Read the terms and conditions carefully. That is what you are told while
buying an insurance policy. However, even after hours of poring over the contract, chances are you would
not be any better informed. The reason being insurance contracts are replete with legalese.
In recent years, the regulator and insurers have taken steps to reduce
ambiguity in insurance contracts. You too, need to dissect the clauses to avoid shocks at the time of claim
A clause meant to protect the interest of policyholders. It prevents insurers
from calling a life policy into question after the first three years, on any grounds. Till that time,
insurers can raise queries in case of frauds. In such cases, the insurer will have to give in writing the
grounds on which it has based its allegation. You can prevent claim rejection if you can prove that you did
not knowingly make a wrong statement or suppress facts.
You have the option of returning the policy within a fortnight of receiving
the document. If you are not happy with the cover you have been sold, you can return the policy and get a
refund. Remember, the period starts from the day you receive the policy documents and not the date of
issue. However, while your premium will be refunded, charges for medical tests, stamp duty and
proportionate risk premium will be deducted.
The amended insurance Act has introduced the concept of beneficial nominees—
parents, spouse and children. Even if other legal heirs lay claim to insurance proceeds, the insurance
company can hand over the proceeds to the beneficial nominees. The policyholder is allowed to specify
multiple beneficial nominees and share that each is entitled to.
Insurers have to compulsorily renew policies except on grounds of fraud,
moral hazard or misrepresentation. Likewise, insurers cannot arbitrarily hike renewal premiums on the basis
of claims made in the previous year. Premiums can be raised only on the basis of overall age-wise and
ailment-wise claims experience, among other factors.
"This clause decrees that only 'reasonably and necessarily' incurred expenses
will be eligible for claim, leaving room for interpretation. "This is one of the grey areas and give rise
to disputes with customers at the time of claim settlement," says Sanjay Datta, Chief, Underwriting and
Claims, ICICI Lombard. The clause is aimed at ensuring "fair billing" by hospitals known to inflate bills
for patients covered under health insurance.
"Reasonable charges are arrived at by insurers by comparing the standard
billing charged by a hospital and comparing the same with the prevailing charges in the same geographical
area for similar or identical services," says Subrahmanyam B, Senior VP and Head, Health, Commercial Lines
and Product Development, Bharti-AXA General Insurance.
"In other words, if your hospital has charged Rs1 lakh for a treatment
procedure whose 'reasonable' cost is deemed to be Rs 70,000, you will be entitled to the latter amount.
Health insurance regulations, however, have narrowed down the scope for interpretation. The insurer needs
to justify the reason in writing. Therefore, make sure you question the company's decision if you find it
to be unfair.
Exclusions and sub-limits
Insurance policies exclude or impose sublimits on certain conditions or
expenses. So, focus on checking what is not covered. The IRDAI issued a list of 199 exclusions in 2013. You
also need to keep an eye on the waiting periods for various claims. For example, all claims except the ones
related to accidents are not eligible for payout during the the initial 30 days from policy
Sub-limits refer to caps on individual expense categories, within the overall
sum insured. Even if your total claim has not exhausted the cover, you will still have to shell out some
amount from your pocket. Generally, they are imposed on hospital room rent, doctor's fees, operation
theatre charges and so on.
Do not make the mistake of assuming that the amount that you will have to pay
will be small—the sub-limit on room rent, for instance, can scale down your entire claim, as all other
charges, including doctor's fees, will be reduced proportionately. If the clause makes you uncomfortable,
buy premium variants that do not carry any sub-limits. On the other hand, if you do choose a policy with
such restrictions, ensure that you choose a room that fits the bill.
Like sub-limits, co-payment clause too is meant to restrict the insurer's
liability. This clause puts the onus of paying a small part of the admissible claim on the policyholders—
the insurer then takes care of the balance amount. The clause comes into play primarily in case of senior
citizens' policies or in case policyholders choose to get treated at hospitals that are not part of the
insurer's cashless network.
Some insurers also offer product variants that charge a lower premium if
policyholders voluntarily opt for copayment. Make sure you go through this clause carefully—the percentage
of claimsharing is mentioned clearly in the policy documents—before signing up for the policy.