Important Health Insurance Terms


It is a person skilled in the field of Statistics and Mathematics. They are known for analyzing the risk associated with the insurance cover. They make use of their financial systems to find out premium rates and decide the benefits which can be offered to policyholder.


Another name for this is the rider cover. It is a kind of additional insurance cover that comes with a health insurance policy. They are bought mainly to enhance the coverage offered under a regular policy. Some of the most popular ones are accident cover, critical illness cover, restoration of the sum insured, air ambulance cover, etc.

Allowed amount 

Maximum amount on which payment is based on covered healthcare services. It is also known as ‘eligible expense’, negotiated rate, or payment allowance. If your provider charges you more than the allowed amount, then you need to pay the balance in that case.


A request for your health insurer or a plan to review a decision or a grievance again.

Balance billing

When provider bills you for paying the difference of provider’s charge and allowed amount.


It is the amount paid by the insurance company to the policyholder for all medical costs incurred.

Benefit level

The maximum amount which health companies can offer to pay for a covered benefit.

Benefit year

It is the 12-month period for which health insurance benefits are calculated which is necessarily not coinciding with the calendar year. Health Insurance may update plan benefits and rates during the beginning of the financial year.

Cashless Treatment

When a policyholder gets hospitalized and takes treatment without spending money, it is known as a cashless treatment. To avail of the benefit of cashless treatment, a policyholder needs to take prior authorization from the insurer. Once the treatment is completed, the hospital will send the bill to the insurer and get it reimbursed.


Request made by a plan member or any plan member’s health care provider to the insurance company for paying off the medical services.


The amount paid to the share the cost of services after paying to the deductible. The coinsurance rate is usually the percentage. If the insurance company pays 70% of the claim, you need to pay 30%.

Coordination of benefits

The system used in group health plans to eliminate giving same benefits twice. It usually happens when you are covered under more than one health insurance plan. Benefits under the two plans usually are limited to no more than 100% of the claim.


It is a fixed out-of-pocket amount paid by an insured for sharing the cost of certain health services covered under a health plan. 

Cumulative Bonus

It refers to the bonus amount provided by an insurer for not making any claim during a policy year. Many of the insurers are giving a cumulative bonus of 5% or 10% every claim-free year subject to a maximum of 50% of the sum insured.

Chronic Condition

A chronic condition is a long-lasting or permanent condition as against an acute condition. Some health insurance plans have certain provisions for chronic conditions.


It is the amount of money that you pay each year to cover eligible medical expenses before your insurance policy starts paying.


Any individual, either spouse or a child, that is covered by the primary insured member’s plan.

Drug Formulary

It is the list of prescription medications covered under your health insurance plan.

Domiciliary Hospitalization

It refers to the treatment process in which a patient takes medical treatment from home without visiting a hospital. It happens in that case where a patient’s health condition prevents him or her from taking medical treatment from a hospital.

Eligibility Criteria

This refers to the set of conditions that must be met by a person before enrolling in a health insurance coverage offered by a company.

Employee Contribution

In group health insurance offered by an employer, employee contribution refers to the part of the premium amount deducted from the employee’s salary.

Experimental Procedures

These are unproven procedures that are not approved by any medical council. Insurance companies do not provide coverage for experimental procedures.

Effective Date

The date on which a policyholder’s coverage begins.

Exclusion or limitation

Any specific situation or condition or treatment which is not a part of your health insurance plan.

Explanation of benefits

It means the health insurance company has given a written explanation of how a medical claim was paid. It contains detailed information about what the company has paid and what portion of the cost, a policyholder is liable for.


A complaint that you communicate to the health insurance company.

Group Health Insurance

A coverage plan offered by the employer that covers the individuals in that group and their dependents under a single policy.

Health Insurance

A contract that requires your health insurer to pay some or all your health care costs in exchange of a premium paid to avail of the benefit of health insurance policy.

Health Maintenance Organization

Health care financing and delivery system that provides comprehensive health care services enrolled in the geographical area. Health Maintenance organizations require the use of specific, in-network plan providers.

Income Tax Relief

The premium paid for health insurance is eligible for income tax relief as per Section 80D of the Income Tax Act. There are specific deduction limits set by the government for claiming income tax relief. 

Individual health insurance

It is the type of health insurance plan which is purchased by individuals to cover themselves and their families. It is different from group plans, which are offered by employers to cover all their employees.

Long Term Care policy 

Insurance policy which covers specified services for a specific time. Long term care policy varies according to the insurance companies. Covered services mostly include home health care, nursing care, and custodial care.

Long term disability insurance

Insurance company, in this case, pays insured a percentage of money each month if they become disabled.


It is a case, where a group of doctors, health care professionals, or doctors are being asked to provide health care to the employees of insurance companies for less than a fee they charged. Provider networks can cover a large geographical market for giving health care services.


It is the case, where a health insurance company whose plan pays to help cover the cost of your care.  It is also known as a carrier.

Pre-existing condition

A health problem that has been diagnosed, or for which you have been treated, before buying a health insurance plan.


The amount that a policyholder needs to pay each month in exchange for insurance coverage.


Any person (i.e., doctor, nurse, dentist) or institution (i.e., hospital or clinic) that provides medical care.

Prescription Drug coverage

A health insurance plan which helps in paying off for prescription drugs and medication.

Out-of-Pocket Maximum

This amount one needs to pay each year toward costs including your deductible, copay, and coinsurance. 

Sum assured

Sum assured is also known as the payout amount which the insurer is liable to pay to the insured in case of any eventuality. It works on the principle of indemnity.


Underwriting refers to the process by which the risk of insurance is assessed by an insurer. Based on the assessed risk, the company will determine whether to extend coverage to the individual.

Waiting Period

It is the fixed period for which insurance coverage will not be available for certain illnesses. For instance, pre-existing diseases have a waiting period of 2 years to 4 years depending upon the insurance company.

Waiver of Premium

In certain types of health insurance, future premiums will be waived upon the diagnosis of a specific illness. For instance, critical illness covers waive off future premiums following the diagnosis of any of the named illness.