Insurance FAQ India — 22 Plain-English Answers
The questions people actually ask before buying insurance in India, answered without jargon and without a sales pitch.
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Getting started
What is the best insurance to buy first?
Health insurance, then term life. Health cover protects against the most probable financial shock — a hospitalisation costing ₹1–5 lakh can happen at any age. Term life becomes essential the moment someone depends on your income. Everything else (travel, critical illness, home) sits below these two in priority. Motor third-party is separate: it is legally mandatory if you own a vehicle.
How much health cover do I actually need in 2025?
In a metro, ₹10 lakh is the practical floor for an individual and ₹15–25 lakh for a family of four. Medical inflation in India runs at roughly 14% a year — roughly double general inflation — so a ₹5 lakh policy bought today provides materially less real cover in a decade. If the premium for high cover is a constraint, a base policy plus a super top-up is the cost-efficient route.
Should I buy insurance online or through an agent?
Buying direct online is cheaper because no commission is built into the premium, and the policy is identical. An agent earns their keep only if they genuinely help at claim time — many do not. Whichever route you take, read the policy wording yourself. The single most common cause of rejection in India is a declaration form that someone else filled in on your behalf.
Individual policy or family floater — which should I pick?
A floater shares one sum insured across the whole family and is cheaper per person, which suits a young family where a large claim by two people in the same year is unlikely. Individual policies give each person their own cover and make more sense once a parent is above 50 or someone has a condition, because one serious claim can exhaust a floater for everyone.
When is the best time to buy health insurance?
Earlier than feels necessary. Premiums rise with age, waiting periods for pre-existing conditions run 2–4 years, and anything diagnosed after you apply is excluded or loaded. Buying at 25 rather than 35 means your waiting periods are long finished by the time you are likely to need them, which is the whole point.
Super top-up
What is a super top-up plan and why is it the most underused product in India?
A super top-up pays once your *cumulative* medical expenses in a policy year cross a chosen threshold (the deductible). If you hold a ₹5 lakh super top-up with a ₹5 lakh deductible, it activates after ₹5 lakh of claims in that year — regardless of whether that came from one hospitalisation or four. It is dramatically cheaper than raising your base cover because the insurer only bears the tail risk.
Super top-up vs regular top-up — what is the difference?
A regular top-up applies the deductible to *each individual claim*. A super top-up applies it to the *total of all claims in the year*. If you have a ₹3 lakh deductible and two hospitalisations of ₹2 lakh each, a regular top-up pays nothing (neither claim crossed ₹3 lakh individually) while a super top-up pays ₹1 lakh (the total of ₹4 lakh crossed the threshold). Super top-up is almost always the better structure.
Should I buy a ₹25 lakh base policy or a ₹5 lakh base plus ₹20 lakh super top-up?
The base-plus-top-up combination typically costs 35–50% less for equivalent total protection. The trade-off is that the top-up only responds after the deductible is met, so your base policy must be large enough to absorb ordinary claims. A ₹5 lakh base handles most single hospitalisations; the top-up exists for the catastrophic year. For most families this combination is the better use of the same premium rupee.
Health
What does 'no room rent cap' actually save me?
More than the room cost itself. When you exceed a room rent cap, insurers cut every other charge on the bill (surgeon, anaesthetist, nursing, ICU, OT, investigations) by the same ratio. On a ₹2 lakh bill where you took a room at double the capped rate, you can end up paying ₹80,000–1,00,000 rather than just the room difference. Of the 15 health plans compared on this site, 14 have no room rent cap.
What is Incurred Claim Ratio and why does a low number worry me?
ICR is the proportion of premium income an insurer pays back out as claims. 70–90% is the healthy band. Below 70% suggests the insurer keeps an unusually large share of the money it collects — which can be a sign they are strict about paying claims. Care Health sits at 56% and Star Health at 67% in FY 2024-25 data. ICR is not a verdict on your individual claim, but read alongside Claim Settlement Ratio it completes the picture.
Is my employer's group health cover enough?
Almost never, for three reasons. It typically carries a low sum insured (₹2–5 lakh), it disappears the day you leave the job — often when you are least able to buy fresh cover — and it may impose co-payments and room caps you cannot change. Treat group cover as a supplement, and hold a personal policy alongside it so your waiting periods are already served when you need them.
What is portability and when should I use it?
