Health insurance can protect you against unexpected health problems, but its terms and conditions can get tricky. One such condition is the "room rent limit" – something that could substantially affect your claim settlement if not understood. So, let’s dig deeper into this concept with each step forward.
Room rent is the per-day room or bed occupancy cost a patient is charged by the hospital.
So, what's room rent limit? Room rent limit is nothing but a maximum cap, decided by your insurer, on the type of room you can select.
Based on the insurance policy purchased by you, insurers impose different types of room rent limits:
At times, insurance policies cover a specific type of room regardless of the cost associated with it.
For instance, if your policy covers shared accommodation, you could opt for any room under that category, no matter the cost.
Other times, insurers impose a specific percentage limit on your policy’s sum insured.
For instance, if your sum insured is Rs 2,00,000 and a 1% limit of this has been set on room rent. Then, you could choose a room with a maximum rent of Rs 2,000/ day.
If your insurance plan has a room rent limit, you will not have to pay anything out of pocket if you choose a room within that amount. However, if you choose a room with rent that exceeds that limit, things will be different.
For example, if you prefer a room that costs Rs. 4000/day but your room rent limit is Rs. 2,000/day, then the insurer won’t pay the full amount as there will be deductions.
Now, you might think that you would only have to pay the difference in the room rent, which in this case comes to Rs. 4000-2000 = Rs. 2000 — not such a huge amount. No, you are thinking wrong.
You will have to pay proportionately more because there is something called "proportionate deduction."
The reason why the room rent limit shocks most policyholders is "proportionate deductions." It is because of this that you don’t simply pay the difference between the allowed room rent and the chosen room rent, but rather pay a proportionate amount of the entire bill.
For example, Vikram choose a room charging Rs. 4000/day but his room rent limit is Rs. 2000/day, so his insurer will not only deduct the additional charges of the room but also deduct a "same proportion" (room rent allowed/ room rent charged) from all other associated expenses that are attached to the room he selected.
So, while Vikram thought that a 4-day stay in the hospital with a total bill of Rs. 1 lakh would only mean an additional expense of Rs. 8000 (Rs. 4000-Rs. 2000 * 4), his insurer would only pay Rs. 50,000 (Rs. 2000/Rs. 4000 * Rs. 1,00,000) – deducting proportionately from the total amount claimed. Thus, Vikram will have to pay Rs.50,000 out of his pocket.
However, if Vikram had chosen a room within his allowed limit, the total bill would have been paid by the insurer.
But wait, the above explanation is simplistic and proportionate deduction works in more complex ways. The thing is the proportionate deduction does not apply to every cost incurred during a hospital stay. Yes, you read that right!
According to IRDAI’s regulations, proportionate deduction can’t be applied to the following costs:
On all other charges, a proportionate deduction is applied, be it doctor's fee, surgery cost, etc.
Now, I understand you might be wondering how any of this is fair or even logical. Why is your room rent affecting your claim substantially? This is because there is a relation between room-rent and the cost of several associated services.
Apart from the room rent itself, many charges—for instance, surgery costs or doctor’s fees—differ for different hospital rooms. Yes, a hospital has differential pricing for several services according to the room one occupies.
So, not only will the room rent of a private room be higher than a shared room, but many other services will be higher as well. Thus, depending on which room you choose—private, shared, luxury, deluxe, etc.—you will also have to pay differently for the same services like surgery cost, doctor's fee,etc.
Let’s understand this with an example.
Roy and Shanaya have the same health plan with sum insured of Rs. 5,00,000 and room rent limit of Rs. 5,000 (1% of SI). Both were admitted in the same hospital for a day for the same treatment. But they both picked different rooms. While Roy selected a private room of Rs. 10,000, Shanaya chose a shared room of Rs. 5,000.
Now, let’s see how the hospital charges them for a day
So, not only would the amount approved be different for Roy and Shanaya, but also the amount claimed would be substantially different.
Therefore, it’s a wise choice to know if your insurance policy has a room-rent limit and, if so, what it is.
The condition of the room rent limit in health insurance is beneficial only till you choose a room whose rent is within the allowed limit. Otherwise, it can significantly affect the claim amount that you will get.
Hence, the best option is to go for an insurance policy with no room rent limit. For this, note that in most cases, policies with less than Rs. 5 lakh of sum insured have a room rent limit.
However, what options are available to you if your policy has a room rent limit?
"Super top-ups" are insurance layers that provide additional coverage to you and your family by becoming effective soon after your minimum deductible limit is breached.
So buying a super top-up with a low deductible will ensure that your super top-up gets activated quickly in case of a claim, thus reducing the impact of the room rent limit.
Buying a critical illness cover will ensure that you get fixed cash benefits in case you are diagnosed with a serious illness that might require longer, more expensive hospitalisation. This provided cash benefit could make up for the deductions.
InsureMyTeam does not just say that it cares for you, but it shows its care for you. You can reach out to us to discuss the best policy features and guidance. Also, if your policy has a room-rent limit, our experts are there to help you understand your options and assist you through them.