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How to make a claim on two health insurance policies?

Mr. Jon working in an MNC has purchased a Health insurance from ABC insurance company along with his family for a family floater sum insured of Rs.4 Lacs. But with the rising medical operational costs he felt that this sum insured would not be enough and opted for an individual family health protection plan for a floater sum insured of Rs.8 Lacs from XYZ insurance company. He has taken adequate coverage and also informed the insurance companies regarding the other health insurance policy.


One bad day, while driving in his car he met with an accident, and was immediately rushed to a nearby hospital where he underwent a major surgery. The final bill at the time of discharge was around Rs.9 Lacs, he applied with both the insurance companies for claim settlement expecting that each insurance company would settle Rs.9 Lacs and he would end up getting Rs.9 Lacs profit from the whole scene. But little did he know that there would be a concept of indemnity and contribution in the insurance industry where the claim would be paid on the basis of actual or up to sum insured.

Concept of Indemnity in Insurance:

The concept of indemnity in insurance is that the insurance company promises to compensate the loss faced by the insured in return for a particular premium amount.

The insurance company guarantees to replace the insured in the same position as he/she was just before the occurrence of loss. In short the insured cannot be profited by insurance.

For example in the above case Mr. Jon has taken two insurance policies with a sum insured of Rs.4 Lacs and Rs.8 Lacs and the final hospital bill was around Rs.9 Lacs. In this scenario even though he had paid premium for both the policies, he cannot claim more than the expenditure i.e. hospital bill. Both the insurance companies together will settle Rs.9 Lacs only according to the principle of indemnity.

Concept of Contribution in Insurance:

The concept of contribution is a corollary of principle of indemnity and states that the claim amount will be contributed to the insured in proportionate to the premium paid / Sum insured selected. The insurance companies promises to settle the claim of the insured and replace him/her in the same position just before the occurrence of the loss.

In the above scenario Mr. Jon has taken insurance policy from 2 companies with Sum insured Rs.4 Lacs (ABC Health insurance) & Rs.8 Lacs (XYZ health insurance), the final claim amount was arrived at Rs. 9 Lacs. The insurers will pay Rs. 3 Lacs (ABC -4 Lacs S.I) and Rs. 6 Lacs (XYZ- 8Lacs S.I), respectively.

The claim amount is divided among the two insurance companies in proportionate to the premium paid and the sum insured taken. In this way the insured will be settled with the overall claim amount from both the insurance companies as per the principle of contribution.

There would be many reasons for buying multiple health insurance policies such as Employer health insurance coverage might not be adequate for the entire family, a separate health insurance policy for parents and many other reasons.

However as per the new health insurance rules regarding multiple insurers, if the claim amount is less than the sum insured of the insurer you are claiming then the contribution clause would not be applicable. Only if your claim amount is more than the sum insured of the insurer you are claiming the contribution clause will be applicable.

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