Personal Finance

Why timely renewal of health cover is critical

Bavadharini KS | Updated on February 10, 2019 Published on February 10, 2019

Pay the premium on time to reduce stress and for continuity benefits

Joe has a health insurance policy which was due for renewal on December 1. By the end of February, he had to undergo a small surgery and decided to renew his health policy on February 1. But he was unable to do so and lost all his policy coverage. This created undue financial stress for him, as he had to bear the medical expenses, entirely. To avoid this and keep the policy going, it is better to pay up before the due date. Here’s what you should know about renewal of health policy.

Grace period

Grace period is a saviour in disguise when due date is missed. It is a time-frame given to policyholders to pay the premium due without any penalty. For health insurance policies, the grace period given is usually 30 days. Once the premium is paid, the policy coverage will continue without loss of benefits such as waiting periods and coverage of pre-existing diseases.

According to Vaidyanathan Ramani, Head Production and Innovation “Normally, health policy renewal reminder is triggered 45 days prior to the due date. The insurer has to accommodate the same terms and conditions of the policy until the due date. But you will not be covered under the policy in the grace period given to pay the premium...” Post the premium payment, all benefits of the policy would be restored and claims paid.

Note that, you cannot revive or renew your health policy, post the grace period. So when you pay the premium after that period, it will be tantamount to you taking the health policy for the first time. This means, you will have to go through procedures such as waiting period, medical check-up once again.

The problem with purchasing new policies is that, if you happen to develop any health issues or complications, you might not even get a policy, adds Vaidyanathan Ramani.

Benefits lost

If you don’t renew your health policy on time, there are some benefits you may lose. The first and foremost being the continuity benefit — typically, the waiting period benefits. It is a period of time that has to pass before some or all of your health coverage can begin. Suppose your policy has a four-year waiting period and you had already waited for two years, now, when you don’t renew the health policy, you will lose this key advantage and have to begin all over again.

“Another subset of continuity benefit is the specific illness waiting period, which is generally one to two years. You will lose on this benefit as well, if you don’t renew your policy”, says Sapna Desai, Head marketing and communications, Cigna TTK Health Insurance.

Further, you will also have to forfeit the no claim bonus (NCB) if the health premium payment is not paid on time. The insurer gives a certain percentage as sum insured that comes as a bonus, known as NCB. This bonus gets accumulated over a long period up to a certain limit, provided you don’t make any claim inbetween. For instance, if you have a ₹10-lakh policy and you have not made a claim and renewed it on time, the insurer will give you an additional sum insured (say 10 per cent of the SI) as bonus. In this case, you will have ₹10 lakh policy plus ₹1 lakh as bonus. You will not be able to avail yourself of this benefit if you fail to meet the premium payment deadline.

Other benefits such as one-time discounts on premium may also be declined if the policy renewal is missed.

Remember, by not renewing your health policy, you will also be letting go the tax benefits under Section 80 D.

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