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Clause library

Every insurance clause, explained plainly

Insurance is complicated on purpose. This is the plain-language library of the clauses, waiting periods, and benefits that decide whether your claim gets paid. Each term is defined the way you would actually search for it, with examples and the mistakes to avoid.

Limits and sub-limits

Room rent cap

A room rent cap is a limit on how much your health insurer will pay per day for your hospital room. If you choose a room that costs more, you pay the difference, and in many policies the insurer also cuts every other bill in the same proportion.

Sub-limit

A sub-limit is a cap on how much your policy pays for a specific treatment or expense, even though your total sum insured is larger. For example, a cataract sub-limit of Rs 40,000 means the policy pays at most Rs 40,000 for that surgery regardless of your Rs 10 lakh cover.

Proportionate deduction

Proportionate deduction is when an insurer scales down your whole admissible claim because you chose a room above your policy's eligible category. Since many hospital charges are linked to room class, exceeding the room-rent limit can cut the entire bill in the same proportion — not just the room charge.

Zone-based co-pay

Zone-based co-pay is an extra share of the bill you pay if you get treated in a higher-cost city than the zone your premium was priced for. Insurers group cities into zones; treatment in a costlier zone than your policy's can trigger a percentage co-pay unless you opted for pan-India cover.

Cost sharing

Co-pay

A co-pay is the share of an approved claim you agree to pay yourself, expressed as a percentage. If your policy has a 20% co-pay and the approved claim is Rs 1 lakh, the insurer pays Rs 80,000 and you pay Rs 20,000, on every claim the co-pay applies to.

Deductible

A deductible is a fixed amount you pay before your insurance starts paying. With a Rs 1 lakh deductible, the insurer covers costs only above Rs 1 lakh. Deductibles are common on top-up and super top-up plans and on some voluntary-deductible health policies.

Waiting periods

Pre-existing disease (PED) waiting period

A pre-existing disease (PED) waiting period is the time you must hold a policy before conditions you already had when buying are covered. During this window, claims arising from those conditions are excluded. IRDAI has been reducing the maximum length of this waiting period in recent years.

Initial waiting period

The initial waiting period is a short window at the start of a new health policy (commonly around 30 days) during which only accident-related hospitalisation is covered. Illness claims raised in this window are usually excluded, to prevent buying cover only after symptoms appear.

Disease-specific waiting period

A disease-specific waiting period is a fixed period (often around two years) before the policy covers certain named conditions and planned surgeries such as cataract, hernia, some joint replacements, and specified ENT or gynaecological procedures, even if the condition is not pre-existing.

Benefits

Restoration benefit

A restoration (or refill) benefit tops your sum insured back up after it is used up during the policy year, so a second unrelated hospitalisation still has cover. The trigger, whether it applies to the same illness, and how many times it refills all vary by policy.

No Claim Bonus (NCB)

A No Claim Bonus rewards you for a claim-free year. In health insurance it usually increases your sum insured at no extra premium; in motor insurance it is a discount on your own-damage premium. Making a claim can reduce or reset the accumulated bonus.

Day-care procedures

Day-care procedures are treatments that need hospitalisation for less than 24 hours because of technology, such as cataract surgery, dialysis, chemotherapy, and many others. Good policies cover a wide list of these even though the usual rule requires a 24-hour admission.

Exclusions

Permanent exclusions

Permanent exclusions are treatments and situations a policy never covers, no matter how long you hold it. These are listed in the policy wording and commonly include cosmetic surgery, most dental and vision unless from an accident, and treatments arising from specified excluded causes.

Policy rights

Free-look period

The free-look period is a window after you receive a new policy during which you can review it and cancel for a refund if you disagree with the terms. IRDAI mandates this window for life and health policies; the exact length has been revised in recent norms, so check the current figure.

Grace period

The grace period is extra time after your renewal due date to pay the premium without losing continuity benefits such as waiting-period credit. If you pay within the grace period, your policy is treated as continuous; if it lapses, you can lose accumulated credits.

Moratorium period

After a continuous coverage period defined by IRDAI, a health policy enters a moratorium: the insurer can no longer contest a claim on the ground of non-disclosure or misrepresentation, except in cases of proven fraud. It protects long-standing policyholders from late rejections.

