Health insurance: 5 gaps in your policy that could leave you with a bigger bill at the time of claim

Ask an average Indian if they have health insurance and their answer will most likely be ‘yes’. Ask them if they can point to room rent clause or consumables coverage, and they’ll not be as confident. Health insurance in India has become table-stakes, but ‘insured’ and ‘covered’ aren’t the same thing. This gap may show up, for instance, on the day of discharge when a bill that looks fully protected on paper turns out to have a few thousands or lakhs that a family needs to pay on its own.

Out-of-pocket expenses accounted for nearly 39% of total health expenditure in India, as per 2021-22 government data. Coverage has risen to about 46% of rural and 44% of urban households as of 2025, but coverage and protection haven’t moved in step. Even where a policy exists, benefit limits routinely fall short of what treatment actually costs. This is a global problem. A World Health Organisation report found that out-of-pocket expenses for medicines and other medical products push up to 12% of households in European countries into poverty or deepen their financial hardship.

So, does it happen due to policy design or a gap in understanding? Why do buyers end up paying for riders they are never likely to use while actually staying exposed to what could cost them at the time of a claim?


Also read: Health insurance claim settlement: Which insurers are fastest at paying approved claims?

Common reasons for shortfall

Most buyers assume sum insured is the only number that matters. While it is largely true, out-of-pocket expenses rarely arise due to a shortfall in sum insured.

*Room rent capping: Room rents are capped either as a flat amount per day or as a percentage of the cover, like 1% of a Rs.10 lakh sum insured, which works out to Rs.10,000 a day. If you pick a room above that limit, even a small margin gets accumulated over the length of the stay and arrives as an overhead cost. However, many new-age plans now come with no room rent capping.

*Restoration benefit: This feature offers meaningful coverage if your sum insured is exhausted. However, friction comes in the fine print of when and how it gets activated. Some policies restore the sum insured once it is fully exhausted; others get triggered on partial exhaustion; a few require a 45-day gap between claims before the restored amount is usable. Sometimes, it is applicable for any reason for hospitalisation; at other times, a claim for the same condition might not be allowed. A benefit that reads as identical across four policies can behave in three different ways when a second hospitalisation happens. This can be the difference if the need arises for multiple hospitalisations. Some new-age policies have unlimited restoration benefits.

*Gaps in consumables cover: A popular add-on, consumables cover is bought by about eight in ten buyers. For years, gloves, syringes, PPE kits and other single-use items were a source of out-of-pocket spend that policies didn’t cover. Now, these items are classified across four lists: some products cover only the first, others may cover two. Two policies may have the same add-on name and pay out differently at claim time, leading to a shortfall. So, cross-check the consumables that are included as a starting question rather than a settled one.

*Inadequate employer-provided cover: Many feel that employer-provided cover handles their insurance needs and postpone getting a personal policy. But this cover disappears entirely when someone changes jobs or retires, exactly when medical risk starts climbing.

Also read: Non-life insurance to play a bigger role in financial planning over the next 25 years: ICICI Lombard

The counter-intuitive overinsuring problem

Once you understand these gaps, the solution may not necessarily be to buy bigger, buy more of everything. A policyholder may stack features they may use just once, while carrying a base sum insured that hasn’t been revised since their first job. Here are a few common mistakes

*Holding two base policies for higher cover age while paying two full base premiums instead of a super top-up plan.

*Paying extra for disease-specific covers, like vector-borne diseases or diabetes, while keeping the sum insured at Rs.5-10 lakh. In practical terms, a high sum-insured comprehensive policy provides the highest value for money in most hospitalisation cases.

*Many end up opting for daily hospital cash instead of consumables cover. During hospital stay, you will get a fixed, limited amount of daily hospital cash; but depending on the nature of treatment, consumables may make up for 15-20% of the bill. The latter expense may often be higher.

Pick what’s worth paying for

Regulation has made health insurance products more accessible and aligned with real-world healthcare needs. The real measure of good insurance is not how comprehensive it looks when you buy it, but how much of the bill it actually protects you from when you need it.

The Author is Joint Group Ceo, PB Fintech