What is moratorium period in health insurance? How is it different from the free-look period or waiting period?
—Name withheld on request
Moratorium period is also referred to as the look-back period in insurance. This is a safeguard clause built-in for the policyholders. Once the moratorium period is over, insurers cannot reject a claim on the grounds of non-disclosure, or misrepresentation. Insurers have to establish a case of fraud to reject a claim.
For health insurance claims in personal policies, insurers often question disclosures made by the policyholders at the proposal stage. This is especially true for chronic ailments such as diabetes, blood pressure or arthritis. Many policyholders do not necessarily maintain historical health records, so they disclose information on best available basis in the proposal form. At the time of claim, insurers scrutinize these disclosures. They tend to match these disclosures with any commentary made by the treating doctor in the discharge summary. Any variation in the disclosure leads to disputes in claim. Once the moratorium period is over, insurers lose the right to reject claims on such grounds. It also increases the onus of insurers to do a thorough underwriting at the proposal stage, before accepting premium payment. The moratorium period used to be eight years earlier but was recently reduced to fove years.
Free-look period is the initial period after receipt of the policy document. During this period, the policyholder can review the policy wordings and choose to cancel the policy. In such a case, the insurer is obliged to return the full premium. Insurers can only deduct risk premium for the period of coverage and administrative cost such as health underwriting. Free look period is also a safeguard clause for the policyholders to curb mis-selling. If the policy terms are not in line with the understanding given at the proposal stage by the insurance agent or the company, then policyholder can cancel the policy. The policyholder is not obligated to justify their decision. In health insurance, the free-look period is of 30 days from the date of receipt of the policy document.
Waiting period is the cooling-off period before which a claim becomes payable for the specific condition. For example, health insurance policies generally have a waiting period for pre-existing diseases. Claims can be filed in the policy for claims linked to pre-existing ailments only after the policy is continuously renewed for the duration of the waiting period. The actual waiting period for pre-existing diseases can vary across insurers and products. It used to range from one to four years. However, through a recent regulation, the maximum waiting period for pre-existing diseases is now capped to three years. So, insurers are liable to pay claims for pre-existing ailments after this period, unless they have put in a clause for specific permanent exclusion.
Abhishek Bondia is principal officer and managing director at SecureNow.in
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Published: 25 Apr 2024, 04:05 PM IST