In today's fast-paced world, with rising medical costs and unexpected health issues, having a reliable and comprehensive health insurance policy is the need of the day. However, despite its significance, many individuals hesitate to invest in health insurance due to a myriad of complex terms and misconceptions.
In India, it is common to hear myths about insurers frequently rejecting claims, further discouraging potential policyholders. Shockingly, a staggering 50% of Indians find health insurance perplexing and cryptic, as revealed by a study conducted by The Business Outlook.
Amidst these myths and all the complex jargon insurance, one term that many are unfamiliar with is the moratorium period.
What exactly is a moratorium period and how can it help your claims?
To know its significance and demystify the intricacies surrounding it, delve deeper into our article below.
First, How Does Health Insurance Work?
A health insurance works by the insurer assessing your risks and the likelihood of you making a claim. They rely on the information you provide, like your age, health history, lifestyle, etc., to determine how much premium will be charged for your insurance coverage.
You provide this information through your declarations via –
👉The proposal form when you apply for insurance.
👉During interactions with the insurer or their representatives, like when you speak with someone at a lab or call centre.
Since the insurer bases their decisions on the information you provide, it is important to be accurate and honest in your declarations. This ensures you get the right coverage and pricing for your needs. If you provide incorrect information in your policy, the insurance company can cancel your policy or deny your claim. These rejections often occur in cases where insurers would have applied loading conditions or declined the case had they known about the hidden information.
In the past, insurers could cancel your policy or deny claims even after years of renewing it, causing uncertainty for customers. To address this, around 2020, IRDAI introduced the "moratorium period."
What Is A Moratorium Period? How Does the Moratorium Period Work?
After being covered continuously for sixty months by your policy that includes circumstances of porting and migration, the insurer cannot contest your policy and claims due to non-disclosure or misrepresentation, except in cases of proven fraud. This sixty-month period is known as the moratorium period after which the insurer cannot deny the claims.
As of April 1, 2024, the moratorium period has been reduced from 96 months to 60 months. This means that after 60 months, the insurer cannot reject a claim due to non-disclosure unless fraud is proven. Though this comes as a relief, you should keep in mind that the insurer still has the right to reject claims if they can prove fraud. This is why it becomes essential to understand what constitutes fraud and how insurers distinguish between genuine claims and fraudulent ones.
Purpose Of Moratorium Period
The moratorium period serves as a crucial safeguard for both policyholders and insurers within the realm of health insurance. Its primary purpose is to establish a timeframe during which insurers cannot contest a policy or deny claims based on non-disclosure or misrepresentation by the insured party, except in cases of proven fraud.
What Is Fraud?
According to Section 17 laid out in the Indian Contract Act of 1872, fraud encompasses various deceitful acts committed by a party to a contract, or with their cooperation, or by their representative, with the intention to mislead another party or induce them to enter into the contract. These acts include –
- Making a false suggestion as a fact by someone who does not believe it to be true.
- Actively hiding a fact by someone who knows or believes it to be true.
- Making a promise without any intention of keeping it.
- Any other act aimed at deceiving.
- Any act or omission that the law declares to be fraudulent.
In simple terms, a fraudulent health claim is made when someone purposely deceives an insurer for their own benefit. If an insurance provider wants to reject a claim after 60 months, they need to show proof that –
- You did not disclose or misrepresented information
- You were aware of this information
- You did it on purpose or with willful intention.
How Can You Use The Above Information?
Let’s look at a few ways to put this information into use –
⏩When You Are Buying A Policy
- Be sure to disclose all the information you know.
- Use extra paper or email to add any additional details, and keep records of all confirmations.
⏩When You Already Have A Policy
- If you are aware of any non-disclosure, inform the insurer promptly.
- Holding onto a policy with undisclosed information is like giving away your insurance money to a wealthy company. This is because you should be aware that your claims will be questioned.
- Insurers are skilled at uncovering undisclosed information during claims, and so, you should not underestimate them.
How To Navigate The Moratorium Period?
Navigating the moratorium period requires proactive communication and diligence on the part of policyholders. When purchasing a policy, ensure that you provide accurate and complete information during the application process. Disclose all relevant details about your medical history, lifestyle, and any pre-existing conditions to avoid potential issues during the claims process.
If you become aware of any discrepancies or omissions in your policy information, promptly notify your insurer to rectify the situation. Transparency and honesty are key to maintaining a positive relationship with your insurer and ensuring that your coverage remains valid and effective.
Important Note!
When you are purchasing health insurance for elderly parents or individuals with medical histories, they might forget to mention certain details. To ensure accuracy, review their medical records and speak with their family doctor and double-check everything before making your declarations.
This way, if there is ever a dispute with the insurer in the future, you can show that you took thorough steps to provide accurate information. By being diligent and proactive, you can avoid potential issues down the road.
To Conclude,
After the 60-month moratorium period in health insurance, insurers cannot reject claims due to undisclosed information. You should, however, remember that honesty is key when providing information to insurers, as misrepresentations can still lead to claim rejection. By staying informed and truthful, you can ensure that your insurance coverage remains reliable and effective.
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