Motor insurance

Insured Declared Value (IDV)

IDV is the maximum your motor insurer will pay if your vehicle is stolen or written off. It is roughly the current market value after depreciation, not what you originally paid. A higher IDV means a higher payout at total loss but a slightly higher premium.

Zero-depreciation (bumper-to-bumper)

Zero-depreciation (or bumper-to-bumper) is a car-insurance add-on that pays the full cost of replaced parts at a claim, without cutting for wear and tear (depreciation). Without it, plastic, rubber and fibre parts especially are paid at a depreciated value, so you fund the gap. It is most valuable on newer cars.

Own damage vs third-party liability

Third-party liability cover pays for injury or damage you cause to others — it is legally mandatory for every vehicle in India. Own-damage cover pays for damage to your own vehicle (accident, theft, fire, natural events). A comprehensive policy combines both; a standalone third-party policy covers only your liability to others.

Personal accident cover (owner-driver)

Owner-driver personal accident (PA) cover pays a benefit if the vehicle's owner-driver dies or is disabled in an accident involving the insured vehicle. It is a compulsory component for the registered owner who drives, and can often be extended to cover passengers or a paid driver as add-ons.

Motor add-ons (engine protect, RSA, RTI, consumables)

Motor add-ons extend a comprehensive car policy for extra premium. Common ones: engine protect (damage to engine/gearbox, e.g. from water ingress), roadside assistance (towing, jump-start, help on the road), return-to-invoice (pays the invoice price, not just IDV, on total loss/theft), and consumables (oils, nuts, bolts normally excluded).

Compulsory vs voluntary deductible (motor)

A deductible (excess) is the part of an own-damage claim you pay yourself. The compulsory deductible is a fixed amount set by the insurer that always applies. A voluntary deductible is an extra amount you choose to bear in exchange for a lower premium — it raises your out-of-pocket cost at every claim.

Claims and process

Cashless claim

A cashless claim lets you get treated at a network hospital without paying the covered amount yourself. Your insurer or its TPA settles the approved bill directly with the hospital. You still pay for anything excluded, above your sum insured, or below a deductible or co-pay.

Reimbursement claim

In a reimbursement claim you pay the hospital yourself, then submit bills and documents to your insurer to get the covered amount back. It is how you claim at non-network hospitals, or when cashless was not used, and it pays only the admissible portion of your bill.

Network hospital and TPA

A network hospital is one that has a tie-up with your insurer to offer cashless treatment. A TPA (Third Party Administrator) is the agency that issues your health card and processes claims between you, the hospital and the insurer. Some insurers process claims in-house instead of using a TPA.

Pre- and post-hospitalisation expenses

These are medical costs linked to a hospitalisation but incurred before admission and after discharge — like diagnostic tests, doctor consultations, medicines and follow-ups. Most health policies cover them for a fixed number of days before and after the hospital stay, provided they relate to the same condition.

Health insurance portability (porting)

Portability lets you switch your health insurer or plan while carrying forward the credit you have earned for waiting periods already served. Under IRDAI rules you apply before renewal; the new insurer can accept, price, or decline based on underwriting, but cannot make you restart pre-existing-disease waits you have already completed.

Claim intimation and pre-authorisation

Claim intimation is telling your insurer about a hospitalisation, within the window your policy requires. Pre-authorisation is the cashless approval step, where a network hospital sends your diagnosis and estimate to the insurer to confirm cover before or during treatment. Both are process steps that protect your claim.

Claim settlement ratio (CSR)

Claim settlement ratio is the share of claims an insurer settled out of all claims it decided in a period. A high CSR suggests most claims get paid, but it says nothing about how much was paid, how fast, or why some were rejected — so it is a starting signal, not the whole picture.

Incurred claim ratio (ICR)

Incurred claim ratio is the total claims an insurer paid divided by the total premium it collected in a period. Around or below 100% means it paid out less than it earned; well above 100% means it paid more. It reflects the insurer's book, not any one policyholder's claim experience.

