Recently, a founder Alu insertion in exon 4 of RP1 was detected in Japanese and Korean patients with inherited retinal diseases (IRDs). However, carrier frequency and diagnostic challenges for detecting AluY insertion are not established. We aim to investigate the frequency of AluY in individuals with or without IRDs and to overcome common diagnostic pitfalls associated with AluY insertion. A total of 1,072 subjects comprising 411 patients with IRD (IRD group) and 661 patients with other suspected Mendelian genetic disease (non-IRD group) was screened for AluY insertion. Targeted panel sequencing and whole-genome sequencing were used for detection of AluY insertion, and an optimized allele-specific PCR (AS-PCR) was used for validation. The AluY insertion was detected in 1.5% in IRD group (6/411). The AluY insertion was not observed in non-IRD group (0/661). All patients with AluY were confirmed to have RP1 pathogenic variants on the paired allele. We identified AluY allele dropout leading to false homozygosity for c.4196del pathogenic variant in Sanger sequencing. The allelic relationship between variants of RP1 was accurately determined by AluY AS-PCR. Delineating diagnostic challenges of AluY insertion and strategies to avoid potential pitfalls could aid clinicians in an accurate molecular diagnosis for patients with IRD.