How Health Insurance Works in India?

Health insurance in India helps cover medical expenses by offering cashless treatment or reimbursement through network hospitals. Understand how premiums, claims, and benefits work to make informed decisions.
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3 min
04-August-2025

Healthcare costs are increasing rapidly, and medical emergencies can arise at any moment. Health insurance provides a financial safety net by covering medical expenses, ensuring that you and your family receive the best medical care without worrying about the costs. In this article, explore the benefits of buying medical insurance, essential factors to consider when purchasing a policy, and crucial points to remember when making a health insurance claim.

How health insurance works in India?

Understanding how health insurance works is essential for individuals seeking financial protection against medical expenses. In India, health insurance plays a crucial role in providing access to quality healthcare while mitigating the financial burden associated with medical treatments.

Health insurance in India is offered by both public and private insurance companies. Individuals pay a premium to the insurance company, which entitles them to medical coverage up to a certain amount. If the individual incurs medical expenses, the insurance company reimburses or covers the expenses directly, subject to the terms and conditions of the policy.

Health insurance policies in India offer a range of benefits, including coverage for hospitalisation, pre- and post-hospitalisation expenses, day-care procedures, and more. Policyholders can choose from various types of health insurance plans, including individual, family floater, and critical illness plans, based on their specific requirements and budget.

How does health insurance renewal work?

When you purchase a mediclaim policy, you pay a premium that provides coverage for a specific period. Most health insurance plans offer flexible premium payment options—annually, bi-annually, quarterly, or monthly.

Once this period ends, your policy must be renewed to continue enjoying uninterrupted coverage. If your health insurance plan expires without renewal, your coverage stops immediately, and you won’t be able to make any claims. To ensure you’re always protected, it’s important to renew your policy before the expiry date.

You can do health insurance renewal by contacting your insurer directly or doing it online. Simply visit the insurer’s website, choose the policy you want to renew, pay the premium, and your coverage will be extended seamlessly.

How does health insurance claim work?

When you face a medical expense, you need to file a health insurance claim to request your insurer to cover the cost. However, before approving the health insurance claim, the insurance company will first verify whether your illness or treatment is included in your policy coverage.

Health insurers will only settle medical bills if the condition or treatment is covered under your health insurance plan.

If your treatment is covered, and you opt for cashless hospitalization, the insurer will directly settle the bills with the hospital. With the cashless everywhere feature, you can avail treatment at any hospital of your choice. However, you’ll still need to pay for deductibles and any non-covered expenses upfront—the insurer will pay the rest.

If your cashless claim is denied, you must pay the entire hospital bill yourself at the time of discharge. Later, you can file a reimbursement claim by submitting all necessary documents to your insurer.

Be sure to collect all your medical records and bills during discharge—they’re essential for claim processing.

Once your reimbursement claim is submitted, the insurer will review your documents and check if your policy covers the illness or treatment. If eligible, they will proceed with reimbursing your medical expenses.

Pro Tip

Avail hospitalisation and treatment benefits with health insurance plans starting at just Rs. 15*/day.

End Uses

How does health insurance coverage work?

Health insurance coverage works by offering financial protection against medical expenses. When you fall ill or need treatment, your insurer pays for the costs—either directly to the hospital (cashless) or reimburses you later—provided the illness or procedure is covered under your policy terms and conditions.

Why is it beneficial to buy medical insurance?

Medical insurance is beneficial in the following ways:

1. Financial protection:

Health insurance provides financial protection against medical emergencies, reducing the burden of medical expenses.

2. Cashless medical treatment:

Health insurance policies enable cashless medical treatment, where the insurance company covers the expenses directly, ensuring hassle-free treatment for the policyholder.

3. Tax benefits:

Premiums paid towards health insurance policies are eligible for a tax deduction under section 80D of the Income Tax Act.

4. Emergency assistance:

Medical insurance provides coverage for emergency medical situations, ensuring prompt treatment and assistance during emergencies or accidents.

5. Preventive care:

Many insurance plans offer coverage for preventive services such as vaccinations, screenings, and wellness visits, promoting early detection and prevention of illnesses.

Things to remember when buying a health insurance policy

When buying a health insurance policy, the following things should be kept in mind:

  • Coverage needs: Assess your medical needs and select a policy that adequately covers them, including hospitalisation, medication, and specialist care.
  • Network providers: Check the network of hospitals and doctors covered by the insurance plan to ensure convenient access to healthcare services.
  • Premiums and deductibles: Compare premium costs and deductible amounts among different policies to find one that offers the best value for your budget.
  • Exclusions and limitations: Understand the exclusions and limitations of the policy, including pre-existing conditions, waiting periods, and coverage restrictions.
  • Additional benefits: Consider additional benefits such as wellness programs, maternity coverage, or telemedicine services offered by the insurance plan.
  • Customer service: Evaluate the insurer's reputation for customer service, including claim processing efficiency and responsiveness to inquiries.
  • Policy renewal: Review the terms and conditions for policy renewal, including premium adjustments and coverage changes.

