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Room rent limit in health insurance plan: The devil’s in the detail

The cap on room rent plays the biggest role in deciding the actual amount your insurer pays to settle your hospital bills.

October 04, 2022 / 06:37 AM IST
Representative image

Representative image

Buying health insurance in India is a tough job.

Not literally, but because one has to deal with a lot of fine print in the health insurance policies. Though IRDAI is simplifying and standardising all issues involved, it is still far from ideal.

Take, for instance, the concept of room rent sub-limit. On the face of it, it looks simple, as it seems to indicate that it would only impact the type (and cost) of room you get in the hospital. But reality is far from that.

Als0 read: Moneycontrol-SecureNow Health Insurance Ratings: Picking the health insurance policy that really matters 

Truth about room rent limit

The importance of having a big enough sum assured (SA) is known to all. But most people don’t understand the impact of this room sent sub-limit on the final claim settlement amount.

Let’s take an example to understand this.

Suppose you have Rs 3-lakh health insurance plan with a room rent sub-limit of 1 percent of the SA. This means that the room rent limit is 1 percent of Rs 3 lakh, which is Rs 3,000 per day.

Now, let’s say you get hospitalised for five days. But since cheaper rooms were not available, you chose a room that cost Rs 5,000 per day (remember your policy limits it to Rs 3,000 daily. Now suppose, for your five-day hospital stay, the total bill came to Rs 2 lakh.

You might think that since your sum assured is Rs 3 lakh and the bill (Rs 2 lakh) is much below that, your claim would be settled fully to a large extent, except for the few thousand rupees in excess room rent. But that is not true.

Remember, you took a room of rent Rs 5,000 per day when your insurance policy sub-limit was Rs 3,000?

This room rent sub-limit is a hidden demon. This not just impacts the room rent claim, but also the overall bill. Here’s how:

Your claim will only be settled to the proportionate extent of your room rent limit. That is, only an amount of = Rs 2 lakh * (3,000/5,000) = Rs 1.2 lakh will be settled by your health insurance provider. And the rest, Rs 80,000 would need to be borne by you.

So, just having a high SA doesn’t mean that all your bills will be settled up to that limit. The cap on the room rent plays the biggest role in deciding the actual amount your insurer would pay to settle your hospital bills.

This is a shocker for most people who don’t know about this strange rule (referred to as the ‘proportionate deductible’ clause) and come face-to-face with it only when they go to clear their hospital bills.

And if you didn’t notice, then let me highlight that your hospital bill of Rs 2 lakh is made up of several components – room rent, procedure costs, doctor visits, ICU chargers, medicines, etc. So, the limit of hospital room rent affects your insurance claim for the full bill and not just a part of it. Insurers consider all associated hospital expenses too, while applying this rule.

Also read: How room rent sub-limits can jeopardise your health insurance claims 

What to do if planning to purchase a new policy?

It is very simple. Now that you know about this odd rule, you should look for health insurance plans that come with no such room rent limits. Luckily, these days there are many such plans, mostly with higher SA.

A policy with a room sub-limit will definitely come cheap, but it is still advisable to pay a higher premium and go for one that comes with no sub limits. This ensures that fewer hassles will be faced at the time of bill settlement.

Also read: How to use Moneycontrol – SecureNow Health Insurance Ranking

What to do if you have a policy with limits?

If you already have a health insurance plan, first check the room-rent limit. If you think it’s not suitable for you, then first ask your insurer to remove the room rent limit by paying an extra premium (loading).

But if that is not possible, then you can port your policy to a different insurance company, which gives you a new plan without any such limits.

It is sad that something as important as health insurance is made so complicated for the common man and people having to understand the fine print.

Though the regulator acknowledges this and is working to improve things, it is in people’s interest to be careful and know the rules. At least that way, they can be better prepared to avoid last-minute surprises ― of the nasty kind.
Dev Ashish is a SEBI Registered Investment Advisor (RIA) and Founder, StableInvestor