Health insurance
Also written Health insurance policy · Mediclaim
Insurance that covers an insured person's medical and surgical expenses, regulated in India by the Insurance Regulatory and Development Authority of India (IRDAI).
In plain language
Health insurance exists so that a medical emergency does not also become a money emergency.
The insured person pays a regular premium. This can be the owner of the policy, or simply the person the policy covers. In exchange, the insurer pays for medical and surgical treatment when it is needed, within the terms of the policy.
The booklet treats health insurance as one type among several. A household should also know life insurance, motor insurance, travel insurance and property insurance. Each of these protects against a different kind of loss.
How it works
The booklet's definition: health insurance is "Insurance coverage that covers the cost of an insured individual's medical and surgical expenses." It clarifies who "the insured" is: "the owner of the health insurance policy or the person with the health insurance coverage" — the policyholder and the covered person can be the same, or different, individuals.
Health insurance in India is regulated by the Insurance Regulatory and Development Authority of India (IRDAI), which the booklet describes as aiming "to protect the interests of the insurance policy holders and ensures systematic growth of the insurance industry."
For grievances specifically about health insurance or any other insurance product, Chapter 13's grievance table sends complaints about a "Contract of Insurance" to IRDAI, not to SEBI.
A worked example
Ramesh buys a health insurance policy with a Sum Insured of Rs 5,00,000, paying an annual premium of Rs 12,000 for himself and his family.
When his daughter needs hospitalisation for a surgical procedure costing Rs 1,80,000, the insurer settles the eligible medical and surgical expenses under the policy, subject to its terms and any sub-limits, leaving the family to pay only what falls outside the policy's cover — instead of the full Rs 1,80,000 out of pocket.
If Ramesh later has a dispute with the insurer over a claim, his grievance is not a SEBI matter at all: Chapter 13's table routes a "Contract of Insurance" grievance to IRDAI, so he takes his complaint to the insurance regulator, not to SEBI's SCORES portal.
Why NISM asks about it
Chapter 6 (Insurance Related Products) lists health insurance among the classified insurance policy types, and names IRDAI as the sector regulator at the end of the same chapter. Chapter 13's grievance-redressal table separately confirms IRDAI as the authority for insurance-contract complaints. Expect a regulator-matching question: which authority handles a health insurance grievance.
Common exam traps
- IRDAI regulates insurance, including health insurance; SEBI does not. A grievance about a health insurance claim is never a SCORES matter.
- The insured need not be the policyholder — the booklet's own definition allows the owner of the policy and the covered person to be different people, such as a parent insuring a child.
- Do not confuse health insurance with the Pradhan Mantri Jan Aarogya Yojana (Ayushman Bharat) government health scheme covered elsewhere in the booklet — that is a specific no-cost government scheme for identified families, not a purchased private health insurance policy.
- Travel insurance's medical cover is a separate, narrower product — it covers unexpected medical costs specifically during travel, not general health insurance's ongoing coverage.
Check yourself
1.In insurance terminology, who is the insurer and who is the insured?
- a)The insurer buys the policy; the insured provides the cover
- b)The insurer is the entity which provides insurance; the insured or policy holder is the person who buys it
- c)Both terms refer to the person covered
- d)The insurer is the agent and the insured is the company
Show the answer
Answer: (b) The insurer is the entity which provides insurance; the insured or policy holder is the person who buys it
"An entity which PROVIDES insurance is known as the INSURER. A person who BUYS insurance is known as an INSURED OR THE POLICY HOLDER." The remaining two words complete the vocabulary: the premium is "a periodic payment", and the insurance policy is the contract the insured receives, "which contains details like the conditions and circumstances under which the insured will be financially compensated." The agent, incidentally, is not part of this definition at all — the contract runs between the insurer and the insured. Health insurance uses the same word with a specific gloss: "the 'insured' is the owner of the health insurance policy or the person with the health insurance coverage."
2.What does a personal accidental cover policy provide?
- a)Cover for medical and surgical expenses of any illness
- b)Monetary compensation in the event of bodily injuries, disability or death caused solely by accident
- c)Repair costs for a damaged vehicle
- d)Compensation for loss of luggage while travelling
Show the answer
Answer: (b) Monetary compensation in the event of bodily injuries, disability or death caused solely by accident
"Insurance plan which provides MONETARY COMPENSATION in the event of BODILY INJURIES OR DISABILITY OR DEATH CAUSED SOLELY BY ACCIDENT." Two words deserve attention. Disability — this is the only policy in the chapter that pays for a person being unable to work, as distinct from paying for treatment or for damage. And solely — the cause must be an accident. The wrong options belong to other products: (a) is health insurance, covering "the cost of an insured individual's medical and surgical expenses"; (c) is motor insurance, for "cars, trucks, motorcycles and other road vehicles"; (d) is travel insurance, covering "lost or stolen luggage" among other risks. For anyone whose income depends on physical capacity — a driver, a carpenter, a tailor — disability is often financially worse than death, because the household loses the income and gains a patient at once.
