Understanding Room Rent Limits in Health Insurance: Impact on Your Claims

Room rent limits in health insurance policies are hidden charges which people ignore and face the aftermath of at the time of claiming with insurance companies. Let’s understand the room rent limit in this blog – how it works and how to make informed decisions.

What is a Room Rent Limit?

Health insurance companies usually set a limit on the daily room rent charges which they’ll cover during your hospital stay. The reason behind keeping it on a limit is that people should not spend more money on room rent, as the insurance is bought mainly for the treatment of disease. Room rent capping is the fixed percentage of your sum insured that your insurer has set for a specific room type (shared room, single room, etc.) in your policy.

Why Do Room Rent Limits Exist?

Insurers set the room rent limits to manage their financial risk. Hospitals have vast cost variations for similar services depending on the room type, which increases proportionately. Rent limits help prevent policyholders from choosing expensive accommodations which will drive up the claim costs.

How Does a Room Rent Limit Affect Your Claim?

Did you know that room rental restrictions directly affect your premiums? Let us understand this with this two example.

Case 1: Stay in the room set by the insurance company

If you choose a hospital room that is less expensive or equal to the coverage limit, in that case – the insurance company will pay the full cost of the room along with other medical expenses covered as per your policy in the contents of the

Case 2: Exceeding the Room Rent Limit Set By Insurer

If you opt for a more expensive room. In that case, you might think that you need to pay the difference amount on the rent. However, insurers will apply a concept called “proportionate deduction” in this scenario.

Proportionate Deduction Explained

Imagine that your room rent limit is Rs. 5,000 per day and you choose to opt for a Rs. 8,000 room. In that case, the proportionate deduction will be calculated based on the percentage of the coverage you’ll receive for the entire bill and not just the room charges.

Here’s the formula:

Claim Approved = (Room Rent Allowed / Room Rent Claimed) * Amount Claimed

It means that the insurer will pay a portion of your entire hospital bill.

Mathematical explanation of the impact of exceeding the room rent limit

Assuming that your policy covers a Rs. 5,000 daily room rent limit. 

Your total bill is Rs. 1 lakh. 

You opt for a room rent of Rs. 8,000 per day.

Following the formula:

Claim Approved = (5,000 / 8,000) * 1,00,000 = Rs. 62,500 /-

Here, you will receive Rs. 62,500 from the insurer and you’ll have to pay Rs. 37,500 out of your pocket, despite having health insurance.

How to Manage Room Rent Limits?

• Choose a Plan with No Room Rent Limit: Although these health insurance plans typically come with higher premiums but they offer good flexibility and potentially higher claim payouts. 
• Understand Your Policy Limits: Before hospitalization, do take some time to clarify your room rent limit and its implications at the insurance desk. 
• Plan Your Room Choice Wisely: When you’re hospitalized, you’re not on a vacation to enjoy. So staying within the limits is the best option to avoid out-of-pocket expenses.

Conclusion

Room rent limits can significantly impact your claim amount. Evaluate your needs and opt for a plan that aligns with your budget.