Coverage basics

Sum insured (vs sum assured)

Sum insured is the maximum a health (or general) insurer will pay in a policy year — it works on indemnity, reimbursing actual costs up to that cap. Sum assured is a life-insurance term: a fixed amount paid on a covered event, regardless of any 'cost'. Health uses sum insured; life uses sum assured.

Maternity cover

Maternity cover pays for pregnancy and delivery costs — normal and caesarean — usually up to a defined limit, and often after a waiting period of a few years. Many base health plans exclude maternity or offer it only as an add-on, and newborn cover terms vary, so read the specifics.

OPD cover

OPD (out-patient department) cover pays for treatment that does not need hospital admission — doctor consultations, diagnostics, pharmacy and minor procedures. Most base health plans focus on hospitalisation and exclude OPD; where offered, it usually comes with a modest annual limit and specific conditions.

Critical illness cover

Critical illness cover pays a fixed lump sum if you are diagnosed with one of the specific serious illnesses listed in the policy (such as certain cancers, heart or stroke conditions). It is a benefit payout, not a reimbursement — you receive the amount regardless of your actual treatment bills, subject to survival and definition terms.

Daily hospital cash

Daily hospital cash pays a fixed amount for each day you are hospitalised, on top of your main claim, to help with incidental costs like travel, attendant or lost income. It is a defined-benefit add-on with a per-day amount and a cap on the number of days, independent of your actual bill.

Consumables and non-payable items

Consumables and non-payable items are hospital charges many policies do not pay — things like gloves, syringes, PPE kits, administrative and certain disposables. They appear on the bill but are deducted from the claim unless your policy specifically covers them or you have a consumables add-on.

Domiciliary hospitalisation

Domiciliary hospitalisation covers treatment taken at home for a condition that would normally need hospital admission — because the patient could not be moved, or a hospital bed was unavailable. It applies only under those specific conditions, often for a minimum duration, and may carry its own limits.

AYUSH cover

AYUSH cover pays for in-patient treatment under Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy systems. Many modern health plans include AYUSH hospitalisation, often at recognised or government-registered facilities, sometimes up to a sub-limit rather than the full sum insured.

Organ donor cover

Organ donor cover pays the hospitalisation costs of the donor during an organ transplant where the insured person is the recipient. It typically covers the donor's surgery to harvest the organ, subject to the policy's terms, and usually excludes the donor's pre/post-care and any payment to the donor.

Lifelong renewability

Lifelong renewability means your health insurer must let you renew the policy for life, so cover cannot be stopped just because you have aged or claimed. Premiums can still rise with age and revisions, and you must renew on time — but the insurer cannot refuse renewal on those grounds.

Life insurance basics

Sum assured

Sum assured is the guaranteed amount a life insurer pays your nominee on death (or on maturity, for some plans) — a fixed benefit, not a reimbursement of costs. In term insurance it is the pure protection amount your family receives. Choose it to replace your income and clear liabilities, not by premium alone.

Rider (add-on cover)

A rider is an optional add-on you attach to a base life (or health) policy for extra protection — such as critical illness, accidental death, disability or waiver of premium. It costs a little more premium and comes with its own terms, extending cover without buying a separate standalone policy.

Surrender value and paid-up value

Surrender value is what you get if you exit a savings-linked life policy early; paid-up value is the reduced cover you keep if you stop paying premiums after a point but do not surrender. Pure term plans usually have neither. The free-look period lets you cancel a new policy soon after buying, for a refund minus small charges.

Nominee vs beneficiary

A nominee is the person you name to receive the policy payout. A beneficiary is who is ultimately entitled to that money. Naming a 'beneficial nominee' (like a close family member) makes the nominee the rightful owner of the proceeds; otherwise a plain nominee may act only as a receiver who must pass the money to legal heirs.

Claim settlement ratio (life)

For life insurance, the claim settlement ratio is the share of death claims an insurer paid out of those it decided in a year. Because a term claim is your family's whole safety net, a consistently high settlement record matters — but honest disclosures on your application matter even more to a claim being paid.

MWP Act protection

Buying a life policy under the Married Women's Property (MWP) Act ring-fences the payout for your wife and/or children. The proceeds go into a trust for them and are protected from your creditors and other claimants — useful if you have business debts or want to guarantee the money reaches your family.