The Insurance Regulatory and Development Authority of India (IRDAI) removed its previous rider requiring insurers to provide health insurance coverage to people “at least up to the age of 65” to clarify and preempt any confusion in the circular that may have unintentionally allowed some people to construe 65 as the official upper age limit for coverage. This move ensures that insurers cannot reject customers on the grounds of higher age. However, they could charge them higher premiums. Additionally, Irdai has also reduced the moratorium and waiting period.

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Let’s explore how a moratorium period differs from a waiting and free-look policy in insurance?

Moratorium Period:

IRDAI has reduced the moratorium period from eight to five years. The period applies to claims when the policyholder does not disclose a pre-existing disease when buying the policy. They could reject a claim if it doesn’t meet the moratorium period from the policy’s purchasing date. IRDAI’s reduction of the moratorium period is a significant relief for customers. So, if policyholders forget to disclose a pre-existing disease, they will now have to wait five years, the ‘moratorium period, to settle the claim for that particular disease, effective April 2024.

Prakash, MS FRCS (Glasgow), MD and CEO-designate, Galaxy Health and Allied Insurance, says, “This (change) is applicable for new products launched April 1, 2024, onwards. For existing products, it is left to the companies to reduce the moratorium period to 60 months.”

In case of policy portability, he adds, “Since, portability is also treated as renewal, moratorium period will be calculated from the inception of the first policy.”

Waiting Period:

Unlike the moratorium period, the waiting period is the time policyholders mandatorily spend to be eligible to make policy claims for pre-existing diseases they disclosed when buying the policy. Insurers accept claims for pre-existing diseases only after the waiting period is completed.

The waiting period is shorter than a moratorium period. Earlier, it was two to four years. Irdai has now reduced it to three. When porting a policy, policyholders can also ask insurers to credit the waiting period from their previous insurer.

“The first inception date of cover against each insured person is captured while porting. Hence, this information is useful in calculating credit for portability”, adds Prakash.

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Parthanil Ghosh, director and chief business officer, HDFC ERGO General Insurance, explains, “In case of portability, the moratorium and waiting period will count in terms of continuous years the policy has been running since inception, so that customer doesn’t have to lose the benefits they have accumulated. Such calculations are system-driven.”

Free-Look Period:

A free-look period is different from the other two. A trial period is given to a new customer to review the policy. If the customer is unsatisfied and wants to return or cancel the policy, they can do so for free within the free-look period, usually 30 days from the purchase date. In that case, the insurer will return the full premium to the policyholder.

According to Prakash, “Every policyholder of life and health insurance, except for policies with a tenure of less than a year, shall be provided a free look period of 30 days from the date of receipt of the policy document, whether received electronically or otherwise, to review the terms and conditions”. The free-look period does not apply to policies of less than a year, like travel insurance. Given the many instances of mis-sold policies, a free look period can save the policyholders from unnecessary mental agony by giving them a chance to cancel it.