Types of Health Insurance Policies
The main kinds of health cover in India — indemnity and fixed-benefit, individual, family floater, group, top-up and super top-up — and what the law and IRDAI currently require on age, mental illness and AYUSH treatment.
Two ways a policy can pay
Health insurance pays for medical treatment in one of two ways. An indemnity policy reimburses the hospital expenses actually incurred, up to the sum insured. A fixed-benefit policy pays an agreed sum when an event defined in the policy occurs, such as the diagnosis of a listed critical illness; the amount does not depend on the hospital bill.
Individual, family floater and group
An individual policy gives each insured person a separate sum insured. A family floater has a single sum insured shared by all the family members covered: any member can use any part of it, but the family's total claims in a policy year cannot exceed that one amount.
A group policy covers the members of a group under one contract. It is typically arranged by an employer as an employee benefit: the employer pays the premium and cover often extends to the employee's family. Pooling risk across many people generally makes group cover cheaper per person.
Top-up and super top-up
A top-up plan pays only the part of a claim above a deductible, a threshold met by a base policy or by the policyholder. A top-up applies the deductible to each claim separately, so it pays only when a single claim exceeds it. A super top-up applies it to the total of all claims in the policy year, so several smaller claims can together cross it. Either way, the plan can pay up to its own sum insured.
What the rules require today
Insurers must offer health insurance products for all age groups; older material describes an earlier rule that entry be allowed at least up to age 65. Section 21(4) of the Mental Healthcare Act, 2017 requires cover for mental illness on the same basis as physical illness, and IRDAI requires AYUSH treatment to be treated on a par with other systems of medicine.
What a policy pays for still depends on its wording. Most standard policies cover day-care procedures, AYUSH treatment and ambulance charges, while dental treatment is typically excluded unless an accident makes it necessary.
Separately, the government's PM-JAY scheme provides hospital cover of ₹5 lakh per family per year. Since 29 October 2024 its Ayushman Vay Vandana extension makes everyone aged 70 or over eligible, whatever their income.
Rules at a glance
One floater, four people
Illustration with assumed figures: a family of four in Kochi holds a family floater of ₹10 lakh. The father is hospitalised and the admissible claim is ₹7 lakh. ₹10 lakh − ₹7 lakh = ₹3 lakh is what remains for all four members for the rest of that policy year, unless the policy has a feature that restores the sum insured.
Two claims in a year: top-up against super top-up
- Assumptions, for arithmetic only: a base policy of ₹5 lakh; a second plan with a ₹5 lakh deductible; two admissible claims in one policy year, of ₹4 lakh and ₹3 lakh; no co-pay or sub-limits.
- Base policy: pays the first claim of ₹4 lakh, leaving ₹5 lakh − ₹4 lakh = ₹1 lakh for the second. Unpaid part of the second claim = ₹3 lakh − ₹1 lakh = ₹2 lakh.
- Top-up: ₹4 lakh and ₹3 lakh are each below the ₹5 lakh deductible, so it pays nothing.
- Super top-up: the year's claims total ₹4 lakh + ₹3 lakh = ₹7 lakh, which is ₹2 lakh above the deductible. It pays ₹2 lakh.
Result. With the top-up, ₹2 lakh stays with the family; with the super top-up, nothing is left unpaid.
Key points
- An indemnity policy reimburses actual hospital expenses; a fixed-benefit policy pays an agreed sum on a defined event.
- A family floater is one sum insured shared by the family; group cover is typically arranged by an employer.
- A top-up applies its deductible to each claim; a super top-up applies it to the year's total claims.
- Products must be offered for all ages, and mental illness covered on the same basis as physical illness.
Common misunderstandings
- A family floater does not give each member the full sum insured: one large claim reduces what is left for everyone.
- A top-up is not a second base policy: it pays nothing until the deductible is crossed.
- The all-ages rule concerns availability: the premium and terms at any age are still set by the insurer.
Questions people ask
Can a person hold more than one health policy?
Yes. With several indemnity policies the policyholder chooses the insurer to claim from first, and that insurer coordinates the balance with the others. Fixed-benefit policies each pay their agreed sum.
Is dental treatment covered?
Typically not, unless it is required because of an accident. The policy wording decides.
What is the most a super top-up can pay?
Its own sum insured. A ₹25 lakh super top-up with a ₹5 lakh deductible can pay up to ₹25 lakh a year; with a ₹5 lakh base policy, total protection is ₹30 lakh.
What this lesson relies on
- IRDAI Master Circular on Health Insurance Business (29 May 2024)
- Mental Healthcare Act, 2017 — section 21(4)
- Ayushman Bharat PM-JAY and Ayushman Vay Vandana — Government of India scheme announcements (Press Information Bureau, October 2024)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.