IRDAI allows you to switch health insurers at renewal while carrying forward your accumulated waiting periods and no-claim bonus. Apply 45–60 days before renewal. It is worth doing if your current insurer has a weak claim settlement record, has imposed a room rent cap you want to escape, or has raised premiums disproportionately. You do not lose your served waiting periods by switching correctly.
What is co-payment and should I accept one to cut my premium?
A co-pay means you pay a fixed share of every approved claim, commonly 10–20%. On a ₹4 lakh hospital bill a 20% co-pay costs you ₹80,000 even though the claim was approved in full. It lowers the premium noticeably, but it converts a predictable annual cost into an unpredictable one at the worst moment. Avoid it unless the premium is genuinely unaffordable otherwise.
What happens if I miss my renewal date?
Most policies allow a grace period of 15 to 30 days to pay late. Cover is usually not active during that gap, so a claim for something that happens inside it can be refused. Miss the grace period and the policy lapses — you lose every waiting period already served and the 60-month moratorium clock restarts. Set a reminder a fortnight ahead.
Term life
How much term cover do I need?
Start at 10–15x your annual income, then add all outstanding loans and the projected cost of your children's education. The test is simple: if you died tomorrow, could your family invest the payout and live off the returns without changing their lifestyle? Most Indians are underinsured by a factor of three to five.
Is return-of-premium term insurance worth it?
Rarely. ROP plans cost roughly 2–3x a regular term plan. If you invest the difference — around ₹15,000–20,000 a year — in an index fund over 30 years at historical returns, you would accumulate substantially more than the premiums the insurer returns to you. Buy pure term and invest the difference separately.
CSR is high but what is Amount Settlement Ratio and why does it matter more for large cover?
Claim Settlement Ratio counts how many claims were paid. Amount Settlement Ratio measures what proportion of the total claimed *value* was paid. An insurer can settle 98% of claims by count while disputing the largest ones. PNB MetLife leads on ASR at 99.30%; LIC's ASR of 96.90% sits below its CSR. If you are buying ₹1 crore or more, ASR is the more revealing number.
Should I add a critical illness rider or buy a standalone CI policy?
A rider attached to your term plan typically costs 40–60% less than an equivalent standalone policy for the same cover. Buy the rider first. Standalone CI only makes sense if you need cover beyond what the rider permits, or want the CI to continue after the term plan ends.
Motor
Is zero depreciation cover worth the extra premium?
For any car under five years old, almost always yes. Without it, insurers deduct depreciation on replaced parts — 30–50% on plastic and rubber components. A ₹15,000 bumper replacement can leave you paying ₹6,000. Zero dep costs ₹1,500–3,500 a year and typically pays for itself in a single claim.
What is IDV and why should I not let the insurer lower it?
Insured Declared Value is the maximum you receive if the vehicle is stolen or written off. Insurers often propose a lower IDV because it reduces the premium — and their exposure. Setting IDV ₹2 lakh below market value saves perhaps ₹500 a year in premium and costs ₹2 lakh in a total loss. Check your car's actual market value before renewing.
Does my No Claim Bonus transfer when I sell my car?
Yes — and most people do not know this. NCB belongs to the policyholder, not the vehicle. Request an NCB certificate from your insurer before transferring or surrendering the policy, and apply it to your next car's policy. A 50% NCB is worth several thousand rupees every year.
Travel
How much medical cover do I need for international travel?
USD 5,00,000 is the accepted standard for USA, Canada and Europe, where a single ICU week can exceed USD 1,00,000. For Southeast Asia, USD 2–3,00,000 is generally adequate. Schengen visa applications require a minimum of EUR 30,000 — but that figure is a visa formality, not a safe level of protection.
My credit card includes travel insurance — is that enough?
Sometimes, but check three things. First, the medical limit — many cards cap well below USD 5,00,000. Second, whether cover is conditional on booking the trip with that card. Third, the pre-existing condition exclusion, which is usually stricter than a standalone policy. For a short trip to a low-cost destination it may suffice; for the USA it usually does not.
Does travel insurance cover trip cancellation?
Only for the reasons the policy lists, typically illness, injury, death in the family, or a natural disaster at the destination. Cancelling because plans changed, work intervened, or you simply decided not to go is not covered. Check whether the cover starts from the date you booked or the date you travel, because that decides whether a cancellation weeks ahead is claimable at all.
