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How does Health Insurance work in India?

In India, the majority of the population is unaware of Health Insurance. And those who know about it think that it is not so important for them. Once you know the concept, benefits, and how it works, you will feel the importance of Health Insurance. Let us understand Health Insurance in detail.

Concept of Health Insurance

It is a type of insurance that covers medical expenses arising from illness. These expenses include doctor's consultation fees, medicines cost, and the cost of hospitalization. It is a contract by which an insurance provider pays some or all of an insured's healthcare expenses for a premium accepted from the insured. Health Insurance either reimburses the cost incurred for the treatment of the insured, or it can directly pay it to the care provider. If you have health insurance, it will save you from paying the medical bills you can't afford in an emergency.

The necessity of Health Insurance

None of us wants to get hurt or fall ill in our life. But we know that illness or accident can strike us without prior notice at any point in time. These things come with a cost of treatment that can hamper our savings which we do for ourselves and our family. And this cost of treatment is rising day by day. Smart people take care of their health by taking the necessary steps to ensure their health. Health insurance is a better solution for us to manage finances in emergencies. No one wants to compromise their family's better future and happiness due to an illness or accident. Health Insurance provides for these unforeseen situations and keeps your savings safe for the future.

How does It work in India?

To better understand the functioning of health insurance in India, we will learn the types of policies available in India and the process.

Types of Health Insurance Plans available in the Indian Market-

Individual Plan-

The name itself explains that this policy covers the treatment expenses of a single person insured under it.

Family Floater Plan-

In this type of plan, a common sum insured is made available for all members of the family insured in it.

Senior Citizen Plan-

These are the customized plans for people above 60 years with comprehensive coverage for their specific needs.

Group Insurance Plan-

Employers offer these plans to their employees to make them worry-free about their health and family's health.

Maternity Insurance Plan-

This is another self-explanatory type of insurance dedicated to providing cover for pregnant women. It covers the maternity expenses.

Plans for Critical Illness-

These plans provide coverage for specific medical issues, mostly life-threatening diseases. These policies come with particular rules.

Top-up Plan-

These plans help the insured when their bills go beyond the estimated cost and cover the extra part; they can avail of top-up plans by paying an additional premium.

We have learned the types of plans available in India. Now we will understand the process of health insurance in India.

Process (How it works?)-

  • This process begins with buying the insurance policy from the provider. Before making this choice, you should think about your exact needs, coverage, and other benefits from the provider. After comparing the available options online, choose the better option for yourself.
  • Your relationship with an insurance provider begins when you buy a plan for yourself. The provider charges you a premium based on your age and income. It would help if you also underwent a medical check-up from the network hospital. The result of this check-up also plays an important role in deciding the rules for your policy.
  • Once you buy an insurance policy from the provider, your cover period starts from that day. In this period of cover, if you fall ill or meet with an accident, then the cost of treatment can be claimed from the insurance provider as per the policy rules.
  • Suppose you do not claim for any of your treatments during the period of cover. In that case, many insurance providers allow you the benefit of a No Claim Bonus (NCB) either in the form of a discount in premium at the time of renewal of the policy or the form of added coverage in the sum insured.
  • Now, the main part is the claim settlement procedure. There are two types of claim settlements on the basic modes of payment of the cost of treatment. One is a Cashless claim, and the other is a Reimbursement claim. Each of these types has a separate process for payment to the care provider.
  • When you need some hospitalization, and if your policy is cashless, you must contact the network hospital. When you take treatment, the third-party administrator (TPA) is the key person who takes care of all the documentation and other processes required to be completed for settling the claim from the provider.
  • Some insurance providers avail the facility of hospital cash in the form of a daily amount paid to the insured for covering daily expenses incurred in the hospital. The daily hospital cash limit is given to the insured based on several days of hospitalization.
  • If your policy is not cashless, your insurance provider will settle your claim by reimbursement. In this case, when you undergo hospitalization for your treatment, you need to pay all the bills in the hospital. Then you need to contact the TPA for the claim and hand over all the hospital documents. 
  • TPA verifies all of them and completes your application. The application is then filed with the insurance provider. The company processes the claim accordingly and provides you with the reimbursement for the bills you paid. It can be either full or partial reimbursement based on rules in the policy.
  • There is a possibility of some disallowances, which means some portion of the bills needs to be borne by you. It is referred to as co-payment. Similarly, there are some items for which the provider pays proportionately. They are known as deductibles.
  • The majority of the insurance companies try to keep their claim settlement process hassle-free and less time-consuming. These companies try to be helpful to their customers in clearing the claims and maintaining good relationships.

This is how health insurance works in India, and the claims are settled for the insured persons.

Advantages of Health Insurance

After knowing the functioning of the health insurance, you must have understood its importance. Now, let us look at the benefits of health insurance in India.

It deals with rising healthcare costs-

Health insurance helps the insured deal with the rising costs of treatment for hospitalization. Financial management becomes easy with the help of this policy.

Coverage for critical illness-

The majority of the insurance providers cover critical illnesses and other serious health issues by paying extra premiums. It is one of the vital benefits of health insurance.

Easy cashless facility-

With the help of network hospitals, the majority of the insurance providers give cashless facilities for settling their claims. The process of availing of emergency treatment becomes easier with the help of this facility.

Add-on coverage-

The personal health plan gives you more benefits than group insurance. And also, there are facilities to avail of add-on benefits in the form of coverage which makes it even better.

Tax benefits-

In India, section 80D of the Income Tax Act, 1961 allows the premium toward the health insurance for tax deductions. Thus, our health protection saves them money in tax deductions.

No claim bonus-

As mentioned earlier, the provision of no claim bonus is offered by the providers. This is either in the form of a discount in premium while renewing a policy or added coverage benefit.

Online renewal for policy-

You can renew your policy online from the insurance provider's website. No need to go to the office physically and make an effort. So if your policy is about to expire, you can renew it online.

Pre and post hospitalization consideration-

Under the health insurance policy, many insurance providers consider 30 days of pre-hospitalization and 60 days of post-hospitalization. This facility helps to reduce your expenses for the treatment.

Day-care treatment for insured-

Some insurance companies allow the claims only for those who undergo hospitalization for more than 24 hours. But there are some plans which allow claims for day-care treatments as well. So there is no compulsion to stay in the hospital for any minimum period.



After knowing the concept, functioning, and benefits of health insurance, we can suggest that it is always better to get protected by availing of health insurance for ourselves and our family members. Your savings are safe for the purpose intended, and at the same time, you make provision for health treatment. It is the right choice for a healthy and better future.



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