5 checks to avoid health insurance claim rejections
Buying health insurance is not just a financial decision, it could actually be a lifesaver. However, opting for a policy based only on a low premium or a high sum insured, without checking the fine print, could end up costing you more when it's time to file a claim. So, what should you keep in mind before selecting a health insurance policy? Here are five key factors every policyholder should assess before buying one:
1. Buy adequate health insurance coverage
The sum insured is the foundation of any health insurance policy. It determines the maximum amount your insurer will pay towards hospitalisation and other covered medical expenses.
With healthcare costs rising rapidly, opting for a low cover simply to save on premiums can leave you severely underinsured. According to Digit Life, medical inflation is projected to be 13% in 2025, making adequate coverage more important than ever.
Also read: ICICI Lombard denied health insurance claim, stating the policy was cancelled; policyholder wins the case in consumer court, here’s why
"A major surgery in a metro city can easily cost Rs 5-10 lakh, so a Rs 3 lakh cover may be insufficient," says Siddharth Singhal, Head of Health Insurance, Policybazaar.
“In a metro city, if someone ends up in the ICU for a serious heart issue or an accident, hospital bills can easily cross Rs 8 lakh. A tiny policy runs out in a couple of days, and you are left scrambling for cash,” says Sarita Joshi - Head of Health and Life Insurance, Probus.
According to Chetan Vasudeva, Senior Vice President, Alliance Insurance Brokers, a base cover of Rs 10 lakh to Rs 30 lakh, depending on family size, age and city, is generally more practical for urban households. A super top-up policy can then be used to increase protection against very large medical expenses without significantly increasing premiums.
Apart from the coverage amount, policyholders should also evaluate whether they need additional features such as maternity benefits, consumables cover, OPD cover and critical illness cover.
2. Read the fine print: Check sub-limits, waiting periods and exclusions
A policy may offer a high sum insured, but restrictions hidden in the terms and conditions can significantly reduce the amount you actually receive during a claim.
Room-rent sub-limits
Many policies impose limits on room rent.
“If your policy caps your room at Rs 5,000 a day but you choose one that costs Rs 8,000, a rule called proportionate deduction kicks in. Since you picked a pricier room, the insurance company scales down your doctor fees and surgery charges too, which ends up pushing your out-of-pocket expenses way up,” says Joshi.
Co-payment clauses do something similar. If your policy has a 20% co-pay, your share on a Rs 5 lakh claim comes out to Rs 1 lakh. Going for a policy with zero co-payment is generally a much better way to get full financial protection, she adds.
Waiting period and pre-existing diseases
A waiting period is the time during which certain illnesses or treatments are not covered after buying the policy.
This becomes especially important for people with conditions such as diabetes, hypertension, thyroid disorders or previous surgeries.
“Insurers usually require a waiting period of three to four years before covering treatments for these specific conditions,” says Joshi.
Also read: Should you go for accidental death insurance despite having term insurance? Check this before deciding
Equally important is full disclosure. Failing to disclose an existing medical condition while buying the policy can result in claim rejection later on grounds of non-disclosure.
3. Check the insurer's claim settlement record
A health insurance policy is only as good as the insurer's ability to settle claims. Claim settlement ratio refers to the percentage of the number of claims that an insurer pays or settles, out of the total number of claims that it receives during a certain period.
According to the IRDAI Handbook of Indian Insurance Statistics 2024-25, among standalone health insurers, the following reported a 100% claim settlement ratio, with all claims settled within three months:
4. Don't ignore the incurred claim ratio
Another important metric is the Incurred Claim Ratio (ICR), which measures how much an insurer pays out in claims relative to the premium it collects.
For instance, if an insurance company collects a premium of Rs.100 crore in a year, and pays out Rs.75 crore in claims, its ICR will be 75%. A reasonably healthy ICR indicates that the insurer is paying claims while maintaining financial stability.
“A healthy ratio - usually between 70% and 90% - is a wonderful sign,” says Joshi.
According to the IRDAI Annual Report 2024-25, for FY2024–25, ManipalCigna Health Insurance reported the highest incurred claim ratio (ICR) among standalone health insurers at 74.81%, followed by Aditya Birla Health Insurance at 71.5% and Star Health and Allied Insurance at 70.3%.
