Introduction

Falling sick or getting hospitalised is stressful enough — worrying about the bills makes it even harder. That’s where health insurance comes in. It is an agreement under which you pay a fixed amount (premium) to an insurance company, and in return, they cover your medical expenses during hospitalisation, surgeries, and treatments.

In this guide, you’ll understand how health insurance works in India, what factors define your policy, and how to maximise its benefits for your family’s safety and peace of mind.

 

A Short History

The idea of health insurance started globally in the early 20th century when organised healthcare systems began expanding. In India, it initially took shape through public schemes by government insurers and later evolved as private companies entered the market with more specialised plans.

A turning point came with the creation of the Insurance Regulatory and Development Authority of India (IRDAI) in 1999. The IRDAI standardised practices, ensured consumer protection, and introduced transparency into the insurance sector. Over time, Indian health insurance moved from simple Mediclaim policies to comprehensive health plans covering hospitalisation, critical illnesses, wellness programs, and even preventive check-ups.

This evolution has made modern health insurance policies more accessible, transparent, and customer-friendly — keeping pace with India’s rising healthcare costs and changing lifestyles.

 

Key Components & Terms

To understand how health insurance functions, it’s essential to know the core terms that shape your policy and impact your claims:

• Premium:

  The price you pay monthly, quarterly, or annually to keep the policy active. Your age, health condition, and sum insured influence how much you pay.

• Sum Insured / Coverage Limit:

  The maximum amount the insurer will pay for claims during a policy year. Available as individual or family floater cover.

• Waiting Period / Pre-existing Diseases (PED):

  A defined duration before specific benefits (like maternity or pre-existing diseases) become payable.

• Co-pay / Deductible:

  The part of the claim you pay out of pocket — either as a percentage or a fixed amount.

• Network Hospitals:

  Partner hospitals where you can avail of cashless treatment. For non-network hospitals, expenses are reimbursed later.

 

How Health Insurance Works: Step-by-Step Process

1. Choosing a Plan

Assess your healthcare needs based on age, family size, and budget. Compare multiple insurers to balance premium costs with benefits and hospital network strength.

2. Policy Issuance

Once you pay the premium, the insurer issues a policy document outlining the coverage details, exclusions, and terms. Always read this carefully before signing.

3. During Hospitalisation

When you need treatment, visit a network hospital for cashless admission. For non-network facilities, you pay the bill first and later file a reimbursement claim.

4. Claim Process

• Cashless Claims: The hospital sends a pre-authorisation request to the insurer or TPA. Once approved, the insurer directly settles the bill with the hospital.
• Reimbursement Claims: You pay upfront, collect all documents (bills, reports, discharge summary), and submit them to the insurer for verification and reimbursement.

5. Post-Treatment Expenses

Expenses like follow-up visits, tests, and medicines may be covered for up to 60 or 90 days post-hospitalisation, depending on the plan. Keep all receipts for smooth claim processing.

 

Scope & Types of Coverages

Health insurance today is not limited to hospitalisation. It includes various features depending on the plan’s scope:

• Inpatient Care:

  Covers hospitalisation, surgeries, doctor’s fees, and medicines.

• Daycare Procedures:

  Surgeries or treatments that don’t need 24-hour admission (e.g., cataract surgery).

• Maternity Benefits:

  Coverage for delivery, newborn care, and related complications.

• Critical Illness Cover:

  Lump-sum payout on diagnosis of conditions like cancer, heart attack, or stroke.

• Outpatient Care:

  Doctor consultations and diagnostic tests (in plans with OPD cover).

Additional riders like ambulance cover, wellness programs, or mental health benefits can be added for wider protection.

 

Why Health Insurance Works: Purpose & Benefits

Health insurance operates on a risk-pooling principle — many policyholders contribute premiums into a common fund. When any insured member needs medical care, the claim is paid out from this pool. This collective system spreads out financial risk and keeps healthcare affordable.

The primary purpose of health insurance is financial protection. With rising medical costs, a single hospital stay can easily cost lakhs. Insurance ensures you don’t have to dip into your savings or fall into debt to pay for treatment.

Modern policies also emphasise preventive care by covering routine check-ups and screenings. Early diagnosis helps manage diseases better and lowers long-term costs.

 

Common Misconceptions & Pitfalls to Avoid

• Claim Rejections:

  Usually caused by incomplete documentation or taking treatment at non-network hospitals without informing the insurer.

• Ignoring Waiting Periods:

  Many buyers overlook pre-existing disease waiting times, leading to denied claims early in the policy.

• Relying Only on Employer Cover:

  Corporate health plans end when you switch jobs — always maintain a personal plan.

• Not Reviewing Annually:

  Life changes, and so do medical needs. Reassess your coverage every renewal.

How to Avoid Mistakes:

• Read your policy wording and schedule thoroughly.
• Always prefer cashless treatment in network hospitals.
• Keep medical bills and records organised for future claims.
• Renew your policy before expiry to avoid coverage lapses.

 

FAQs About Health Insurance

How soon does a health insurance policy start working?

Coverage begins from the effective policy start date once the insurer approves your proposal and receives payment. Most policies, however, have an initial 30-day waiting period for non-accidental claims.

What is a waiting period?

A waiting period is a defined duration after policy issuance during which certain claims aren’t payable. Typically, it includes:

• Initial waiting period — 30 days for general hospitalisation
• Pre-existing diseases — 2 to 3 years
• Maternity or specialised benefits — as per plan terms

Can I switch insurers (portability)?

Yes. Under IRDAI’s portability rules, you can move an existing health policy to a new insurer at renewal without losing accumulated benefits like waiting-period credits and no-claim bonuses. Apply at least 45 days before your policy expires.

What if my hospital isn’t in the insurer’s network?

You can still get treatment — pay the bill upfront and apply for reimbursement. For emergencies, most insurers allow cashless settlement at non-network hospitals if notified within 24–48 hours.

How are premiums affected by age and health?

Premiums rise with age or medical conditions. Younger individuals enjoy lower premiums, while older adults or those with pre-existing diseases may face loadings or co-pay requirements.

 

Conclusion

Understanding how health insurance works — its structure, coverage, and claim process — empowers you to make informed decisions. The best plan is one that suits your health risks, lifestyle, and budget. Always compare policies, study the fine print, and maintain continuous coverage.

With ManipalCigna , you get access to a wide range of health insurance solutions designed to fit diverse needs, ensuring you and your family are well-prepared for any medical emergency. Get in touch with us to know more!