If the policy lapses you lose all benefits such as no claim bonus, waiting period waiver and coverage for pre-existing conditions.
Rishi, a 35 year old techi bought a health insurance policy about three years back and until this year, he has been quite regular in terms of renewing the policy. However, it wasn’t the case this year. Due to some unavoidable reason, he missed paying renewal premium and as a result, his policy “lapsed”. Rishi is not alone. In fact, on an average, one out of three individual fail to renew their insurance policy. Yes, lapses do happen! People forget to pay premium on time and the policy lapses. If you happen to be amongst those who missed the date, then you do have a chance to rectify the mistake. Insurers allow a grace period for you to renew your policy, extended to a maximum of 30 days, from the date of renewal.
Try to renew your policy within the grace period. However, this lifeline comes with a rider that you cannot make a claim if something were to happen to you during this interim period when your policy is in lapsed state, which means you will have to clear all medical bills and hospitalization expenses out of your own pocket. This can be understood with an example. An individual has got a health insurance policy which was due for renewal on June1, 2015. He has not yet renewed it and he has been hospitalized due to some illness on June 10th. He is treated and allowed to go home on June 12th. Now he has the option to renew the policy before June 30, but the policy will not pay for the hospitalization that took place between June 10 and June 12.
If by any chance you have already crossed the grace period, your policy becomes redundant. There is absolutely nothing you can do about it and you are left with just one option – buy a new one!
There are many drawbacks in buying a new policy under such circumstances. Here are the main three losses you suffer:
Loss of no claim bonus: If you have been renewing your health insurance policy for a long period of time, you must have accumulated some no claim bonus, which leads to an increase in sum assured. For example if you have renewed your Rs 3 lakh sum assured policy for two years, at 5% each year your sum assured has gone up to Rs 3.3 lakh, while you pay premium only for a sum of Rs 3 lakh. If you fail to renew and buy a new one, you begin from Rs 3 lakh cover again.
Waiting period: Each health cover comes with some waiting period for some diseases. This waiting period typically ranges between 30 days to 90 days. In case of maternity benefit it varies between 9 months to 48 months, depending on insurer. If one buys a new policy, this waiting period begins all over again and if the assured individual is hospitalized due to one such disease, immediately after buying a new policy he will not be covered for that.
Pre-existing diseases cover: Insurers wait for two to four years to cover pre-existing medical conditions. If one has completed claim free two or four years, depending on terms in his existing health insurance policy, he is entitled for coverage for pre-existing covers. If the policy lapses, he has to begin from the scratch once again and complete four years.
In case of buying a new policy you may have to undergo medical tests again. What’s more, if your policy lapses owing to non-payment of premium, you may end up being in the insurance company’s bad books thereby making it even more difficult for you to qualify for the eligibility criteria for a policy issuance.
So, what should be your plan of action? Ideal scenario would be to set renewal reminders on phone or an alert on your email. Even your insurance company would keep reminding you through the grace period to renew. In today’s technology age, you can’t possibly miss this. You can renew your policy during the grace period as well, in case you missed the date.
Renewing is a simple process. All you need to do is, fill the renewal document, clear the dues, fine amount and you are good to go!
The importance of having a health insurance plan cannot be stressed enough, given the increase in the cost of healthcare services. Any exposure to medical illness (especially, if it is terminal in nature), can drain out major chunk from your savings. Only your health insurance plan can save the day for you under such situation. What’s more, you also avail good tax benefits from a health policy. You can claim tax benefit of up to Rs.25000 and Rs.30000, in case of senior citizen under section 80D of the Income Tax Act. That’s not all, an additional deduction of Rs.25000 has been allowed for differently-abled citizens under Section 80DD and Section 80U of the Income Tax Act.
Remember, other things can wait but not health. Go get your policy renewed now or set a reminder for the same so that you don’t miss the important date. Didn’t you know that a sapling becomes a tree slowly over the years with continuous and timely care? Similar is the case for health insurance. Timely payment will go a long way in securing your and family’s future.