Your rights in life and medical insurance claims: Unpacking the moratorium clause

Nevertheless, as per the moratorium clause for medical insurance insurance policies as outlined by the Insurance coverage Regulatory and Improvement Authority of India (Irdai), if a policyholder has paid 5 or extra annual premiums, an insurance coverage firm can not reject their declare even when they’d not disclosed a pre-existing illness or another essential data.

“No coverage and declare of medical insurance shall be contestable on any grounds of non-disclosure and/or misrepresentation apart from established fraud, after the completion of the moratorium interval, i.e., 60 months of steady protection,” reads part 13 of chapter I of the Grasp Round on IRDAI (Insurance coverage Merchandise) Rules 2024–Well being Insurance coverage.

In life insurance coverage, if a policyholder has persistently paid three annual premiums, an insurance coverage firm can not reject a declare on grounds of misstatement or non-disclosures, and even fraud.

“No insurer shall repudiate a life insurance coverage coverage on the bottom of fraud, if the insured/beneficiary can show that the misstatement was true to the most effective of his data and there was no deliberate intention to suppress the actual fact or that such misstatement of or suppression of fabric truth are throughout the data of the insurer,” states the Insurance coverage Legal guidelines (Modification) Act, 2015.

Moratorium in medical insurance

In medical insurance, an insurer can contest a declare on the grounds of fraud even after 5 years.

“One shouldn’t misinterpret the (moratorium) clause. Whenever you purchase a coverage, you should declare your well being situations in totality. In case you conceal a significant illness which might have precipitated the insurance coverage firm to reject your coverage proposal within the first place, they will reject your declare even after 5 years are over, and rightfully so,” mentioned Harshvardhan Roongta, chief government of Roongta Securities. “The (moratorium) clause is legitimate provided that an insurer has rejected your declare for a non-critical illness.”

The moratorium clause got here to assistance from Mukherjea after she reached out to Insurance coverage Samadhan, an insurance coverage grievance redressal firm. “We regularly obtain such circumstances in medical insurance the place the moratorium interval is over however the insurer nonetheless rejects the declare classifying it as fraud,” mentioned Shilpa Arora, co-founder of Insurance coverage Samadhan. “Sabita’s declare was lastly authorised after we emphasised on the moratorium clause and the truth that the physician suggested hospitalisation.”

The years specified below the moratorium clause apply even when a policyholder ports a coverage to a different insurer. “The accrued credit gained below the ported and migrated insurance policies shall be counted for the aim of calculating the moratorium interval,” Irdai said in its round.

For instance, when you’ve got paid two annual premiums for a medical insurance coverage after which ported it to a different insurer, you solely should pay three extra annual premiums to finish the moratorium interval.

Nevertheless, in the event you enhance the insurance coverage cowl within the ported coverage, the moratorium interval will begin afresh on the elevated sum insured. In case you had a canopy of ₹10 lakh within the unique medical insurance coverage and ₹30 lakh within the ported coverage, the unique ₹10 lakh cowl could have a remaining moratorium interval of three years and the extra ₹20 lakh could have a five-year moratorium interval. Additionally, in the event you embrace a no-claim bonus of, say, ₹10 lakh within the ported coverage, the brand new 5-year moratorium will apply solely to ₹10 lakh.

The moratorium interval in medical insurance was once 8 years however was decreased to five years in Could 2024.

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Moratorium in life insurance coverage

Part 45 of the Insurance coverage Act, 1938 states that no life insurance coverage coverage shall be referred to as in query on any floor in any respect after the expiry of three years from the date of the coverage—i.e., from the date of issuance of the coverage, the date of graduation of threat, the date of revival of the coverage, or the date of the rider to the coverage, whichever is later.

“The distinction between the moratorium clause in life and well being is that claims within the latter will be denied on the grounds of fraud, however not within the former,” mentioned Mahavir Chopra, co-founder of Beshak.org, a digital insurance coverage market.

Nevertheless, insurance coverage firms nonetheless discover methods round this.

Madhya Pradesh-based Kabir Zaidi’s father had purchased life insurance coverage insurance policies from a number of insurers, together with two insurance policies of ₹25 crore every from Life Insurance coverage Company of India and a non-public insurer.

LIC cleared the declare for Zaidi’s father however the non-public insurer denied cost stating that the policyholder had not disclosed details about the LIC coverage, in accordance with Zaidi.

“My father had disclosed particulars of each single insurance coverage coverage to the insurer, together with the one taken from LIC, and but the declare was rejected. I approached the buyer courtroom, but it surely didn’t assist. I plan to re-appeal,” mentioned Zaidi.

To make sure, Zaidi’s father had purchased the coverage from the non-public life insurer in 2014.

“The modification to the Insurance coverage Act occurred in 2015, earlier than which insurers might reject claims even after 3 years in case of fraud. Since they (the non-public insurer) have categorised Zaidi’s case as a fraud, they mentioned the modification isn’t legitimate. However it’s legitimate. I need to emphasize that it isn’t a fraud declare both,” mentioned Sanjay Aggarwal, co-founder of Insurance coverage Samadhan.