simple, conversational manner. We’ll use real-life examples, analogies, and relatable situations so you can confidently choose a health insurance plan and know exactly what you’re signing up for.
Let’s start by understanding why this jargon even matters.
When you understand insurance terminology, you avoid overpaying, underinsuring, or being caught off guard by exclusions. You’re also more likely to get the right coverage for your specific needs and budget. So whether you’re buying health insurance for yourself, your family, or your parents, decoding this jargon is a must.
1. Sum Insured
This is the maximum amount your health insurance company will pay in a policy year for hospital expenses. If your sum insured is ₹5 lakhs, that means the insurer will cover hospital bills up to ₹5 lakhs in that year.
Think of it like a wallet your insurer carries for your healthcare. If you fall ill and your hospital bill is ₹3 lakhs, they’ll pay it. If the bill is ₹6 lakhs, they’ll only cover ₹5 lakhs, and the rest is up to you—unless you have something called a top-up cover (we’ll get to that later).
It’s important to choose a sum insured that reflects your lifestyle, risk level, and medical inflation. Today, even a moderate surgery in a private hospital can cost ₹2–4 lakhs. So for a family of four, a sum insured of ₹10–15 lakhs is often recommended.
2. Deductible
A deductible is the amount you agree to pay before the insurance company starts paying. This is more common in top-up and super top-up plans, but let’s understand it with a simple example.
Let’s say you have a super top-up plan of ₹10 lakhs with a deductible of ₹3 lakhs. This means you need to bear the first ₹3 lakhs of hospital expenses in a year, either through a base policy or from your pocket. Once that limit is crossed, the insurer will start covering up to ₹10 lakhs.
It’s like saying, “Dear insurer, I’ll handle the small stuff, but if things get really expensive, please step in.”
Why would anyone choose this? Because plans with higher deductibles are cheaper. They’re great if you already have an employer-provided insurance and want to add a backup without paying too much.
3. Co-payment
Co-payment (or co-pay) means you and the insurer split the bill. If there’s a 20% co-pay clause, it means you pay 20% of every hospital bill, and the insurer pays 80%.
For example, a ₹1 lakh bill will be split: ₹20,000 from you, and ₹80,000 from your insurer.
Co-pays are more common in senior citizen plans or when you opt for treatment outside your city or in non-network hospitals.
Be careful with co-pays. They lower your premium, but they also mean you have to pay a portion of every claim. If you’re on a tight budget or elderly, frequent hospital visits can become financially draining with co-payments.
4. Premium
This is the amount you pay to buy and maintain your health insurance policy. It’s typically paid annually, but some insurers allow monthly or quarterly payments.
Premiums depend on your age, sum insured, health conditions, city, and type of policy. For example, a 30-year-old in Mumbai will pay less than a 55-year-old in Delhi for the same ₹10 lakh cover.
Remember, the cheapest policy is not always the best. Sometimes a slightly higher premium gives you better coverage, faster claims, or no sub-limits, which can save you lakhs later.
5. Waiting Period
This is the time after buying a policy during which certain conditions are not covered.
There are three types:
- Initial waiting period: Usually 30 days from the date of purchase. During this time, you can’t make a claim unless it’s an accident.
- Pre-existing disease (PED) waiting period: Usually 2–4 years. If you have diabetes, thyroid, or hypertension, the insurer won’t cover related hospitalizations during this time.
- Specific diseases waiting period: Some surgeries like hernia, joint replacement, cataract, etc., have a 1–2 year waiting period even if they’re not pre-existing.
If you’re healthy and buying early, you can clear these periods without issue. But if you’re buying late, check these carefully—especially for parents or senior citizens.
6. Network Hospitals
These are hospitals that have a tie-up with your insurer for cashless treatment. If you go to a network hospital, you don’t have to pay the full bill and get reimbursed later. The insurer settles the bill directly with the hospital, except for any exclusions, deductibles, or co-pays.
Cashless claims are easier and faster, but only available in network hospitals. Always check if your nearby hospitals are on the insurer’s list.
If you go to a non-network hospital, you’ll need to pay first and claim later (reimbursement process), which can be slower and more stressful.
7. Pre and Post Hospitalization
Health insurance not only covers hospitalization but also expenses incurred before and after it—like doctor consultations, diagnostic tests, and follow-up treatments.
Usually, policies offer 30–60 days of pre-hospitalization and 60–90 days of post-hospitalization coverage.
Let’s say you fall sick, get diagnosed, and are hospitalized. Your policy will cover all test bills and checkups leading to that admission and also the recovery follow-ups afterward. This can be very helpful because these tests and consultations can add up to thousands.
