Health insurance for mental illness: Coverage, exclusions and costs explained

Mental health treatment can involve recurring expenses, including consultations, therapy sessions and prescribed medicines. While Indian law provides for insurance coverage of mental illness on the same basis as physical illness, the benefits available to policyholders depend on the terms and scope of their health insurance plans.

A survey commissioned by Aditya Birla Sun Life Insurance (ABSLI) found that 81% of respondents believed mental health issues were rising across society, while nearly 80% expressed hesitation about seeking therapy or counselling.

The findings, part of the insurer’s अ-Nishchit Index 2.0, were based on 3,583 respondents across 20 cities, surveyed between July and October 2025.

Released ahead of World Mental Health Day on October 10, the survey also found differences across regions and genders in respondents’ attitudes towards mental health and professional support.

What does the law say about mental health insurance coverage?

Section 21(4) of the Mental Healthcare Act, 2017, requires insurers to provide medical insurance for the treatment of mental illness on the same basis as is available for the treatment of physical illness.

The Insurance Regulatory and Development Authority of India (IRDAI) has also issued directions to insurers regarding compliance with this provision.

However, policyholders need to check the specific benefits available under their plans, particularly the distinction between psychiatric hospitalisation and outpatient treatment, such as consultations with psychologists, psychiatrists and therapists.

Saurabh Vijayvergia, founder and CEO of CoverSure, said some policyholders may be unaware that their health insurance covers psychiatric hospitalisation or may be uncertain about whether outpatient therapy is included.

He said policy documents, communication at the point of purchase and claims processes need to clearly explain the coverage available to customers.

Does health insurance cover therapy and counselling?

Coverage for outpatient mental health treatment varies by policy. Customers should check whether consultations and therapy sessions are covered, whether separate limits apply and whether treatment must meet specified conditions.

Kulin Shah, co-founder and COO of Onsurity, said mental healthcare can involve recurring expenses that affect household budgets, particularly when treatment continues over several months.

He advised employees to check outpatient coverage, treatment eligibility, session or annual limits, co-payments, waiting periods and exclusions. They should also distinguish between benefits provided under an insurance policy and counselling services offered separately by an employer.

Shah said employees covered by group health insurance should also check how benefits are affected when they leave their jobs. Reimbursement timelines and the requirement to pay treatment costs upfront are other factors that may affect how policyholders access their benefits.

Mental health benefits offered by insurers

Some health insurance products include access to mental health consultations or counselling as part of their stated benefits.

Vineet Gupta, head of product development at ManipalCigna Health Insurance, said the company’s ManipalCigna INFINIX product includes unlimited e-consultations with psychologists and nutritionists, along with mental well-being tools and lifestyle support.

Gupta also cited the insurer’s India Health Quotient 2026, which found that respondents assigned equal importance to mental and physical health, each accounting for 50% of their perceived importance to overall well-being.

ICICI Lombard’s Gen Z-focused health proposition, VIBE, includes a feature called Mind & Mood Recover, which provides access to three to 10 professional mental health counselling sessions, according to the company.

These are product-specific benefits. Policyholders should check the applicable terms, eligibility criteria and limits before assuming that similar services are included in other health insurance plans.

How can mental health conditions affect physical health?

Dr Divya Kannan, clinical psychologist, founder of Dhira Wellness and executive and leadership mental health consultant, said prolonged stress, anxiety and depression can manifest through physical symptoms, including headaches, body pain, fatigue, low energy and stomach problems.

She said stigma can prevent people from seeking professional help, with some viewing treatment as a sign of weakness or believing they should manage their difficulties without assistance.

Kannan said access to professional support is important and that evidence-based therapy, along with medication when required, can help people manage mental health concerns.

What should policyholders check before buying health insurance?

Before purchasing or renewing a policy, customers should examine the policy wording and check:

• Hospitalisation cover: Whether psychiatric treatment requiring hospitalisation is covered and what conditions apply.
• Outpatient benefits: Whether consultations with psychologists, psychiatrists and therapists are covered.
• Limits and cost-sharing: Any sub-limits, co-payments, deductibles or other conditions affecting the amount payable by the insurer.
• Waiting periods and exclusions: Whether specific conditions or treatment requirements affect eligibility.
• Claims process: Whether prior authorisation is required, what documents must be submitted and whether expenses need to be paid upfront.
• Employer-provided benefits: Whether counselling is covered by insurance or offered separately through an employee assistance programme.