What does travel insurance not cover?
Pre-existing conditions unless specifically declared and accepted, adventure sports without an add-on, anything arising from alcohol or drugs, losses you did not report to local police within the stated window, and travel against medical advice. Baggage claims almost always need a Property Irregularity Report from the airline, filed before you leave the airport.
Do I need travel insurance for trips inside India?
Far less than for international travel, because your health policy already covers hospitalisation anywhere in India. Domestic travel cover is mainly about trip cancellation, delays and lost baggage. For most domestic trips the cost outweighs the benefit, unless the booking value is large enough that losing it would hurt.
Claims
My claim was rejected. What is the first thing I should do?
Get the rejection in writing with the specific policy clause cited. A generic 'not payable as per policy terms' is not sufficient — write back demanding the exact clause number and the factual basis. That letter is the foundation for every escalation step that follows, including the Ombudsman.
How does the Insurance Ombudsman work and what does it cost?
Nothing. The Ombudsman is a quasi-judicial body with 17 offices across India, handling disputes up to ₹50 lakh. There is no fee, no court stamp, and advocates are not permitted to file on your behalf — you present the case yourself. Decisions typically arrive within three months and are binding on the insurer once you accept them. You must file within one year of the insurer's final rejection, and only after giving the insurer 30 days to respond.
How long does an insurer legally have to settle my claim?
Under IRDAI regulations insurers must settle or reject a claim within 30 days of receiving the last necessary document. Where an investigation is required, it must be completed within 30 days and settlement follows within 45 days of that. Delays beyond this attract interest at 2% above the bank rate — a right most policyholders never invoke.
What is a TPA and should I deal with them or the insurer?
A Third Party Administrator processes claims on the insurer's behalf — they issue the health card, approve cashless requests and check documents. Deal with the TPA for the routine process, but if a claim is refused, address the grievance to the insurer's Grievance Redressal Officer. The TPA cannot overturn a rejection and the regulatory clock runs against the insurer, not the TPA.
Can I claim from two health policies for the same hospitalisation?
Yes. If one policy does not cover the full bill you can claim the balance from the second under contribution rules. Settle with the first insurer, obtain the claim settlement letter and attested copies of the bills, then file with the second. You cannot profit — the total recovered cannot exceed what you actually spent.
Tax
What tax benefits do insurance premiums attract?
Health insurance premiums qualify under Section 80D — up to ₹25,000 for yourself and family, plus a further ₹50,000 for senior citizen parents. Life insurance premiums fall under Section 80C within the ₹1.5 lakh ceiling, and death benefits are exempt under Section 10(10D). Note that these deductions apply under the old tax regime; the new regime removes most of them, so the tax benefit should never be the primary reason to buy cover.
Exactly how much can I claim under Section 80D?
₹25,000 for yourself, spouse and dependent children, rising to ₹50,000 if you or your spouse is 60 or over. A separate amount is allowed for your parents' premium on top: ₹25,000 if they are under 60, ₹50,000 if they are 60 or over. So a person under 60 paying for senior citizen parents can claim up to ₹75,000. Preventive health check-ups count up to ₹5,000, but inside those limits rather than on top.
Can I claim 80D for my parents' premium?
Yes, if you pay it, and the deduction sits on top of your own family limit. They do not have to be financially dependent on you. The premium must be paid by a traceable method — net banking, card or UPI, not cash. Only the check-up portion may be paid in cash and still qualify.
Is there GST on my insurance premium?
Not on individual policies any more. The GST Council exempted all individual life and health insurance from GST with effect from 22 September 2025, where the rate had previously been 18%. Group and employer policies still attract 18%. If you are comparing a quote against an older one, make sure you are comparing like with like.
Is a term insurance payout taxable for my family?
No. A death benefit from a life insurance policy is exempt under Section 10(10D), and there is no cap on that exemption for a pure protection term plan. Maturity proceeds from investment-linked policies are a different matter and can be taxable depending on the premium paid relative to the sum assured, which is one more reason to keep protection and investment separate.
Go deeper
- Health Insurance India — 15 plans compared
- Term Life Insurance India — 15 plans compared
- Travel Insurance India — 15 plans compared
- Motor Insurance India — 15 plans compared
- Claim rejected? — the full escalation route