Sub limit

What is a sub limit?

A sub limit in health insurance is a cap or restriction placed on specific expenses within the overall sum insured of a health insurance policy.
Even if your total coverage is high, the insurer will only pay up to the defined sub limit for certain treatments, procedures, or hospital charges.

In simple terms, a sub limit decides how much of your total sum insured can be used for a particular expense.

Difference between sum insured vs sub limit

Why do insurers apply sub limits?

Insurers introduce sub limits to:

• Control claim costs
• Keep premiums affordable
• Prevent overutilisation of high-cost procedures
• Manage predictable or frequently claimed treatments

Sub limits are especially common in group health insurance plans, where pricing needs to balance employer budgets and employee coverage.

Types of sub limits in insurance

1. Room rent sub limit

A room rent sub limit caps the daily amount payable for hospital room charges (e.g., ₹3,000 per day).

Choosing a room above the limit can increase out-of-pocket expenses due to proportionate deductions.

2. Disease-wise sub limit

Some group health insurance policies apply limits to specific illnesses such as:

• Cataract
• Hernia
• Joint replacement

Example: Cataract treatment capped at ₹40,000 per eye.

3. Treatment-wise sub limit

This is one of the most common sub limits in health insurance.

Applies to treatments like:

• Maternity benefits
• AYUSH treatments
• Dialysis
• Mental health treatments

Example: Maternity sub limit of ₹75,000 under a ₹5 lakh policy.

4. Procedure-wise sub limit

Certain medical procedures may have fixed payout caps, regardless of hospital or doctor fees.

Common for:

• Minor surgeries
• Daycare procedures
• Diagnostic interventions

5. Sub limit in group health insurance plans

In group health insurance, sub limits are often applied to:

• Maternity
• Room rent
• OPD benefits
• Specific surgeries

However, many employers now opt for no sub-limit group health insurance plans to improve employee experience and reduce claim disputes.

How does a sub limit work? (Example)

Step-by-step explanation

Let’s break it down simply.

Policy Details:

• Sum insured: ₹5,00,000
• Sub limit: ₹50,000 for a specific treatment

Actual Hospital Expense: ₹90,000

Claim Settlement:

• Insurer pays: ₹50,000 (as per sub limit)
• Employee pays: ₹40,000 out of pocket

Even though the sum insured is ₹5 lakhs, the sub limit in health insurance restricts the claim amount.

Sub limit in group health insurance

Why employers choose plans with or without Sub limits

• With sub limits: Lower premium, predictable costs
• Without sub limits: Better employee satisfaction, fewer escalations

Startups and growing companies often begin with sub limits and later upgrade as budgets allow.

Impact on employees during hospitalization

• Higher out-of-pocket expenses
• Confusion during cashless claims
• Unexpected partial claim settlements

Sub limits are one of the top reasons for employee dissatisfaction with group health insurance.

How HRs can negotiate sub limits with insurers

HRs can:

• Remove room rent sub limits
• Increase maternity sub limits
• Opt for disease-wise limit enhancements
• Choose plans with no sub limit for key benefits

What are the advantages of sub limits?

Sub limits in health insurance can be beneficial in certain scenarios, especially when affordability and cost control are priorities.

1. Lower premiums for employers

By applying sub limits, insurers are able to reduce overall risk exposure. This results in lower premium costs, making group health insurance more affordable for employers, particularly startups and small businesses.

2. Better cost control for insurers

Sub limits help insurers manage high-frequency or high-cost claims. By capping specific treatments or expenses, insurers can maintain pricing stability and ensure long-term sustainability of health insurance plans.

3. Useful for predictable and standard treatments

For common and predictable treatments such as cataract surgery, maternity care, or minor procedures, sub limits create clarity on claim payouts and help standardise coverage across policyholders.

4. Enables basic coverage within limited budgets

Sub limits allow employers to provide basic health insurance coverage to employees even when budgets are constrained. This ensures wider coverage without significantly increasing premium costs.

What are the disadvantages of sub limits?

While sub limits help control costs, they can also create challenges for employees during claims.

1. Higher out-of-pocket expenses for employees

When medical expenses exceed the defined sub limit, employees must bear the remaining cost themselves even if their total sum insured is sufficient.

2. Confusing claim calculations

Sub limits often lead to confusion, especially when combined with room rent caps or proportionate deductions. Employees may not understand why the full bill is not reimbursed.

3. Common reason for partial claim settlement

Sub limits are one of the most frequent reasons for partial claim approvals, particularly in cashless hospitalization cases. This can cause dissatisfaction and claim escalations.

4. Reduced perceived value of insurance benefits

When employees experience repeated out-of-pocket expenses due to sub limits, it can reduce trust in the insurance plan and lower the perceived value of employer-provided health benefits.

How to check sub limits in your policy?

Policy wording sections to look for

• “Limitations”
• “Sub-limits”
• “Schedule of Benefits”
• “Specific Conditions”

Where employees usually miss sub-limit clauses

• Room rent eligibility
• Maternity benefits section
• Disease-wise exclusions
• Annexures or policy add-ons

Tip for HRs during policy onboarding

Always explain sub limits in group health insurance using real claim examples during employee onboarding.

How to avoid sub limit issues?

• Choose health insurance plans with no sub limits
• Opt for higher room rent eligibility
• Clarify sub limits before planned hospitalization
• Request a benefits summary from HR or insurer

Confused about sub limits in your group health insurance policy?

Pazcare helps HR teams remove hidden caps and build transparent employee health benefits.