Suryaa Business Desk: Financial and insurance experts are warning policyholders against canceling existing health insurance policies to switch to new ones based solely on lower premiums or agent recommendations. Doing so may result in the loss of significant legal protections earned over the previous five years.
According to Insurance Regulatory and Development Authority of India (IRDAI) regulations, a moratorium period applies once a policyholder maintains a health insurance policy continuously for 60 months. After this five-year period, insurance companies cannot reject claims based on non-disclosure or incorrect information in the application form, unless they can prove deliberate and significant fraud.
When a policy is canceled to purchase a new one, the five-year moratorium protection is voided. The countdown for a new five-year period begins from the first day of the new policy. During this time, companies may reject hospital bill claims by alleging that medical histories, such as blood pressure or diabetes, were not properly disclosed.
Experts advise that the only secure ways to change insurance are through "porting" or "migration." Porting involves moving to a different insurance company, while migration involves switching to a different plan within the same company. These methods ensure that the benefits of the five-year moratorium and waiting periods are transferred to the new policy.
If the sum insured is increased during a policy switch, the five-year moratorium protection applies only to the original coverage amount. The additional coverage amount will be subject to a new five-year moratorium period. Experts suggest that policyholders should thoroughly examine room rent limits, co-pay clauses, and policy terms rather than focusing only on premiums.