1. Buy adequate health insurance coverage
The sum insured is the foundation of any health insurance policy. It determines the maximum amount your insurer will pay towards hospitalisation and other covered medical expenses.
With healthcare costs rising rapidly, opting for a low cover simply to save on premiums can leave you severely underinsured. According to Digit Life, medical inflation is projected to be 13% in 2025, making adequate coverage more important than ever.
Also read: ICICI Lombard denied health insurance claim, stating the policy was cancelled; policyholder wins the case in consumer court, here’s why
"A major surgery in a metro city can easily cost Rs 5-10 lakh, so a Rs 3 lakh cover may be insufficient," says Siddharth Singhal, Head of Health Insurance, Policybazaar.
“In a metro city, if someone ends up in the ICU for a serious heart issue or an accident, hospital bills can easily cross Rs 8 lakh. A tiny policy runs out in a couple of days, and you are left scrambling for cash,” says Sarita Joshi - Head of Health and Life Insurance, Probus.
According to Chetan Vasudeva, Senior Vice President, Alliance Insurance Brokers, a base cover of Rs 10 lakh to Rs 30 lakh, depending on family size, age and city, is generally more practical for urban households. A super top-up policy can then be used to increase protection against very large medical expenses without significantly increasing premiums.
Apart from the coverage amount, policyholders should also evaluate whether they need additional features such as maternity benefits, consumables cover, OPD cover and critical illness cover.
2. Read the fine print: Check sub-limits, waiting periods and exclusions
A policy may offer a high sum insured, but restrictions hidden in the terms and conditions can significantly reduce the amount you actually receive during a claim.
Room-rent sub-limits
Many policies impose limits on room rent.
“If your policy caps your room at Rs 5,000 a day but you choose one that costs Rs 8,000, a rule called proportionate deduction kicks in. Since you picked a pricier room, the insurance company scales down your doctor fees and surgery charges too, which ends up pushing your out-of-pocket expenses way up,” says Joshi.
Co-payment clauses do something similar. If your policy has a 20% co-pay, your share on a Rs 5 lakh claim comes out to Rs 1 lakh. Going for a policy with zero co-payment is generally a much better way to get full financial protection, she adds.
Waiting period and pre-existing diseases
A waiting period is the time during which certain illnesses or treatments are not covered after buying the policy.
This becomes especially important for people with conditions such as diabetes, hypertension, thyroid disorders or previous surgeries.
“Insurers usually require a waiting period of three to four years before covering treatments for these specific conditions,” says Joshi.
Also read: Should you go for accidental death insurance despite having term insurance? Check this before deciding
Equally important is full disclosure. Failing to disclose an existing medical condition while buying the policy can result in claim rejection later on grounds of non-disclosure.
3. Check the insurer's claim settlement record
A health insurance policy is only as good as the insurer's ability to settle claims. Claim settlement ratio refers to the percentage of the number of claims that an insurer pays or settles, out of the total number of claims that it receives during a certain period.
According to the IRDAI Handbook of Indian Insurance Statistics 2024-25, among standalone health insurers, the following reported a 100% claim settlement ratio, with all claims settled within three months:
- Aditya Birla Health Insurance
- Galaxy Health Insurance
- Narayana Health Insurance
- Niva Bupa Health Insurance
4. Don't ignore the incurred claim ratio
Another important metric is the Incurred Claim Ratio (ICR), which measures how much an insurer pays out in claims relative to the premium it collects.
For instance, if an insurance company collects a premium of Rs.100 crore in a year, and pays out Rs.75 crore in claims, its ICR will be 75%. A reasonably healthy ICR indicates that the insurer is paying claims while maintaining financial stability.
“A healthy ratio - usually between 70% and 90% - is a wonderful sign,” says Joshi.
According to the IRDAI Annual Report 2024-25, for FY2024–25, ManipalCigna Health Insurance reported the highest incurred claim ratio (ICR) among standalone health insurers at 74.81%, followed by Aditya Birla Health Insurance at 71.5% and Star Health and Allied Insurance at 70.3%.
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