Banking and Insurance - Laws and Practice · General and Health Insurance

Health Insurance Products and Policies for CS Professional

Updated 11 October 2026 · Fact-checked

Health insurance is a contract where an insurer pays for medical costs or pays a fixed sum on a defined illness or injury, in return for a premium. Main products are mediclaim (indemnity), family floater, critical illness (benefit), and personal accident. Answer by naming the product, its terms, exclusions, and claim route.

Understand Health Insurance Products and Policies

Health insurance covers the financial risk of illness and injury. You pay a premium. The insurer pays under the terms of the policy. Policies fall into two basic types: indemnity and benefit.

An indemnity policy, commonly called mediclaim, reimburses the actual hospital expenses you incur, up to the sum insured. You cannot recover more than your loss. A benefit policy pays a fixed amount when a defined event occurs, such as diagnosis of a listed critical illness, whatever the actual bill is.

In an individual policy, each person has a separate sum insured. In a family floater, one sum insured is shared by all named members, and any member can use it. A floater is usually cheaper than separate policies. But if one member uses a large part, less remains for the others in that year.

Personal accident cover pays on accidental death, disability (permanent or temporary) as set out in the policy. It is usually a benefit cover and does not depend on hospital bills. Critical illness cover pays a lump sum on diagnosis of a listed illness, often after a survival period set by the policy.

Key terms you must know: sum insured, waiting period (time before certain claims are payable), pre-existing disease, exclusions, co-payment (share of the claim you bear), deductible, sub-limit (cap on a specific expense), and cashless facility (insurer or its TPA settles directly with a network hospital). Under the Insurance Act, 1938, an insurer must keep a record of policies and claims, including the claim date, claimant details, discharge date, or the date and grounds of rejection (Section 14). Records may be kept in electronic form as specified by regulations.

Key rules to remember

Indemnity limit: Claim payable ≤ lower of (amount left after exclusions, sub-limits, deductible and co-payment, sum insured); Mediclaim pays actual loss only, never a profit. Sequence: admissible expense after exclusions and sub-limits, then deductible and co-payment as the policy provides, then cap at the sum insured.
Co-payment: Insurer pays = admissible claim × (100% − co-payment %); Use this when the policy has co-payment only. If it also has a deductible, the order depends on the policy wording. This page assumes deductible first, then co-payment on the balance. Then check against the sum insured.
Deductible: Insurer pays = admissible claim − deductible; The deductible is fixed in rupees and borne by the insured first. If a co-payment also applies, apply it to the balance after the deductible, unless the policy wording says otherwise. Then cap at the sum insured.
Floater sum insured: Total claims by all members in the policy year ≤ one shared sum insured; Individual policy: separate limit per person.
Record of claims (Section 14): Record = claim date + claimant name and address + date discharged, or date and grounds of rejection; Section 14 allows the record to be kept in electronic mode as specified by regulations.
Assignment of a policy (Section 38): Endorsement or separate instrument + signed + attested by at least one witness + notice to insurer; The assignee gets no right to sue the insurer until written notice and the instrument or certified copy are delivered to the insurer.

How to solve Health Insurance Products and Policies questions

Use this order for any question on health insurance products, whether theory or case-based.

1Identify the product: indemnity (mediclaim), floater, critical illness, personal accident or other. State whether it is indemnity or benefit.
2List the key facts: sum insured, policy year, waiting periods, pre-existing disease, co-payment, deductible, sub-limits.
3Check exclusions and waiting periods against the facts of the claim, and say which applies.
4Compute the payable amount in order: admissible expense after exclusions and sub-limits, then deductible and co-payment in the order the policy wording gives (if it is silent, state your assumption, for example deductible first, then co-payment on the balance), then cap at the sum insured.
5State the claim route: cashless at a network hospital or reimbursement with documents. Note the insurer's record-keeping duty under Section 14: the claim is entered in the claims record, and for a rejected claim the date of rejection and its grounds are recorded.
6If the facts involve transfer of the policy, apply Section 38 conditions.
7Conclude with a clear answer and a practical compliance or drafting point.

Quickest way: Product, Exclusion, Number, Route

When to use it: Use when time is short and the question gives facts and asks whether and how much the insurer pays.

Write the product type in one line (indemnity or benefit).
Tick waiting period and exclusion: if triggered, payable is nil for that item.
Do the sum: admissible expense after exclusions and sub-limits, then deductible and co-payment in the order the policy gives (state your assumption if it is silent), then cap at the sum insured.
Add one line on claim route and records (Section 14), then conclude.

