Moratorium period in health insurance policies

 

 

With the cost of health insurance rising consistently every year, a health insurance policy has become mandatory. However, health insurance comes with its own set of terms and conditions and an important feature of this policy is the moratorium period.

 Moratorium period is a term in a health insurance policy which indicates the time period where the policyholder will not be covered for any pre-existing illness in spite of having a health insurance policy. This is also known as the waiting period.

 Let us look at the moratorium period in more detail in this blog.

 How does the moratorium period work?

 When you decide to buy a health insurance policy, you will be required to fill a questionnaire by the insurance company where you will have to disclose information about any history of illnesses or medical conditions you may have. If any of your responses fall under the category of pre-existing illness, the insurer will ask you to wait for the duration of the moratorium period before you become eligible for coverage for any treatment related to pre-existing illnesses.

 The definition of a pre-existing illness in a health insurance policy is any illness that was diagnosed 36 months prior to purchasing the policy.

 The moratorium period which was previously eight years has now been reduced to five years as per the revised guidelines on health insurance policies by IRDAI. The changes were brought about by IRDAI earlier this year.

 After the moratorium period of 5 years is over, coverage for pre-existing illnesses will be activated and the insurer cannot reject any claim due to non-disclosure unless it is proven as a fraud.

 Reasons for moratorium period in health insurance policies

 Insurance companies require health insurance policies to have a moratorium period to prevent individuals from taking a policy when they are faced with the need for insurance coverage for pre-existing medical conditions.

 Such a trend will result in a surge in claims and increase the premium amount for everyone. The moratorium period prevents this by maintaining a balanced risk pool.

 The moratorium period or waiting period protects the insurers and prevents the trend of taking a health insurance policy only when there is a need when in fact this policy should be purchased as a precautionary measure to protect one’s health and finances.

 The moratorium period results in a balanced and healthier risk pool for insurers and makes the premium affordable for policy holders. In short, it is a win-win for both the insured and the insurer.

 Benefits of a moratorium period

 Moratorium period in health insurance encourages policyholders to be honest and upfront about their medical condition before buying a policy. Awareness of the moratorium period will more likely encourage policyholders to disclose all details of their medical condition before taking up a policy. This will help the insurance company to assess the risk of insuring individuals and determining the appropriate premium.

 The policyholder gains peace of mind knowing very well that any medical treatment for pre-existing illnesses will be covered once the moratorium period is over.

 IRDAI rule for moratorium period in health insurance policies

 The IRDAI says the moratorium period is compulsory for all health insurance policies and all insurance companies must follow this rule.

 Once the moratorium period ends, the insurance company cannot deny any claims except on the grounds of fraud.

 The IRDAI notification stipulates that an insurer cannot contest a health insurance policy and any claim on the basis of non-disclosure or misrepresentation after the policy has been in effect for sixty continuous months or five years (including portability and migration). However, the insurer may contest the policy and any claim on the basis of fraud.

 The moratorium period would apply to the sums insured of the original policy. If the sum insured is enhanced, the insured would have to wait sixty months or five years from the date of enhancement before making a claim on the enhanced limit.

 Effect of moratorium period in a health insurance policy

 The implications of the waiting period vary in the pre-moratorium and post-moratorium phase in an insurance policy.

 Pre-moratorium period: The insurance provider reviews your medical history for a predetermined amount of time throughout this initial period. Claims pertaining to specific conditions that you may have had treatment for, experienced symptoms of, or visited a doctor for may not be reimbursed if they discover evidence of pre-existing conditions.

However coverage for unrelated diseases or accidents that happen during this period is included.

 Post-moratorium period: The "look-back" time ends when the moratorium has been successfully served. This implies that, like any other medical condition, pre-existing conditions are covered by the insurance policy.

Certain pre-existing conditions may still be permanently excluded from some insurance policies, though. One should read the wordings of the insurance policy carefully before signing for health insurance.

 Buying a health insurance policy with moratorium period

 When buying a health insurance policy, it is better to disclose your medical history during the application process regardless of the moratorium period. This will help the insurer determine the premium and avoid any rejection of your claim.

 A moratorium period might not work for you if you have a pre-existing condition that requires immediate insurance coverage. In such a case, you can look for other options such as self-insurance or health insurance policies with zero waiting period.

 Today many insurers offer health insurance policies with coverage from day one to a maximum moratorium period of three years for pre-existing health conditions. Apart from this, some leading insurers offer optional covers to help policyholders bypass the waiting period for pre-existing diseases which require payment of additional premium amount.

 

The moratorium period can vary in every health insurance policy and hence it is important that you look at other policy features also such as critical illness benefits or hospitalisation benefits, medical procedure-based sub limits, coverage for modern medical treatment, co-pay, etc., when making a comparison of policies before making a purchase.

 Before buying a health insurance policy read it thoroughly to understand the terms and conditions and the implications of the moratorium period.

 

It is best to consult an insurance broker to understand how the moratorium period works and how it impacts your health insurance needs.

 

We at Zen Insurance Brokers assist in choosing a health insurance policy with clauses suited to your requirements. Get in touch with us for any assistance.

Disclaimer:

Zen Insurance Brokers is an IRDAI registered broker which facilitates quick and adequate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products.