What is the Contribution Clause in Health Insurance?

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The contribution clause is also known as the principle of contribution. In health insurance, it is a standard provision in indemnity-based policies. It applies when a person holds multiple insurance policies covering the same risk.


The risk includes hospitalisation or medical expenses for the same injury or illness. In practice, the clause promotes fairness among insurers by distributing the payout based on each policy’s sum insured.


Purpose of the Contribution Clause


The main goal of the contribution clause is to prevent overcompensation or double-dipping. You cannot profit by claiming the full amount from each insurance and receiving more than your actual medical expenses.


Instead, the insurers share the claim payout proportionally, so the total reimbursement is equal to the actual loss. However, every effort is made to ensure that the reimbursement does not exceed the actual expenses.


This principle stems from the broader doctrine of indemnity in insurance. It aims to restore you to your pre-loss financial position without allowing a gain.


How Does it Work?


Suppose you have two health insurance policies.



  • Policy A: Sum Insured = ₹5 lakh

  • Policy B: Sum Insured = ₹10 lakh

  • Total medical bill = ₹3 lakh. In such a situation, you assume it is fully eligible.


Under a strict contribution clause, the insurers share the claim in the ratio of their sum insured (5:10 or 1:2).



  • Policy A pays = ₹1 lakh (⅓ of the bill)

  • Policy B pays = ₹2 lakh (⅔ of the bill)

  • Total payout = ₹3 lakh.


Common Methods of Sharing Include



  • Pro Rata (by limits): This is based on each policy’s sum insured relative to the total coverage.

  • Equal Shares: This method is comparatively less prevalent in health insurance. According to this method, insurers split equally until limits are reached.


Note: Having multiple policies can still be beneficial, as it includes higher overall coverage limits or different network hospitals. However, it does not let you claim more than the actual expense.