Moratorium Period in Health Insurance: Meaning, Rules & Benefits

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

Moratorium Period in Health Insurance: Meaning, Rules & Benefits

When you are buying health insurance, you will come across various terminologies or components that make up 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 during which 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 discuss more about what is a moratorium period.

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.

As per 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 of the moratorium period is to encourage people to disclose their medical history accurately 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 for 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, 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 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.

Difference Between Moratorium Period and Pre-Existing Disease Waiting Period

When you buy health insurance to cover your pre-existing diseases (PEDs), the two important terms you should know about are a moratorium period and a waiting period. Here are the major differences between the two:

Details	Waiting Period	Moratorium Period
What does it mean	It is the time during which you cannot make any PED claims and you should wait until this period is over to file your claims.	It is the time period after which insurers cannot reject your PED claims for any reason, like non- disclosure or misrepresentation.
Can claims be rejected?	Yes, after the waiting period is over, insurers can check your PED claims and reject them for non-disclosure, misrepresentation and other reasons	No, after the moratorium period is over, insurers cannot reject PED claims except if they are fraudulent claims or if they are related to permanent exclusions
Duration	Maximum of 3 years	5 years

Things to Keep in Mind to Benefit from Moratorium Period in Health Insurance

Here are some tips to keep in mind to make the moratorium period better and get the most benefits from it:

▪ Buy a health insurance policy as soon as you start working to save on your premium costs.

▪ Read your policy document thoroughly to understand the terms of the moratorium period and your policy’s inclusions and exclusions, as this will give you a clearer understanding of the moratorium period's meaning.

▪ Always be transparent with your insurer when disclosing your pre-existing diseases at the time of buying a health insurance policy. This can help avoid claim rejections later.

▪ Review your coverage once a year and upgrade if necessary to ensure comprehensive and continuous coverage for your pre-existing conditions.

Conclusion

With the moratorium period reduced to five years as per IRDAI guidelines, policyholders, especially those who purchase health insurance at a younger age, stand to benefit significantly¹. That said, it is essential to carefully read the policy document and clearly understand exclusions to avoid the rejection of pre-existing disease claims even after the moratorium period ends.

While the moratorium helps reduce insurers’ long-term liabilities, it also places greater responsibility on policyholders by encouraging early purchase, accurate disclosures, and informed decision-making.

FAQs

1. What is the 8-year moratorium rule in health insurance?

Earlier, IRDAI prescribed a moratorium period of 8 years, after which insurers could not reject pre-existing disease (PED) claims, except in cases of fraudulent claims or permanent exclusions. However, the rule reduced the moratorium period to 5 years, effective 1st April, 2024.

2. How long does the moratorium period last in health insurance?

As per the latest guidelines, the moratorium period in health insurance is 5 years, provided premiums are paid continuously.

3. What do IRDAI guidelines say about the moratorium period?

According to IRDAI guidelines, the health insurance moratorium period for PEDs has been reduced from 8 years to 5 years, effective 1st April 2024.

4. What is the 5-year moratorium period in health insurance?

Under the 5-year moratorium period in health insurance, insurers cannot reject PED claims after five consecutive years of premium payments, except in cases of fraud or permanent policy exclusions.

5. What is the difference between a waiting period and a moratorium period?

A waiting period is the time during which PED claims cannot be made and may be rejected for various reasons. In contrast, the moratorium period is the duration after which insurers cannot reject PED claims, except for fraudulent claims or permanent exclusions.

6. What is the maximum duration of the moratorium period?

As per updated IRDAI guidelines, the maximum moratorium period is 5 years. The moratorium period meaning in Hindi is “Adhisthagan Avadhi”, while moratorium meaning in Kannada is “Nisedhadha Avadhi”. These terms may appear in regional policy documents.

7. What happens once the moratorium period is completed?

Once you know about what is moratorium period in health insurance and complete it, insurers cannot reject PED claims due to non-disclosure or misrepresentation. Rejection is allowed only for fraudulent claims or permanent exclusions.

8. Are health insurance claims non-contestable after 8 years of continuous premium payments?

Earlier, PED claims became non-contestable after 8 years of continuous premium payments. However, from 1st April 2024, this period has been reduced to 5 years as per IRDAI regulations.

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

Do You Know About The New Health Insurance Claims Norms Introduced

IRDAI Guidelines for Health Insurance Claim Settlement

IRDAI Removes Health Insurance Age Limits in India

Understanding Diabetes-Related Health Insurance Premiums

What Does a Health Insurance Policy Cover?