8. Daycare Procedures
Not all treatments require 24-hour hospitalization. Some like cataract surgery, chemotherapy, dialysis, and tonsillectomy can be done in a few hours.
Earlier, insurance only covered treatments with 24+ hour admissions, but modern plans cover hundreds of daycare procedures. Always check the list in your policy document—more is better.
9. No Claim Bonus (NCB)
If you don’t make a claim in a policy year, your insurer rewards you with a bonus—usually by increasing your sum insured without extra cost.
For instance, if you have a ₹5 lakh cover and don’t claim for a year, you might get ₹5.5 or ₹6 lakhs the next year. Over 4-5 years, your cover might grow to ₹10 lakhs.
This is useful for young, healthy people and incentivizes careful use of the policy. But if you claim even once, the NCB may reset or reduce.
10. Room Rent Limit
This specifies how much room cost per day is covered. Some policies cap it (e.g., ₹3,000 per day), while others allow any private room without restriction.
Why does it matter? Because if you choose a room beyond the allowed limit, you might have to pay a proportional deduction on the entire hospital bill, not just the room charges.
Example: If you’re eligible for ₹3,000 per day, but pick a ₹6,000 room, you might get only 50% of your entire claim, not just the room rent.
If you want flexibility in room choices, choose a plan without room rent sub-limits.
11. Sub-limits
Sub-limits are caps within your overall sum insured for specific treatments, diseases, or expenses.
Common examples:
- ₹40,000 cap on cataract surgery
- ₹25,000 for maternity
- ₹1,000 per day for ambulance
Even if your sum insured is ₹10 lakhs, if the cataract sub-limit is ₹40,000, you get only that much for the surgery.
Plans without sub-limits are more transparent and beneficial, especially for middle-class families or senior citizens.
12. Restoration Benefit
If you use up your entire sum insured in a year, this feature restores it for future claims within the same year.
For instance, you use up your ₹10 lakh cover in January. If your policy has 100% restoration benefit, it recharges your sum insured so you can make fresh claims later that year.
Some policies allow multiple restorations. However, restoration is usually available only for unrelated illnesses (i.e., not for the same disease as the previous claim).
13. Portability
Unhappy with your current insurer? You can shift to a new insurer at renewal without losing the benefits (like waiting periods already served). This is called portability.
For example, if you’ve completed 2 years with insurer A and want to move to insurer B, you don’t need to restart the PED waiting period. The new insurer carries over your credit.
But you must apply for portability at least 45 days before renewal.
14. OPD Cover
OPD (Outpatient Department) expenses include doctor consultations, medicines, or minor procedures without admission.
Most basic policies don’t cover OPD, but some advanced or rider plans do. If you have frequent outpatient expenses, look for this feature. It’s useful for families with children or elderly parents who need frequent doctor visits.
15. Maternity and Newborn Cover
Maternity is not covered by default in most policies. If it is, there’s usually a waiting period of 2–4 years.
Some policies also cover newborn baby expenses for the first 90 days, including NICU, vaccination, and congenital conditions. This is ideal for young couples planning to start a family.
Check limits here carefully. Many policies cap maternity cover at ₹25,000–₹50,000, which may not cover delivery at premium hospitals.
16. Critical Illness vs Hospitalization Cover
A regular health insurance covers hospitalization bills. A critical illness policy, on the other hand, gives a lump sum amount on diagnosis of a serious illness like cancer, stroke, kidney failure, etc.
This lump sum is not based on actual hospital bills. You can use it however you want—treatment, loss of income, travel, etc.
It’s best to have both: a regular policy for bills and a critical illness plan for financial backup.
Conclusion: Making Sense of It All
Now that you understand the key terms—sum insured, deductible, co-payment, sub-limits, network hospitals, and more—you’re in a much stronger position to buy the right health insurance plan.
Here’s a simple checklist to follow while buying:
- Choose adequate sum insured (₹10–15 lakhs for families, higher if affordable).
- Avoid or minimize co-payment and sub-limits.
- Opt for policies with no room rent capping if possible.
- Check network hospitals near you for cashless treatment.
- Prefer restoration, daycare, and no claim bonus features.
- Watch out for waiting periods on pre-existing and specific diseases.
- Consider super top-up if you already have a base policy.
- Buy early when you’re healthy, so you pass waiting periods without stress.
Understanding these concepts helps you avoid unnecessary costs, handle claims smoothly, and feel confident in your healthcare safety net. Don’t just buy the cheapest policy—buy the one that actually works when you need it.
Because in a real emergency, the last thing you want is to decode insurance lingo while your loved ones are waiting for treatment. Be informed, ask questions, and choose wisely.
