What Is Moratorium Period in Health Insurance?

Posted on: Jul 2, 2024 | 3 mins | Written by: HDFC ERGO Team

What Is Moratorium Period in Health Insurance?

When you are buying health insurance, you will come across various terminologies or components that make an insurance product. The moratorium period is one such important term in health insurance. It is related to pre-existing conditions and is a part of all health insurance policies in India. The moratorium period in health insurance is the timeframe when you can’t raise claims for certain pre-existing conditions. Therefore, if your policy is in the moratorium period, your insurance provider will not entertain claims for pre-existing conditions. Let’s talk about this health insurance term in detail.

What is the moratorium period in health insurance?

The moratorium period is the waiting period for health insurance coverage for pre-existing conditions.

A pre-existing condition (PED) is a medical condition that existed before buying health insurance. Some examples of these conditions are diabetes, high blood pressure, asthma, arthritis, and thyroid disease.

After the latest amendments, the IRDAI, or the Insurance Regulatory and Development Authority of India, has directed insurance companies to reduce the moratorium period in health insurance from 8 years to 5 years. This has been effective from 1st April 2024.

What is the purpose of the moratorium period?

Insurance policies have a moratorium period to prevent people from buying health insurance only when diagnosed with a pre-existing condition. This will not be ideal as it will increase both health insurance claims and policy premiums exponentially.

With a moratorium period in place, individuals will buy health insurance in advance, especially those at a higher risk of suffering from pre-existing conditions. This will reduce the financial risk for insurance providers and prevent them from charging abnormally high policy premiums to distribute the risk.

Another important purpose and benefit of the moratorium period is that it encourages people to disclose their medical history correctly during the application process. When they know that the policy will cover pre-existing conditions after 5 years, they may not hide the health issues they are suffering from.

How does the moratorium period work?

The moratorium period in health insurance works in the following ways —

• At the time of policy purchase:

Before issuing a health plan, the insurer will check the pre-existing conditions you may be suffering from. If they find medical records or evidence of any pre-existing condition you are suffering from, the same will not be covered until the moratorium period ends.

However, during this period, the insurer will cover accidents and medical emergencies unrelated to the pre-existing condition you are suffering from.

• After the moratorium period:

Once the moratorium period is over, i.e., after 5 years, the insurance provider will cover the pre-existing conditions. However, some insurers do not cover certain pre-existing conditions, so remember to check the same in the policy wording.

Why does the moratorium period matter?

The moratorium period is an important part of health insurance for the following reasons —

1. Helps maintain a balanced risk pool:

The moratorium period in health insurance reduces the risk of insurance companies. It prevents people from buying health insurance only when they want to cover their pre-existing conditions, as this will create huge financial liabilities for insurance companies.

For example, suppose a person gets diagnosed with heart disease and buys health insurance to cover his medical bills. If he starts filing claims from the beginning of the policy period, the insurer will face heavy losses. Therefore, the insurer will be forced to increase policy premiums for all policyholders.

However, with the moratorium period in place, the insurer starts covering pre-existing conditions only after receiving policy premiums for the last 5 years. This reduces their financial liabilities and helps them keep policy premiums affordable.

2. Encourages people to buy health insurance early:

Since the moratorium period does not cover pre-existing conditions for the initial 5 years, health-conscious individuals and those with a family history of lifestyle diseases and life-threatening conditions will be encouraged to buy health insurance early in life. Having health insurance handy can ease your worries during medical emergencies and ensure peace of mind regarding the coverage of pre-existing conditions.

3. Moratorium period is mandatory:

The IRDAI, or the Insurance Regulatory and Development Authority of India, has mandated a moratorium period for health insurance. Therefore, all insurance companies in India must issue health plans with this waiting period for pre-existing conditions.

How do you learn about the moratorium period in your health plan?

When you are buying health insurance, you must do the following to learn about the moratorium period in your policy —

• Read policy documents carefully:

Read the terms and conditions of your health insurance policy to understand the moratorium period. Check the conditions that the policy covers and look for exemptions as well. Make sure that the pre-existing condition you are suffering from is covered under the health plan.

• Check policy premiums:

Check the premiums of your health plan and remember to pay them on time to keep the policy active. This will help you cover pre-existing conditions after the moratorium period is over.

• Consult an expert:

You can also consult an expert to understand the moratorium period and other terms and conditions of your health plan. They will tell you everything you may want to know about the policy and help you make an informed purchase decision.

Conclusion

The moratorium period in health insurance reduces the liabilities of insurance companies and helps keep premiums affordable for policyholders. However, when you are buying health insurance, make sure you understand how the moratorium period works to avoid any hassles later. Also, check different health insurance plans and their inclusions and exclusions to find one that offers the coverage you want for pre-existing conditions and other health issues. Most importantly, make sure you pay policy premiums on time during the moratorium period and after to enjoy the benefits of your health plan.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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