Important points to claim health insurance

While claiming health insurance, the following important points should be kept in mind:

  • Documentation: Gather all necessary documents, including medical bills, prescriptions, and policy details, to support your claim.
  • Timely notification: Notify the insurance company promptly after receiving medical treatment or incurring expenses covered by the policy.
  • Complete forms: Fill out claim forms accurately and completely, providing all required information to avoid delays in processing.
  • Follow procedures: Adhere to the insurer's procedures and requirements for submitting a claim, including any specific steps or timelines.
  • Keep records: Maintain copies of all documents submitted and correspondence with the insurer for reference and follow-up.
  • Be persistent: Follow up with the insurance company if there are delays or discrepancies in claim processing, advocating for timely resolution.
  • Review coverage: Ensure the claimed expenses are covered under your policy, understanding any limitations or exclusions that may apply.

Health insurance plans offered through Bajaj Finance

Multiple online portals offer health insurance policies that are easy to buy and require minimum documentation. One such platform is the Bajaj Finance Insurance Mall. Here you can choose from various insurance plans from leading insurance providers. You can buy them through a 100% digital journey and zero paperwork. You can choose from different types of policies like individual health insurance, family floater, senior citizen health insurance, and more.

Overall, health insurance works by providing financial protection against medical emergencies, covering medical expenses up to a certain amount and providing benefits like cashless medical treatment and tax benefits. When buying a health insurance policy, it is important to consider the coverage and premium amount, network hospitals, and policy exclusions. While claiming health insurance, notification should be made promptly, and necessary documentation should be kept ready.

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Frequently asked questions

How does health insurance work with examples?

Health insurance covers medical expenses based on a policy. For instance, if you have a Rs. 5,000 hospitalisation bill and a policy covering 80%, the insurer pays Rs. 4,000, and you pay Rs. 1,000, depending on your plan.

How does health policy work?

A health policy outlines coverage details, including premiums, benefits, exclusions, and claim procedures. For example, a policy may cover Rs. 2 lakh for hospitalisation but exclude cosmetic surgeries. Policyholders must understand terms to maximise their benefits during claims.

Can you explain how health insurance works for pre-existing conditions?

Health insurance may impose waiting periods for pre-existing conditions. For instance, if you have diabetes and purchase a policy, the insurer might cover related expenses only after a 2-year waiting period, ensuring the condition is managed before claims.

How health insurance works when it comes to covering medical expenses?

Health insurance covers various medical expenses, including hospitalisation, surgeries, and consultations. For example, if a procedure costs Rs. 1 lakh and your policy has a Rs. 20,000 deductible, you pay the deductible, and the insurer covers the remaining Rs. 80,000.

How health insurance works in terms of premiums and deductibles?

Premiums are regular payments to maintain coverage, while deductibles are amounts paid out-of-pocket before the insurer contributes. For example, if your annual premium is Rs. 15,000 and the deductible is Rs. 10,000, you pay the deductible before claims are reimbursed.

How does health insurance work in India for cashless treatment?

In India, cashless treatment allows you to receive medical care at a network hospital without paying upfront. The insurer settles the bill directly with the hospital, after verifying that the treatment is covered under your policy. You only pay non-covered expenses or deductibles, if any.

How does health insurance work in India during emergencies?

During emergencies, you can visit any hospital (network or non-network). For immediate treatment at a network hospital, you can request cashless approval. If not feasible, you may pay the bill upfront and later file a reimbursement claim with all relevant documents. Insurers typically prioritize emergency claims for faster processing.

How does health insurance work in India for outpatient (OPD) services?

Health insurance policies with OPD coverage reimburse expenses like doctor consultations, diagnostic tests, and prescribed medicines without hospitalization. You must pay the bills first, then submit them for reimbursement, as cashless OPD services are rare. OPD coverage is available in select comprehensive or add-on plans.

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Disclaimer

*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Future Generali Life Insurance Company Limited, Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Limited, ICICI Lombard General Insurance Company Limited, HDFC ERGO General Insurance Company Limited, Tata AIG General Insurance Company Limited, The New India Assurance Company Limited, Cholamandalam MS General Insurance Company Limited, Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited, Manipal Cigna Health Insurance Company Limited and Care Health Insurance Company Limited under the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also a distributor of other third party products from Assistance Services providers such as CPP Assistance Services Pvt. Ltd., Bajaj Finserv Health Ltd. etc. All product information such as premium, benefits, exclusions, sum insured, value added services, etc. are authentic and solely based on the information received from the respective insurance company or the respective Assistance service provider company.

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