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Archive / Investment Adviser (Level 2) / Non-Life Insurance Products
nism-series-xb-third-claim-rejected-exhausted-base-and-deductible[ INVESTMENT ADVISER (LEVEL 2) ]

In Esther's health insurance case (Base Policy = Rs. 3 Lakhs; Top-Up Policy = Rs. 10 Lakhs with Rs. 5 Lakhs per-claim deductible), why was Claim 3 of Rs. 4 Lakhs completely REJECTED by both policies?

[ A ]Because the hospital was located outside India
[ B ]The Base Policy sum insured of Rs. 3 Lakhs was already completely exhausted by Claims 1 and 2, and Claim 3 (Rs. 4 Lakhs) failed to breach the Top-Up policy's single-claim deductible threshold of Rs. 5 Lakhs[ CORRECT ]
[ C ]Because Esther did not submit a death certificate
[ D ]Because the Top-Up policy was cancelled by IRDAI
Takeaway

Claim 3 was rejected because the Base Policy's Rs. 3 Lakh sum insured was already exhausted by Claims 1 and 2, and the Rs. 4 Lakh Claim 3 did not exceed the Top-Up's Rs. 5 Lakh single-claim deductible, so option B is correct.

Derivation
The Base Policy paid Rs. 2 Lakhs on Claim 1 and its remaining Rs. 1 Lakh on Claim 2, fully exhausting its Rs. 3 Lakh sum insured by the time Claim 3 arose. The Top-Up policy, being a standard (non-super) top-up, requires each individual claim to independently exceed its Rs. 5 Lakh deductible before it pays anything; since Claim 3 was only Rs. 4 Lakhs, it fell short of that threshold and the Top-Up paid nothing either. With both layers exhausted or unmet, the full Rs. 4 Lakhs fell to Esther as out-of-pocket cost. This tests whether candidates can trace claim-by-claim exhaustion of the base sum insured together with the per-claim deductible test, the combination of which is what fully rejects Claim 3.
Why the others fail
A — Because the hospital was located outside India
The case involves standard domestic hospitalizations; the hospital's location outside India is not a stated or relevant fact in this scenario.
C — Because Esther did not submit a death certificate
Health insurance covers hospitalization and medical treatment of living policyholders; submission of a death certificate has no relevance to this claim.
D — Because the Top-Up policy was cancelled by IRDAI
The policy remained in force throughout; the claim was declined because it failed to meet the contractual deductible threshold, not because IRDAI cancelled it.