3.A self-employed carpenter is hospitalised after a fall and cannot work for five months. Which policies would respond to which parts of his loss?
- a)Health insurance alone covers everything
- b)Health insurance covers the medical and surgical expenses; personal accident cover responds to the disability and lost earning; motor insurance is irrelevant unless a vehicle was damaged
- c)Personal accident cover pays the hospital bills and health insurance pays his lost income
- d)Only a life insurance policy would respond
Show the answer
Answer: (b) Health insurance covers the medical and surgical expenses; personal accident cover responds to the disability and lost earning; motor insurance is irrelevant unless a vehicle was damaged
Three products, three different jobs, no overlap. Health insurance is "insurance coverage that covers the cost of an insured individual's MEDICAL AND SURGICAL EXPENSES" — the treatment. Personal accident cover provides "monetary compensation in the event of BODILY INJURIES OR DISABILITY OR DEATH CAUSED SOLELY BY ACCIDENT" — it is the only policy in the chapter that responds to a person being unable to work. Motor insurance is "insurance for cars, trucks, motorcycles and other road vehicles" — the vehicle, nothing more. Option (c) swaps the first two, which is the commonest confusion. For a self-employed person the five-month gap is the most dangerous part of the event: there is no employer, no paid sick leave and no group cover, so the household loses the income and gains a patient at the same time — which is why disability is often financially worse than death for anyone whose earning depends on physical capacity.
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- IRDAIThe Insurance Regulatory and Development Authority of India, the regulator of India's insurance sector. It protects policyholders' interests and handles grievances on insurance contracts and ULIPs.
- Endowment policyA life insurance policy that pays the sum assured plus accrued bonus on survival to the end of the term as well as on death — an investment-cum-insurance contract with a level premium.
- Group insuranceOne insurance policy that covers a defined group of people together, such as the members of a society or professional association, or the employees of a particular employer.
- Property insuranceInsurance that pays the owner or renter of a building back for damage to, or theft of, the building and its contents. Includes homeowner's, renters, flood and earthquake insurance.
- Insurance as risk transferThe mechanism by which a household hands its risk of an unexpected loss to an insurance company, in return for a small, certain premium — the basic idea underlying every insurance product.
- Life insuranceThe product family that covers loss of income: temporary loss from disability and permanent loss from death — the first of the three covers in a household insurance plan.
- Co-payA fixed percentage of every admitted claim that the insured pays out of pocket — a proportional share of the loss, applied after any deductible, in exchange for a lower premium.
- DeductibleThe portion of a claim the insured bears before the insurer pays anything — a fixed rupee threshold that lowers the premium and keeps small claims out of the system.
- No claim bonusThe benefit of a lower premium in later years for each claim-free year — in motor insurance a discount of up to 50% on the own-damage premium after five claim-free years.
- Personal accident insuranceA policy paying a defined sum where the insured sustains bodily injury solely and directly from an accident caused by external, violent and visible means — covering three grades of disablement.
- Top up policyA health policy that pays hospitalisation expenses above a pre-agreed threshold (deductible) — applied to each claim separately, unlike a super top-up, which applies it to the year's total.
- Insured / policy holderThe person who buys an insurance policy, pays the premium, and receives the insurer's promise of compensation for a specified future loss.
- Section 80DThe income-tax deduction for medical insurance premiums paid for yourself, your spouse, your dependent children and your dependent parents — the workbook does not state a rupee ceiling.
- Travel insuranceInsurance covering travel risks — lost or stolen luggage, cancellation, and medical costs abroad — with a comprehensive policy adding death, disability and personal liability cover.
- Waiting periodThe interval, typically 2 to 4 years, during which a new health insurance policy does not cover certain named or pre-existing diseases.
- Lifelong renewabilityThe regulatory requirement that a health insurer must keep renewing a policy for the insured's lifetime once it has been issued, with premiums allowed to rise but not because claims were made.
- Medical corpusA pool set aside for the health costs insurance does not pay — medicines, consultations, tests and long-term care — which the workbook says must hold at least three years of such expenses in liquid assets at retirement.
- NPS SwasthyaA PFRDA initiative that pairs old-age income security with healthcare coverage in a single product, introduced because out-of-pocket medical spending is a major drain on retirement savings.
- Income protection needThe insurance need that arises when a sudden, unplanned bill would otherwise be met out of income — the category the workbook fills with health insurance and motor insurance.
- Indemnity insuranceA policy that pays the actual loss the insured is shown to have suffered, so a claim cannot be settled until that loss has been determined — the opposite structure to a defined benefit policy.
- Maintaining a foreign life policyA person who becomes resident in India need not buy fresh life cover here and may keep an existing overseas policy alive, paying the premiums from foreign income or remitting them from India.
- General insuranceNon-life insurance — cover for property, motor, health, travel and personal accident risks — as against life insurance, which covers loss of life or income.