A Simple Breakdown of Health Insurance Terms Everyone Should Know

Health insurance policies contain many terms that may confuse you. Terms including sum insured, deductible, co-payment, waiting period, and network hospital are commonly used jargon in a health insurance policy. The terms have different implications and offer varied benefits to the policyholder.

Having a clear understanding of health insurance terms and definitions will help you in reading and understanding your policy document and compare health insurance plans efficiently. Here is a list of 22 health insurance jargons with health insurance terms and definitions for your reference.

Some of the terms used in Health Insurance

When buying health insurance, you may run into various terminologies. Let’s look at a few of the key terms.

1. Sum Insured

Sum insured refers to the maximum amount payable by an insurer under a health insurance plan for a particular policy year, based on the terms and conditions of the policy.

For example, with a sum insured of Rs 10 lakh, an insured can claim for any amount of expenses up to Rs 10 lakh.

Nowadays, you can also get health insurance with an unlimited sum insured option. To know more about this read our guide on Unlimited Sum Insured in Health Insurance: Benefits and Eligibility

2. Premium

This refers to the amount that you would have to pay for maintaining the health plan on a yearly basis or other payment options decided by the company.

3. Policyholder

A policyholder refers to the person in possession of a policy. This person is liable to make premium payments. In simple words, the buyer of a health policy is called the policyholder.

4. Insured Person

An insured person is someone who receives coverage under the health insurance policy. The policyholder and insured person can be the same individual or different people.

5. Network Hospital

A network hospital has an arrangement with the insurer or its authorised third-party administrator. Eligible policyholders may be able to use cashless treatment at these hospitals.

6. Cashless Hospitalisation

Cashless hospitalisation allows the insurer to settle the approved claim amount directly with the network hospital. You may still need to pay expenses that are not covered under the policy.

7. Reimbursement Claim

A reimbursement claim involves paying the eligible medical expenses yourself and then submitting the required documents to the insurer for reimbursement, subject to the policy terms.

8. Waiting Period

A waiting period is the time you must complete before certain conditions or treatments become eligible for coverage.

Different waiting periods may apply to pre-existing diseases, specific treatments, maternity benefits, and other conditions.

9. Pre-Existing Disease

A pre-existing disease generally refers to a medical condition that existed before the health insurance policy was purchased, as defined by the policy.

Coverage for such conditions may begin after the applicable waiting period.

10. Deductible

It refers to the pre-determined amount that the insured pays before the insurer begins covering eligible expenses for the insured.

For example, if a policy has a deductible of Rs 20,000 and eligible claim is Rs 1,00,000, the insured pays the deductible amount before the eligible claim amount is paid

11. Co-Payment

Co-Payment refers to the percentage of eligible claim you have to cover.

For example, 10% of an eligible claim of Rs 50,000 means Rs 5,000.

12. Exclusions

They refer to the services, treatment, expenses, or circumstances not covered by the insurance policy.

It may differ according to the plans; hence, it is important to go through the policy document before taking any insurance policy.

13. No-Claim Bonus

The bonus that an insurer provides for not submitting a claim. It could be an increase in sum insured or some other benefit on renewal of the policy as per the terms and conditions.

14. Day Care Treatment

Day care treatment refers to certain medical procedures that require hospitalisation for less than 24 hours because of advancements in medical technology.

Only procedures that meet the policy's conditions qualify as day care treatments.

15. Room Rent Limit

The room rent limit is the maximum amount allowed for hospital room charges during covered hospitalisation.

A policy may have no room rent limit or may specify a fixed amount or percentage of the sum insured.

16. Sub-Limit

A sub-limit is a maximum amount that an insurer will pay for a particular treatment, service, or expense.

For example, a policy may have a specific limit for room rent, ambulance charges, or certain medical procedures.

17. Restoration Benefit

A restoration benefit can restore the sum insured after it has been partly or fully used, depending on the policy conditions.

This benefit may provide additional coverage for another eligible claim during the same policy year.

18. Health Insurance Portability

Health insurance portability allows you to switch from one insurer to another while carrying certain eligible benefits from your existing policy.

The process is subject to applicable portability rules and the terms of the new policy.

19. Free-Look Period

The free-look period gives you a specified period after receiving the policy document to review its terms and conditions.

If you do not agree with certain conditions, you may be able to cancel the policy during this period, subject to the applicable rules and deductions.

20. Grace Period

A grace period is the additional time provided after the premium due date to renew the policy.

Coverage during this period depends on the policy terms. A claim may not be payable if the policy has lapsed, even if the premium is later paid during the grace period.

21. Claim Settlement

Claim settlement refers to the process through which the insurer reviews and settles a valid claim according to the policy terms.

The insurer may require documents such as medical reports, bills, discharge summaries, and claim forms.

22. Cashless Pre-Authorisation

Cashless pre-authorisation is the approval requested from the insurer or its authorised administrator before planned cashless treatment at a network hospital.

The hospital generally submits the required details for approval. The final claim remains subject to policy coverage and the terms and conditions.

Why Is It Important to Understand Health Insurance Terminology?

Health insurance terminology is important so you can understand what you are paying for and what you are being covered for. Things like deductibles, co-payments, sub-limits, waiting periods, and other various restrictions and clauses are all part of what will define what you have to pay out-of-pocket during treatment.

The policy document contains all this information along with instructions regarding claims and renewals, among other things. Understanding these things will make comparing different policies and finding one that suits your needs much easier.

Conclusion

Health insurance becomes easier to understand when a person is familiar with the various terms that appear in their coverage policy. The health insurance terms and definitions can help an individual to understand their coverage, claim process and even the amount that they might have to pay out of their pocket.

Before buying or renewing any policy, it is crucial to have a good understanding of the sum insured, waiting periods, exclusions, deductibles, co-payment, sub-limits, room rent limits and claim conditions. Understanding the health insurance terminology can help a person to read their policy with ease and clarity as well as help them to make informed decisions about their coverage.

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