Room rent limits in health insurance affect out-of-pocket expenses. Choosing a room above the limit incurs proportional deductions on related costs, including doctor's fees and nursing charges. Policies may have fixed caps or percentage-based limits, influencing treatment costs significantly.

The limit on room rent is a significant factor in a health insurance policy as exceeding it will increase your out-of-pocket expenses significantly.

If a policyholder opts for a room that is above the limit set in the policy, the insurer will apply a proportional deduction, affecting not only the room rent payout but also all other hospitalisation-related expenses such as doctor's fee and nursing charges, which are usually tied to the room category.

For instance, if the room rent limit is ₹3000 per day and if the policyholder opts for a room with a rent of ₹4000, then she/he exceeds the limit by 25%. This will result in the policyholder not just paying extra room rent but also will have to bear the additional 25% for doctor fee, nursing fee and the treatment procedure out of her/his pocket.

Proportional deductions: What does it mean for you?

“If a policyholder opts for a room with rent exceeding this cap, the insurer may apply a proportional deduction, affecting not only the room rent payout but also related expenses like doctor's fee and nursing charges, which are often tied to the room category chosen,” says Chetan Vasudeva, senior vice president, Business Development, Elephant.in, Alliance Insurance Brokers.

How room rent affects treatment costs

“Many people are not aware of the fact that the cost of the treatment is directly proportional to the room rent. Expenses such as nursing charges, cost of surgery and doctor’s visiting fees increase depending on the type of room opted by the policyholder,” according to Niva Bupa Health Insurance.

“If you have opted for a twin sharing room and will have to pay ₹15000 for a certain procedure, the same treatment may cost you ₹25000 in a deluxe room. Hospitals charge on the basis of the paying capacity of the patient,” Niva Bupa said in its explainer on hospital room rents.

Types of rooms available in health insurance policies

Health insurance policies typically specify the types of rooms available for hospitalisation, which can include shared rooms or single private rooms. There are also policies with no cap on room type, which is typically found in premium plans.

Room rent structure: Fixed amount vs. percentage of sum insured

The room rent in a health insurance is structured in two ways. A fixed amount as the cap or a percentage of the sum insured. A fixed amount cap sets a pre-determined daily limit such as ₹3000 or ₹5000. The percentage of sum insured method typically allows for a cap of 1% to 2% of the total sum insured as the room rent limit. 

For example, if the sum insured is ₹5 lakh, the room rent cap can be ₹5000 per day (1%) or ₹10000 per day (2%).

Once you know the room rent limit, which is specified in the brochure as well as the policy document, you can call up the hospital where you intend to go for treatment to check whether it is adequate.

The best way to enhance your room rent limit is to increase the sum insured. You can continue with the same plan but a higher sum insured will enable you to get a higher room rent. You can also buy another health insurance policy with the same insurance company that offers a higher room rent limit.

Shared rooms vs. private rooms: Understanding the costs

“If a policy restricts the policyholder to shared rooms and they opt for a single private room or deluxe suite, the additional costs incurred will not be reimbursed. On the other hand, modern health insurance plans, particularly premium options, may offer no room rent limits or include a 'single private room' clause, allowing greater flexibility in room choice,” Vasudeva says. 

However, these policies generally come with higher premiums and are especially advantageous for those seeking treatment in higher-end hospitals or luxury care settings, he says.