How portable is your health insurance policy
Mr. Anand Rao (42), was suggested by his insurance advisor to switch his existing health insurance policy to a new insurer under the portability guidelines applicable since 1st October 2011. Since the benefits and features offered by the new insurer were better, Mr. Anand applied for portability nearly 45 days before his policy was due. He was in for a rude shock when he received a letter from the new insurance company stating that they would accept the proposal on the condition that any claims related to “Kidney stones” will be permanently excluded. Mr. Anand had a history of kidney stones and he had already claimed twice for this ailment from his existing insurer. In a similar case, Mr. Nitin Kumar (46) was told to pay additional premium because of his history of “High BP” that he had mentioned and which was already covered in his old policy of more than 5 years.
Before applying for portability option one needs to be aware of certain important portability guidelines so that you end up taking the most appropriate decision as health insurance is one of those policies which one retains and continues for years together.
45 days’ notice period: All those applying for portability need to apply at least 45 days before their policies are due. IRDA has also given the flexibility to the new insurer to accept the application even if the proposal is submitted within less than 45 days of renewal date. Normally in policies where the insured is less than 45 years of age, medical tests are waived and it qualifies as a non –medical test policy. In such cases the proposed new insurer accepts portability requests upto 21 days before the due date.
Period of acceptance by new insurer: The new insurer where the applicant wants to shift his policy, has to give its verdict on acceptance of the proposal within 15 days of receipt of proposal with relevant documents. After 15 days, the new insurer has to accept the proposal. In case of delay in processing the application and where the renewal date is approaching, the insured needs to communicate with the existing insurance company, requesting them to provide coverage for a short period not extending upto 30 days from due date. The insured has to pay the pro rata premium in that case to the existing insurance company.
Underwriting process: The new insurance company is bound to process the proposal as per its underwriting norms. The company may accept the proposal as per its standard premium if there is no claims history or any pre-existing illness. They can even charge additional loading premium in case of any existing illness or past surgery and is some cases even refuse to accept the proposal if it does not suit their underwriting guidelines. In some other cases like Mr. Anand, certain ailments may be permanently excluded too.
Waiting period clause: The waiting period will be waived depending on the period of continuous coverage with existing insurance company and will be applicable as per the rules of the new insurance company. For example, if there is a 2 year waiting period with the existing insurance company for certain ailments such as Hernia, Kidney stones, etc., and if the insured has completed only 1 year with that company, then with the new company the insured will have to wait for 1 more year to claim expenses on the ailments falling under the 2 year clause. Also if the new insurance company has a 3 year waiting clause for the specified illnesses, then the insured has to wait for 2 more years. Therefore it’s very important to note the waiting period clause of the new company. Those who have been continuously insured for more than 4 years without any claim, typically they will get covered immediately for all ailments in the new insurance company without any waiting period.
When should you shift via portability?
Consider all aspects of your existing health policy such as sub –limits, no claim bonus, ease of claims procedure, etc and compare it with other health policies. Only if you are sure that your existing insurer is not providing you the best health policy then only consider the following. Especially for people who are young, under 45 years and have never claimed hospitalisation expenses related to any surgery or ailment, can switch as their proposal would come under non- medical category and will be ported immediately. For those who are above 45 years of age and with clean medical history it is advised that they do their complete medical check-up before they apply as the medical reports can indicate the level of your health and in case any anomaly is detected then you can decide to maintain your existing policy. For others, who have pre – existing illness and have claimed expenses related to certain surgeries can consider maintaining their existing policy. This category of people can take an additional cover if their existing health cover is less, but it makes sense to retain your old health policy as you are sure of getting claims towards your pre-existing illness from your old insurer who is aware of your health history and where you have already completed the mandatory waiting periods.
Chief Planner, Proficient Financial Planners.