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Why is sub-limit the most important feature in health insurance plans – Find out

Detailed explanation on what is sub-limit? Importance of sub-limit of room-rent. The purpose of buying a health insurance policy is to ensure that hospital bills do not pinch one's pocket.

By: Sunil Dhawan | 
Read Time: 2 minutes, 59 seconds | 
Last Updated: 21-01-2022
Why is sub-limit the most important feature in health insurance plans – Find out
The purpose of buying a health insurance policy is to ensure that hospital bills do not pinch one's pocket. By paying a fraction of the coverage amount (sum insured) as premium, the liability is on the insurance company to reimburse the hospitalization cost to the health care provider. The reimbursement is up to the amount of sum insured that is available in the policy. But wait! At times, the insurer may not reimburse the entire bill amount to the hospital. The balance, in such a case, will have to be paid by the policyholder as out-of-pocket expense.
This makes one wonder, why in spite of paying the premium on time, the insurers don't pay the entire hospital bill? This could be because of something called 'Sub-limit' in a health insurance policy. While looking at the features in a health insurance policy, most of us often overlook this.

What is sub-limit?
Sub-limit refers to the upper limit up to which the insurance company will pay for the hospital bill under various expense heads. Typically, a hospitalization will incur expenses under different heads such as doctor's fees, medical procedure charges, nursing cost, medication cost and room rent. Some of these may have an upper cap, i.e. the maximum amount that the insurer will reimburse irrespective of the actual bill amount.
Importance of sub-limit of room-rent
Keep an eye on them but more importantly, look at the sub-limit of the room rent. This is because all other expense heads are linked to room-rent sub-limit. This makes the room-rent sub-limit an extremely important thing to watch out for and also adhere to. If you are hospitalized and the hospital asks you to choose the type of room, it is important to stick to the room rent limit. Here's why.

Generally, the room-rent is capped at 1 per cent of the sum insured of the policy. So, if you have a sum insured of Rs 6 lakh, the room rent sub limit will stand at Rs 6,000. Now, if you opt for a room with rent higher than Rs 6,000 a day, your hospital bill may not be fully reimbursed by the insured.

Proportional Reduction
On opting for a room with the rent exceeding the limit, all other medical expenses as per the hospital bill get proportionately reduced. The reduction in the hospital bill happens in the same proportion as the room rent exceeds the mandated limit. For example, if the room-rent limit exceeds 33 per cent by opting for a room costing Rs 4000 instead of Rs 3,000 per day rent, all other expenses get reduced by 33 per cent. This results in the partial payment of the claim and the policyholder will have to pay the balance to the hospital.

What to do
In most hospitals there are rooms from private, semi-private to even executive suites that one can choose from. To make sure you don't have to pick a portion of the hospital bill and to ensure the insurer pays the entire bill amount to the hospital, it’s better to opt for a room with rent within the permissible sub limit. Further, there are some health insurance plans in which there is no sub-limit on any of the medical expenses, including room rent, but they may come at a higher premium. Few other plans allow one to remove sub-limits on paying a small additional premium. Making an informed decision helps in keeping the worries away during hospitalization.
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Sunil Dhawan
Sunil Dhawan writes on personal finance topics including insurance. Having worked in insurance companies in the past, his insights have benefited readers to make informed decisions while purchasing insurance plans.

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