Why Should I Pay Attention to Health Insurance Jargon?

Understanding the health insurance jargon is the key to making smarter financial and medical decisions related to your healthcare plan. If you are wondering how, this is simply because terms like premiums, co-payments, and claims directly impact your coverage and out-of-pocket costs.

In fact, with medical inflation rising around 15% annually, as reported by the Economic Times, paying attention to these terminologies is essential to avoid hidden surprises during claims and choose a policy that truly meets your needs.

What are the Basic Terminologies Related to Health Insurance?

• Insured or Policyholder: It refers to the person who will receive the benefits of a healthcare plan by paying the premium.

• Insurer: It refers to the company that provides health insurance and pays for the policyholder’s medical bills.

• Sum Insured: Also known as the coverage amount,this is the maximum amount an insurance company agrees to pay for covered medical expenses.


• Premium: The amount an individual pays to an insurance company in exchange for coverage.

• Pre-existing Diseases (PED):Illnesses such as diabetes and hypertension that are diagnosed or treated before purchasing health insurance.

• Waiting Period: A specific timeline during which you cannot make claims. Most insurers have an initial waiting period of 30 days and a PED waiting period of 12 to 36 months.


• Claim:The request made by the policyholder to the insurance company to pay for medical expenses covered under their policy.

• Coverage:This means the range of benefits included in a health insurance plan. For instance, ambulance costs, daycare facilities, and pre- and post-hospitalisation cover.

• Add-on and Rider: Both of these features extend the base coverage of the insurance policy in return for an extra premium. While riders amend your existing policy with some additional benefits, add-ons provide separate additional benefits.

• Network Hospitals: Hospitals that have a direct tie-up with the insurer to provide necessary medical treatment to the policyholder. Only in these hospitals will you get cashless treatment.

• Co-payment:A fixed percentage of the claim amount that the policyholder pays out of pocket. For example, if your ₹1 lakh health insurance has a mandatory co-payment of 10%, you have to pay ₹10,000. The rest of ₹90,000 will be covered by the insurer.

• Cumulative Bonus:A cumulative or no-claim bonus is a discount (Up to 50%) that the policyholder will get for every claim-free year. With this discount, your insurer will increase your sum insured or give a discount on premiums at renewal.

• Grace Period: This period starts after the renewal date of the health insurance policy. It generally ranges from 15 to 30 days.

• Portability: It is the process of switching to a new insurance company from your existing company while keeping the accumulated benefits, such as credit for waiting periods or no-claim bonuses.

Final Words

While purchasing health insurance, always have knowledge of the following jargon. With a clear knowledge of these terms, you can maximise your benefits and protect your funds during medical emergencies.