Moratorium Period in Health Insurance

Moratorium period can have different meanings depending on the context. In general, moratorium period refers to a legally authorised suspension or deferral of obligations. In health insurance, it is the 5-year duration after which insurers cannot reject claims based on non-disclosure. This duration is determined by the Insurance Regulatory and Development Authority of India since April 2024 (IRDAI).

On the other hand, the moratorium period meaning in loans (home loans, personal loans, etc) means an EMI holiday. That is, a temporary halt in loan payments. This period is approved by your bank to help you avoid any form of penalty during financial challenges. This period is regulated by the Reserve Bank of India (RBI).

For more clarity, we have explained the concept for health insurance and loans separately in the table below:

Moratorium period health insurance is a 60-month or 5 years of continuous coverage. Post this period, your claims cannot be rejected on the basis of non-disclosure or misrepresentation of pre-existing conditions. However, there are exceptional occasions when insurers can reject the claim. For example, when they are able to prove a deliberate fraud or the claim involves an exclusion mentioned in the policy.

Now, let us understand the reason why the moratorium period in health insurance exists. Insurance operates on the principle of uberrimae fidei (Latin for utmost good faith). An uberrimae fidei contract is a legal agreement that requires the highest standard of good faith when you disclose all material facts that could influence the other party’s decision. Failing to adhere to it means violating the agreement.

However, policyholders might sometimes make minor errors or omissions while applying for health insurance plans. The moratorium clause prevents insurers from using these minor discrepancies years later to deny legitimate claims. It rewards loyal and constant policyholders.

Before April 2024, the moratorium period was 8 years (that is, 96 months). However, from April 2024 onwards, IRDAI reduced this period to 5 years or 60 months. This benefits all existing and new health insurance policyholders. Particularly, people who have bought the policy recently can avail of complete moratorium benefit 3 years sooner.

The moratorium count also carry forwards during portability in health insurance . It means that you continue to receive the benefit even when you switch from one insurance company to another. This ensures that you receive the benefit despite switching your insurer.

We have explained how the moratorium period was modified in April 2024 in the table below:

The moratorium period starts in health insurance immediately after you buy the policy. For better understanding, we have explained the process step-by-step. This will help you get a complete idea of when it starts, what happens during portability, and the benefits you get after it ends. Step by step process of how moratorium period works in health insurance

Here’s a real life example to make the concept clearer:

• 2019: Let’s assume that Priya buys a ₹5L health insurance policy from Insurer A and discloses hypertension. This is when her moratorium period starts.
• 2021: After 2 years, Priya ports to insurer B. The new insurer accepts the 2-year period completed with the previous insurer.
• 2022: Priya increases the sum insured from ₹5L to ₹ 10L. A fresh 5-year moratorium starts only on the additional ₹5L.
• 2024: Moratorium period for the original ₹5L is now complete (2 years with Insurer A + 3 years with Insurer B).
• 2027: The additional ₹5L cover also completes the 5-year moratorium period. The entire policy is now under moratorium protection.
• Result: The insurer cannot reject any claim citing Priya's 2019 hypertension disclosure, unless it’s proven as fraud.

Moratorium period, waiting period in health insurance and free-look period are different from one another. Each of them serve a different purpose. The duration is also different in each case. Let’s take a look at the differences in detail:

Moratorium period in loans is different from health insurance moratorium period. In health insurance, it refers to the period after which the insurer cannot reject a claim claiming non-disclosure or misrepresentation of pre-existing conditions. This period lasts for 5 years. While moratorium in loan means a temporary pause in loan repayment due to any financial hardships in ones life.

When you complete the health insurance moratorium period, it rewards you with maximum claim security. While it protects the insured’s interest by giving the benefit of no rejection of claim for genuine cases, it allows insurer to reject the claim if they find anything fraudulent.

• The insurer cannot reject your claim based on any old non-disclosure of a pre-existing condition.
• The insurer cannot go through your medical history at the time of proposal (except in the case of a fraud).
• The insurer cannot to cancel the policy on the basis of misrepresentation in the original application.
• The insurer cannot use minor errors or omissions made in the proposal form to deny coverage.

