How does room rent limit affect claims in health insurance policies?

Lets consider this extract from the policy document of health insurance policy issued by New India Assurance.

The document talks of "proportionate deduction". This is best explained with an example:

If the sum insured is Rs 5 lakhs and if the room rent limit is 1% of sum insured then it means the room rent limit is Rs 5,000 per day. If you happen to be hospitalized at a room rent of Rs 10,000 per day then it means your room rent limit is 50% of your actual rent. In such a scenario:

• 100% of the expenditure for medicines will be covered for by the insurance
• All other expenses will be covered only to the extent of 50% (proportionate deduction)

So if you had a claim of Rs 5 lakhs, which included medicines worth Rs 50,000. Then the claim settled by the insurance company will be:

• Rs 50,000 for medicines
• 50% of the balance Rs 4.5 lakhs i.e. Rs 2.25 lakhs

So the total claim amount will only be Rs 2.75 lakhs.