What is the Moratorium Period in Health Insurance

What is the Moratorium Period in Health Insurance?

The moratorium period in health insurance is a defined timeframe after which insurers can not reject claims of the policyholders due to non-disclosure or misrepresentation of medical history, except in cases of proven fraud. This provision aims to encourage policyholders to disclose their medical history accurately at the time of purchasing the policy

As of April 1, 2024, the IRDAI (Insurance Regulatory and Development Authority of India) has reduced this period from 8 years to 5 years for all health insurance policies in India.

Purpose of the Moratorium Period for Health Insurance

The health insurance moratorium period exists to create a fair and balanced health insurance system for both insurers and policyholders. Here’s why it’s important:

1. Prevents Misuse of Insurance

Without a moratorium period for health insurance, some people may wait to buy a plan once they are diagnosed with a serious or pre-existing condition. This can lead to a sudden rise in claims and force insurers to charge much higher premiums for everyone.

2. Helps Keep Premiums Affordable

By having a moratorium period, people are encouraged to buy health insurance at an early age, especially those at higher risk. This reduces the insured risk and helps keep premiums more affordable for everyone.

3. Promotes Honest Disclosure

Knowing that pre-existing conditions will be covered after five years encourages applicants to be honest about their health history during the application process. There's less reason to hide any condition when you know coverage will eventually apply to your pre-existing disease.

Benefits of a Moratorium in Insurance

Here are some of the benefits offered by the health insurance moratorium period:

• Lowers Risk for Insurance Companies: It stops people from buying insurance only after they get seriously ill. This protects insurance companies from big, sudden claim amounts.
• Keeps Premiums Affordable: Insurance companies get five years to collect premiums before they start covering pre-existing diseases. This helps them keep the premium amounts low and affordable for everyone.
• Encourages Honest Health Declarations: People are more likely to share their true medical history when they know their illnesses will be covered later. This reduces problems during claim time.
• Builds Trust Between Policyholder and Insurer: After the moratorium period ends, the insurer cannot reject claims for pre-existing diseases (unless they are fraudulent). This builds trust and makes people feel safe with their insurer.
• Promotes Early Buying of Health Insurance: When people buy health insurance early, their moratorium period ends sooner. This means they can get full benefits before they face any major health issues.
• Gives Peace of Mind: Knowing that pre-existing conditions will be covered after a few years helps people feel secure, both financially and mentally.

How the Moratorium Period for Health Insurance Works?

To understand the functioning of the moratorium period for health insurance, you can go through the following points:

1. When You Buy the Policy

At the time of buying a health insurance policy, the insurance company may ask about your medical history or check your records. If they find that you already have a pre-existing disease, they will not cover it during the moratorium period.

However, any accident or health issue not linked to your pre-existing condition will still be covered during this time.

2. After the Moratorium Period Ends

Once the moratorium period (usually 5 years) is over, your insurer will start covering the pre-existing diseases too. But it's important to note that not all health conditions are always covered. Some insurers may still exclude certain illnesses, so it’s a good idea to read your policy details carefully.

Difference Between Moratorium Period & Waiting Period

Here are the differences between the health insurance moratorium period and the waiting period:

Conclusion

The moratorium period is like a trust-building time between you and your health insurance company. This period promotes honesty of the insured with the insurer and helps to avoid any misleading claims as well. This means your claims will be easier and smoother in the future.

So, while the wait seems long, the moratorium period gives you better protection and peace of mind in the long run. To know more about the moratorium in insurance, please refer to your policy document. In case you find any issue, feel free to connect with our customer support service.