Common mistakes in Health Insurance Products and Policies

Treating critical illness cover as reimbursement of hospital bills.
Both are called health insurance, so students assume the same payout rule.
Fix: Say critical illness is a benefit cover paying a fixed lump sum on diagnosis of a listed illness, subject to the policy terms.
Applying deductible and co-payment after capping at the sum insured.
Students cap first because the sum insured feels like the final limit.
Fix: Find the admissible claim after exclusions and sub-limits, apply deductible and co-payment in the order the policy wording gives (state your assumption if it is silent), then compare with the sum insured.
Saying a family floater gives each member the full sum insured.
Confusion with individual policies.
Fix: State that one sum insured is shared by all members in the policy year.
Ignoring waiting periods and pre-existing disease clauses in a case.
Students focus on the amount and skip the conditions.
Fix: Check the policy start date and the date of illness before computing anything.
Saying the assignee can sue the insurer immediately on assignment.
Students stop at the validity of the instrument.
Fix: Under Section 38(5), the assignee can sue only after written notice and the instrument or a certified copy are delivered to the insurer.
Saying an insurer need not keep any record of a rejected claim.
Students think the claims record covers only claims that are paid.
Fix: Section 14 requires the insurer's record of claims to show, for a rejected claim, the date of rejection and its grounds. This is a record-keeping duty. Do not present it as a duty to communicate reasons to the claimant.

Worked examples

Example 1

Rajesh Kumar has a mediclaim policy with sum insured ₹5,00,000 and a 10% co-payment. His admissible hospital expenses are ₹3,20,000. Ignoring other limits, how much does the insurer pay and how much does he bear?

Show the solution

Admissible expense = ₹3,20,000.
Co-payment borne by Rajesh = 10% of ₹3,20,000 = ₹32,000.
Insurer's share = ₹3,20,000 − ₹32,000 = ₹2,88,000.
Check against the sum insured: ₹2,88,000 is below ₹5,00,000, so no cap applies.

Answer: The insurer pays ₹2,88,000. Rajesh bears ₹32,000.

Example 2

Meera Iyer's family floater has a sum insured of ₹10,00,000 for herself, her husband and child. During the year, her husband's claim was settled at ₹6,50,000. Later, Meera's admissible claim is ₹5,00,000. How much is payable, and what does this show about a floater?

Show the solution

Shared sum insured = ₹10,00,000.
Already used = ₹6,50,000.
Balance available = ₹10,00,000 − ₹6,50,000 = ₹3,50,000.
Meera's admissible claim = ₹5,00,000, which exceeds the balance.
Payable is limited to the balance of ₹3,50,000. Meera bears ₹1,50,000 (assuming no restore or top-up benefit).

Answer: ₹3,50,000 is payable. A floater shares one sum insured among members, so one member's large claim reduces what remains for others.

Exam tips

Begin every answer by classifying the product as indemnity or benefit. It anchors the rest.
In numerical cases, show the order: admissible expense, deductible, co-payment, cap at sum insured.
Quote Section 14 for claim records and Section 38 for assignment only where the facts call for it, and state its conditions exactly.
Close case answers with a practical point: documents for reimbursement, notice to the insurer, or recorded grounds for rejection.
Define terms like waiting period and exclusion in one line each before applying them.

Practice questions from General and Health Insurance

Health Insurance Products and Policies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Health Insurance Products and Policies: frequently asked questions

What is the difference between mediclaim and health insurance?

Health insurance is the wider term for all covers against medical risk. Mediclaim is an indemnity type that reimburses actual hospital expenses up to the sum insured. Other health products, such as critical illness cover, pay a fixed benefit instead.

How does a cashless claim work?

You get treated at a network hospital and the insurer or its TPA pays the hospital directly after approving the request, subject to policy terms. You pay only non-admissible items and any co-payment. Outside the network, you pay first and claim reimbursement with documents.

Family floater or individual policy: which is better?

A floater has one shared sum insured and is usually cheaper. An individual policy gives each person a separate limit, so one member's large claim does not reduce the others' cover. In exams, state this trade-off.

What are waiting periods and exclusions?

A waiting period is the time after policy start before certain claims, such as pre-existing diseases, become payable. Exclusions are conditions or treatments the policy does not cover. Always read the facts against both before concluding.

Must an insurer record rejected claims?

Yes. Section 14 of the Insurance Act, 1938 requires the insurer to keep a record of every claim made, with the claim date, the claimant's name and address, and the date the claim was discharged. For a rejected claim, the record must show the date of rejection and the grounds. This is a record-keeping requirement; the section does not itself say the insurer must send the reasons to the claimant.