Overseas travel insurance

Most Indian health policies are built to handle hospital bills in India, because the insurer's systems for verifying expenses are built for the Indian healthcare system. Step outside the country, and a normal health policy is often out of its depth.

Overseas travel insurance fills that gap. It provides medical, financial and other assistance in an emergency during international travel. Cover typically includes medical help, delay in baggage clearance, and accident cover, paid as reimbursement up to the maximum stated in the policy. Some countries make this cover a condition of entry.

Overseas travel insurance is one of the workbook's flagged exceptions to a general rule about indemnity products. Ordinarily, Indian indemnity policies such as health insurance cover hospitalisation expenses in India only, because the insurer already has the systems to verify Indian medical bills but finds it difficult to ascertain losses in an unfamiliar country. Overseas travel policies are the exception: they are indemnity policies designed specifically for each country, with the insurer making arrangements to verify expenses abroad.

Buying cover from a foreign insurer. Resident Indians can use their Liberalised Remittance Scheme entitlement of up to USD 2,50,000 a year to buy insurance policies from insurers not registered in India, a route the workbook notes is commonly used by Indian students going abroad to study, often on a policy the university itself recommends.

The catch with a foreign policy. Such policies, and their grievance redressal mechanism if a claim is refused, are governed by the regulations of the country where they were issued, not by Indian insurance law or the Indian ombudsman system.

Ms Dutta, heading to the UK for a 2-year master's degree, is required by her university to hold travel and health insurance for the duration. She buys a UK-based insurer's policy using her Liberalised Remittance Scheme entitlement, well within the USD 2,50,000 annual limit.

Midway through the course she needs hospital treatment costing the equivalent of Rs 3,50,000. The policy reimburses her, as an indemnity contract, up to the maximum stated in the policy. But if the insurer disputes the claim, Ms Dutta must pursue it under UK regulations and grievance mechanisms, not through India's Insurance Ombudsman, because the policy was issued outside India.

Chapter 3, section 3.1.2(f), defines overseas travel insurance among the non-life products. The note on indemnity policies covering India-only expenses, with overseas travel policies as the named exception, appears later in the chapter alongside the Liberalised Remittance Scheme route for buying foreign insurance. Expect a question testing why health policies are usually India-only and travel policies are the exception, and a recall question on the USD 2,50,000 limit.

• Overseas travel insurance is the named exception to the rule that indemnity policies cover India only. Do not assume all health-type policies are geography-limited the same way.
• The Liberalised Remittance Scheme limit is USD 2,50,000 per person per year, not per policy or per trip.
• A foreign-issued policy is governed by foreign law, including its complaints process. Indian regulatory protections, such as the Ombudsman, do not automatically apply.
• It may be compulsory for entry to some countries, so it is not always a discretionary purchase the way most other non-life products are.