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How Health Insurance Works in India

Health insurance is a common term that everyone would have heard of at least once in their lives. People tend to talk about it, discuss it and often give advice as to which one is better based on their experience. Not everyone is aware of how it exactly works and how to select the best health insurance for yourself and your family. 

Today, we’ll gain a little knowledge on health insurance, how it is different from medical insurance, why one should have it and how to select proper health insurance for yourself.

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What is Health Insurance?

health insurance offers its policyholders (insured) financial assistance against their medical treatment and related spending such as pre and post-hospitalization expenses, room charges, doctor’s consultation fees, ambulance charges, critical-illness-related expenses and more.

Health insurance is an agreement between the insured and health insurance company where the insured pays a certain fixed amount called a premium to the insurance company at regular intervals and in return the insurance company or the insurer guarantees to offer financial healthcare coverage. The premium is decided depending on various factors such as age, gender, lifestyle, pre-existing illness and so on.

How is health insurance different from medical insurance?

Most of us often get confused with these terms. In fact, we sometimes use it interchangeably, but that should not be the case. Health and medical insurance are two different things that have only one similarity i.e. both of them provide financial assistance to the insured in time of need.

Health insurance offers extensive coverage for various health conditions whereas in medical insurance limited and pre-defined coverage for specific health emergencies is provided. Medical insurance is comparatively affordable and the sum insured amount is confined to Rs. 5 lakhs which is okay for small health emergencies, no add-on cover or riders can be added under this.

There is no set sum insured amount like in medical insurance, it is flexible and dependent on the insured or the policyholder to select the best health insurance policy suitable for them. In health insurance, the insured can additionally include add-on covers and riders as well.

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How Does Health Insurance Work?

Health insurance provides peace of mind to its insurers or policyholder as they don’t need to worry about the burden of unanticipated medical expenses. There are various types of health insurance policies and plans that are available in India but the basic working remains the same. The following are the steps that are involved in the working of health insurance:

  • Selecting health insurance is the first step; this is where your actual insurance journey begins. It is important to access the needs and financial limitations of the policyholder and then select a suitable policy and premium. The insurance company may or may not ask you to get a health check-up done depending on your age and health conditions.
  • After the sum insured and premium amount are selected, the premium needs to be paid at regular intervals for a period of time to leverage the benefits of health insurance. The more premium, the better the coverage.
  • In case of medical emergencies say a disease; the insured can claim the health insurance anytime after the waiting period is over i.e. if the medical emergency is covered under the policy or plan opted for.
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      Benefits of Health Insurance

      Health and medical emergencies are unforeseen things; one can’t plan on falling ill. So having proper health insurance helps a lot. Here are a few benefits of having proper health insurance.

      1. Protection for you and your family

        Health insurance acts as protection for you and your family. There are various types of health insurance policies and plans. You can either buy an individual plan for yourself or get a family floater to cover your entire family. A proper analysis can help you decide on which plan to opt for and what will give you overall coverage.

      2. Reduces Stress

        Having health insurance helps the insured be stress-free. A sudden medical emergency won’t stress you out that much as you would already have health insurance that is already covering you. The insured can easily focus on getting better rather than focusing on the medical bills.

      3. Doesn’t Have an Impact On Savings

        Since a premium is paid at regular intervals over a period of time, the finances of an unfortunate medical emergency won’t drain your pockets all at once.

      4. Tax Benefits under 80D

        The government of India offers tax benefits to promote the buying of health insurance under Section 80D of the Income Tax Act, 1961. The tax deductions are given on the premiums that the insured pays.

      5. Lifetime Renewability Benefit

        According to the Insurance Regulatory and Development Authority of India (IRDAI), all insurance companies must offer a renewability benefit throughout the life of the insured. It allows the insured or the policyholder to renew their health insurance policy without any age limit or upper restriction.


      With the lifestyle that we have and the rising number of diseases and viruses, it is fitting to have proper health insurance for you and your family. In order to opt for proper health insurance that suits your and your family's needs, it is important to know how health insurance exactly works.

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Raghoba Phadke


April 8, 2024

PolicyX made me buy the Niva Bupa Reassure 2.0 health policy. And the customer care executives are so soft-spoken and compassionate about their customer needs.

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April 8, 2024

PolicyX suggested buying Niva Bupa Senior First health insurance for my old age parents. I& 039;m happy to gift them good health, thank you PolicyX.

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April 8, 2024

The team of PolicyX is always open to clear any doubts. I highly recommend buying Niva Bupa health policy from them.

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April 8, 2024

I bought Niva Bupa health insurance for my parents, thanks to PolicyX that now I can be prepared for their health needs.

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April 8, 2024

I got hospitalized due to an accident and my base policy was not sufficient for treatment. So, PolicyX made me buy the Niva Bupa Health Recharge add-on plan. Now, I’ll be prepared for any...

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April 8, 2024

All my queries related to claim settlement ratio for Niva Bupa and claim process were resolved by PolicyX insurance agents

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April 8, 2024

PolicyX helped me with all my queries regarding the Aditya Birla Active Essential Plan and helped me with the buying process. I am so grateful.

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Radhika Aneja


April 8, 2024

With the help of PolicyX, I got my health insurance policy from Aditya Birla Health Insurance. They answered all my queries without any hesitation and helped with every process.

Naval Goel

Reviewed By : Naval Goel

Naval Goel is the CEO & founder of Naval has an expertise in the insurance sector and has professional experience of more than a decade in the Industry and has worked in companies like AIG, New York doing valuation of insurance subsidiaries. He is also an Associate Member of the Indian Institute of Insurance, Pune. He has been authorized by IRDAI to act as a Principal Officer of Insurance Web Aggregator.