How Moratorium Works in Health Insurance Rights

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Health insurance is meant to protect against medical bills, yet it may not cover preexisting conditions or illnesses that have not been disclosed. For example, prior to the IRDA moratorium regulation, policyholders occasionally had claims denied after several years due to minor past illnesses.


The moratorium period, however, protects long-term policyholders. After a period of 60 months of prior continuous coverage, the insurer can no longer deny any claim due to a preexisting condition (except in cases of proven fraud).


What is the Moratorium Period?


The moratorium time is the ‘look-back’ period in a health policy. With the existing IRDAI regulations, it is 5 years (60 months) of continuous coverage. In the course of these years, insurers might impose waiting periods or refuse compensation for pre‑existing or undisclosed conditions.


After 5 years, however, such a condition is subject to treatment as ordinary covered benefits. IRDAI introduced this rule to improve fairness: after 5 years, even earlier undisclosed illnesses should be accepted. The previous IRDAI guidelines set it at 8 years, but it has now been reduced to 5 years.


Insurer Rights Before and After Moratorium


Prior to a moratorium period, insurers have extensive rights against claims of non-disclosure, misrepresentation, or mistakes in the proposal form. Most of these rights are denied to insurers after the moratorium period (5 consecutive years of active coverage under IRDAI rules), except where there is evidence of fraud or permanent exclusions.


Here is a detailed overview:









































Aspect



Before Moratorium



After Moratorium



Claim rejection for non-disclosure



Allowed



Not allowed (except fraud)



Errors in the proposal form



Grounds for denial



No longer grounds



Fraudulent claims



Can be denied



Can be denied



Permanent exclusions



Enforced



Still enforced



Portability



Risk of reassessment



Moratorium protection continues



Sum insured increase



Fresh moratorium applies



Fresh moratorium applies only to the extra cover, applicable from the date of coverage increase



Moratorium vs Waiting Period


The moratorium period is different from specific waiting periods. The average waiting time (for listed treatments or surgeries) is between 30 and 36 months, which tends to differ based on the policy type and insurer.


However, the moratorium period is fixed by the IRDAI at 5 years (60 months).


For example, a plan may exclude cataract surgery for 2 years. Thus, the insured can claim coverage for this procedure after the completion of the 2-year waiting period.


Alternatively, a policyholder may have high blood pressure before policy purchase. After the 5-year moratorium period, he/she will be liable for coverage for treatments related to high blood pressure.


Once the moratorium period ends, your policy will effectively cover past ailments just like any other illness. Permanent exclusions are always omitted, and increases in the sum insured would always create a new moratorium period (so always read the policy terms).