Understanding Health Insurance Room Rent Limits: How They Impact Your Coverage

New Delhi [India], March 25: Health insurance is important in financial planning as it safeguards individuals from unplanned medical costs. As healthcare expenses are continuously rising, having knowledge regarding health insurance policies is a must. One of the most important features of a health insurance plan is the room rent limit, which can impact the level of coverage and out-of-pocket expenses during hospitalisation. Read further to learn about room rent limits and their meaning and implications.

What is a Room Rent Limit?

The term ‘room rent limit' is associated with health insurance and refers to the limit the insurance company has set for covering the cost of a hospital room for a patient admitted to a hospital. This limit can be set in two different ways:

• Fixed amount: A specific amount that the insurer will compensate regardless of the actual room that a patient occupies in the hospital. For example, a policy might limit room rent reimbursement to a maximum of ₹5,000 per day.
• Percentage of the sum insured: Part of the sum insured that the room rent will be reimbursed. Most insurance companies apply a limit to claims ranging from 1% to 2% of the total sum insured. For example, a 5 lakh rupees policy with a 1% room rent limit would cover ₹5000 daily.

Insurers provide options as part of the room rent coverage when you buy health insurance. These are

• Room Rent Without Sub-Limits: These policies do not restrict room rent, freeing the policyholder from the burden of paying extra costs to choose any room. However, such policies tend to have higher premiums.

• Room Rent With Sub Limits: These policies impose a restriction on room rent, either in the form of a specified amount or a percentage of the sum insured.

• Room Rent With Co-Payments: The room rent burden is shared between the insurer and the policyholder. The policyholder covers a portion of the total amount while the insurer covers the rest.

• Room Rent for Specific Categories of Rooms: Some policies only cover limited types of rooms, such as shared or single private rooms. Unrestricted options may come with extra costs.

• Room Rent Cover as an Optional Extra: Some insurers provide room rent coverage as an optional extra. The policyholder can purchase this extra coverage, usually at a higher premium.

• Proportionate Deduction: A degree of deduction can be applied by insurers to the total hospital bill. This implies that when you select a room priced above the limit in your policy, you will not only incur the difference in room rent but also share proportionally the other related medical expenses like the doctor's fees and nursing charges. For instance, if your policy limit on room rent is ₹ 3,000 per day and you select a room costing ₹ 4,000 per day, the insurer is likely to reduce reimbursement for other expenses proportionately.

• Rise in Direct Payments: Apart from the proportional deduction, breaching the room rent limit further increases your expenses as you will now incur the direct difference between the actual rent of the room and the limit set in the policy.

Private hospitals have broad differentials in room categories, such as general wards and deluxe rooms, with steep differences in their pricing. The rate for a single private room in a metropolitan area ranges between ₹ 5000 and ₹ 10000 per day, while this cost in a tier two city may be around ₹ 3000-5000 per day.

The rent cap for a room may limit the locations where you are treated and how much you pay out-of-pocket. Most policyholders believe their hospital bills will be covered, but claim settlements often lead to significant out-of-pocket expenses due to exceeding the room cap.

How to Navigate Room Rent Limits

To better manage expenses incurred by room rent limits, consider these tips:

• Policies that Do Not Have Room Rent Caps: A health insurance plan that has no room rent restriction allows for easier room selection but comes at higher premiums.

• Policies with Higher Room Rent Caps: If policies without limits are not suitable, try to get at least policies capped at higher room rents that coincide with your preferred hospitals.

• Proportionate clause limits understanding: Check for any room rent limit clauses for disproportionate deductions before choosing a policy to avoid unnecessary surprises when claiming.

Understanding room rent restrictions in health insurance is essential for mitigating the chances of paying out of pocket when hospitalised. With frequent changes in the insurance sector, keeping yourself updated about different policies will enable you to make better financial and health management decisions.

Always choose a plan that meets your medical needs and budget. If you are anyone in your family is suffering from a life-threatening illness, consider opting for a critical illness insurance cover.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

 Moneycontrol Journalists are not involved in creation of this article.