Things that can happen after the moratorium period (Important Exceptions):

• The insurer can reject the claim if they are able to prove a fraudulence.
• The insurer can apply permanent health insurance exclusions mentioned in your health insurance policy.
• The insurer can deny claims for any condition that is not covered in your policy.
• If you enhanced your sum insured during the policy term, a fresh moratorium period applies to the increased amount.

When you switch from one insurer to another, the moratorium period count is transferred to the next insurer. The IRDAI master circular effective April 2024 clarifies this explicitly. However, you should honestly disclose all medical conditions to the new insurer. The moratorium period protects you from disputes about previous disclosures, not the new conditions added during porting.

Let us assume that you buy a health insurance policy from insurer A. Now, you complete 3 years of your moratorium period with them and switch to insurer B. The 3 completed years with insurer A is now carried forward to insurer B. After you complete 2 years with insurer B, you achieve 5 years of your moratorium period. In short, 3 years with insurer A + 2 years with insurer B (after porting) = moratorium period of 5 years achieved.

The impact on moratorium period differs on a case by case basis. We have explained each case below and its impact on the moratorium period for clarity.

When you enhance your sum insured, a fresh 5-year moratorium period starts only for the enhanced amount. The original sum insured remains under the previous moratorium period. It means that the increased amount will have an independent moratorium period.

Let us help you understand it with an example:

• Year 0: You buy a ₹10 Lakh health insurance and a moratorium period of 5 years starts
• Year 3: You increase the sum insured to ₹20 Lakh. It means that there is an increment of ₹10 Lakh.
• Year 5: The original sum insured of ₹10 Lakh achieves moratorium after the completion of 5 years. The increased ₹10 Lakh is yet to achieve it.
• Year 8: The increased amount also achieves moratorium after completing its 5 years.

If your health insurance policy lapses, the moratorium period is reset to zero. Therefore, to ensure that the moratorium period remains active, you should keep the policy active, and not let it lapse. The only way to do it is by paying regular premium or renewing your policy in time.

You can set up auto-renewal or calendar reminders 30 days before the policy renewal date. This will help you make sure that your policy doesn’t lapse. It’s especially important when you are about to approach the 5 year moratorium milestone.

Let’s understand the moratorium period outcome based on different situations

The moratorium sets a limit of 5 years where insurers can review the disclosures made during the policy purchase. After this period, insurers usually cannot reject a claim on the grounds of non-disclosure of preexisting conditions. The only time they can do so is when they are able to establish a fraud.

There can be different types of non disclosures. If you unintentionally missed out on mentioning certain preexisting conditions, it is considered an innocent non-disclosure. Such cases are generally protected after the 5-year period.

Some instances include the following:

• Minor symptoms that are not diagnosed
• Tests conducted but results were normal
• Medical terms that the you did not understand
• Conditions that the doctor did not mention

On the other hand, if there are some deliberate non-disclosures, the insurer can treat it as a fraud. Some examples include the following:

• Deliberate concealment of diagnosed conditions
• Ongoing treatment hidden from insurers
• Suppression of hospitalisation history
• False declarations in spite of medical evidence

Let us see how insurers treat non-disclosures before and after the moratorium period:

Tips to avoid the risk of being a fraud:

• Disclose all known medical conditions honestly when you are buying or porting a policy
• In case you are unsure about how "significant" a condition is, you should disclose it anyway.
• Maintain all medical records and reports by keeping them safely. You might need them to prove that you disclosed a condition.
• Even after the moratorium period, you should maintain honest records of any new conditions that might have developed after you purchased the policy.

Moratorium health insurance provides you with several benefits, particularly in the case of innocent non-disclosures. It keeps your claim protected if you mistakenly omit any preexisting conditions or preexisting diseases in your health insurance. Here are some of the benefits that health insurance moratorium period offers you:

While you might have understood moratorium period in health insurance, it’s equally important to understand how to make the most of it. Let’s look at some tips that you can use while using your health insurance policy.