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Anand Rao, 42, was suggested by his insurance advisor to switch his 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 Rao 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 it would accept the proposal on the condition that any claim related to kidney stones would be permanently excluded. Mr Rao had a history of kidney stones and he had twice claimed for this ailment from his insurer.
In a similar case, Nitin Kumar, 46, was told to pay an 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 five years.
Before applying for the portability option one needs to be aware of certain important portability guidelines so that one takes the most appropriate decision, since health insurance is one of those policies which one retains for years.
45 days notice period: All those applying for portability need to apply at least 45 days before their policies are due. The Irda has offered the new insurer the flexibility to accept an application even if a proposal is submitted within 45 days of renewal date. Normally in policies where the insured is less than 45 years of age, medical tests are waived, qualifying it as a non-medical-test policy. In such cases, the proposed new insurer accepts portability requests up to 21 days before the due date.
Period of acceptance by new insurer: The new insurer (to which an applicant wishes to shift his policy) has to give its verdict regarding acceptance of the proposal within 15 days of receipt of the proposal with relevant documents. After 15 days, the new insurer has to accept such a proposal. In case of delay in processing applications and where the renewal date is approaching, the insured needs to communicate with the existing insurance company, requesting it to provide coverage for a short period not extending up to 30 days from the due date. In that case the insured has to pay a pro-rata premium to the existing insurance company.
Underwriting process: The new insurance company is bound to process the proposal according to its underwriting norms. The company may accept the proposal with its standard premium if there are no claims or any pre-existing illnesses. It can, however, charge an additional premium for any existing illness or past surgery and, in some cases, even refuse to accept a proposal if the proposal does not fit its underwriting guidelines. In other cases such as that of Rao, certain ailments may be permanently excluded.
Waiting-period clause: The waiting period will be waived depending on the period of continuous coverage with the existing insurance company and will be applicable according to the rules of the new insurance company. For example, if there is a two-year waiting period with the existing insurance company for certain ailments such as hernia, kidney stones, etc., and if the insured has completed only one year with that company, then with the new company the insured will have to wait for that one year more to claim expenses on the ailments falling under the two-year clause. Also, if the new insurance company has a three-year waiting clause for specified illnesses, then the insured has to wait for two years more. Therefore its very important to note the waiting-period clause of the new company. Those who have been continuously insured for more than four years without any claims, typically will be covered immediately in the new insurance company for all ailments without any waiting period.
When should you shift via portability?
Consider all aspects of your health policy such as sub-limits, no-claim bonuses, ease-of-claims procedure, etc., and compare them with other health policies. Only if you are sure that your insurer is not providing you with the best health policy, consider the following. 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 the non-medical category and will be ported immediately. For those above 45 years of age and with a clean medical history, it is advisable to do a complete medical check-up before applying as medical reports can indicate the state of ones health.
In case any anomaly is detected, one can maintain ones existing policy. Those who have pre-existing illness and have claimed expenses related to certain surgery can consider maintaining their present policy. This category of people can take additional cover but it makes sense to retain the old health policy as one is sure of getting claims towards ones pre-existing illness from the old insurer, who is aware of ones health history and where one has already completed the mandatory waiting period.
The author is Chief Planner, Proficient Financial Planners
