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News & Views

Wednesday, Jul 4, 2012

Health policy clauses you shouldn't overlook before purchase or renewal

[Source : The Economic Times]

Have you gone through your health policy document? Ask this question to an average insurance policyholder and the answer is likely to be in the negative, especially if they have never made a claim.

In fact, most health insurance policyholders refer to their policy wordings only when their claim is rejected.

Even the language used by insurers is complex and riddled with legalese.

To reduce the confusion, the Insurance Regulatory and Development Authority (Irda) has recently proposed a one-page "Customer Information Sheet" which will explain terms and conditions in a simple manner.

In addition, Irda has indicated that it will come up with a standard list of exclusions to be followed by all insurers.

But don't use any excuses. It is in your interest to scrutinise your policy features at the time of purchase and renewal, as it would help you prevent many unpleasant disputes in future.

"Often, insurance-buyers do not read the clauses at all. They should make efforts to read the policy documents before signing up for the policy," says Joydeep Roy, CEO, L&T Insurance. If not the entire document, make it a point to read at least these clauses carefully:


Irda is encouraging a uniform set of exclusions to be adopted by all insurers. However, as of now, each company has a separate list of expenses that it does not pay for.

Typically, these exclusions include dental treatment, preventive healthcare check-ups, diagnostic tests (if they do not result in treatment), post-treatment tonics, tools like wheel-chairs and so on.

Then, there are certain conditions that may not be covered in the initial 1-2-year period. For instance, cataract and piles in the first year. Cosmetic surgery, too, is not admissible unless required for medical reasons.


While some new-age health insurers are doing away with sub-limits, most policies do prescribe internal limits on room rent, surgeons' fees, operation theatre charges, among other things.

Remember, the implications of these caps are far deeper - insurers also reduce associated charges proportionately, as tariffs are linked to the type of room chosen.


You many not know this, but many insurance policies state that only reasonable and necessary expenses will be eligible for a claim. That is, if your hospital has charged you 1 lakh for a surgery which ordinarily costs 50,000, the insurer will approve the lower amount.

"By invoking this clause, the insurance company can question high/inflated costs billed by the providers," says V Jagannathan, chairman and managing director, Star Health & Allied Insurance.

Claim loading

Many policies contain this clause, which increases your premium - at times up to 200% of your current premium - after you make a claim.

Again, the pre-disclosed loading policy varies from insurer to insurer. That is why it merits a close scrutiny at the time of buying a health product.

"It can have a direct impact on your long-term planning for premiums. Since certain products have punitive claim loading rates of up to 200%, it is an important condition customers should be aware of while buying the product," says Mahavir Chopra, head, e-business,, a health insurance advisory firm.

If Irda's proposals are finalised, companies will be able to impose the pre-determined loading only if your claims in each of three consecutive years (except the previous one) exceed 500% of the premium paid.


Many senior citizens complain that renewal requests are turned down on the basis of their age. Remember, you can take your insurer to court for such refusals.

They cannot reject renewal proposals on any ground other than fraud, misrepresentation and moral hazard. Since regulations prohibit changing the existing terms, it is more likely that you will be sold a new product. It's best to scrutinise the features before consenting to the renewal contract.

Waiting period

Expenses incurred on treatment of pre-existing diseases are usually covered after a period of one to four years, depending on the illness, product and insurer.

This time-frame is known as waiting period, which makes it difficult for policyholders to switch insurers at will. However, thanks to health insurance portability, you need not serve the waiting period all over again if you transfer your policy to another insurer.

For instance, say your two-year-old policy stipulates a waiting period of four years and even the new policy specifies the same waiting period. Now, if you decide to switch to the latter, your waiting period will only be two years.

Co-pay ratio

If your policy contains a co-pay provision, it means your expenses will not be borne by the company fully.

For instance, if your co-pay ratio is 10%, you will have to pay 10 from your pocket for every 100 claimed. The clause could come into play for particular age groups or illnesses, treatment at non-network hospitals and so on.


So far, insurers are jointly responsible for disbursing claims of policyholders with multiple policies in the ratio of the sum insured. Now, however, Irda's draft guidelines seek to let the policyholder identify the insurer who would pay out the claim.

Thus, the policyholder will be able to make optimum use of her covers, avoiding claim loading and loss of cumulative bonus at the same time.

In addition, customers should also go through the clauses related to service guarantees and claim service assurances. For instance, find out whether or not the company is giving a written undertaking on settling claims on time," says Roy.

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