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Insurance Article

The Significance of Lifetime Renewability in Health Insurance

May 19 2016
Lifetime Renewability Health Insurance

Lifetime renewability to avoid hassles and high premium

When 64-year-old Mrs. S. Parekh fell down the stairs, it left her with a number of broken ribs and a fractured hand. The doctors suggested she get admitted to the hospital for better care. Mrs. And Mr. Parekh were both retired and were living on their pensions. They worried that the medical bill would put a strain on their budget.

However, it suddenly struck them that they had lifetime renewability on their health insurance policy. This reduced their stress significantly; they would simply have to file the insurance claim and the insurer would reimburse the money. While most of us try to follow a healthy lifestyle, illness or accidents could take us by shock. Therefore, having a health insurance policy for life makes a lot of sense.

Rising Healthcare Costs in India

According to a study by National Sample Survey Office (NSSO), the average hospitalisation cost in rural India was ₹14,935 in 2014, as compared to ₹5,695 in 2004. Likewise, the average hospitalisation cost in urban India was ₹24,436, an alarming rise from 2004, when it was ₹8,851. Both cases indicate a compounded annual growth rate (CAGR) of about 10%.

Additionally, the Insurance Regulatory and Development Authority of India (IRDAI) collated data on health insurance claims, with comparisons across years, which revealed a rise in the claim amounts and the severity of diseases for which claims were made. These numbers indicate the growing significance of a comprehensive health insurance policy.

Why is Lifetime Renewability Important?

Lifetime renewability is a health insurance guideline that has to be followed by insurers. But, why is it important? Think about this in the context of your parents or older family members. As age advances, it becomes difficult to get cover and the premium amount also increases drastically as the perceived risk is more. Lifetime renewability ensures that the policy can be renewed for life without any restrictions or age bar.

For retired individuals, lifetime renewability takes the pressure off finances in case they are confronted with serious illness. Age also makes one more susceptible to diseases and falls. Considering the healthcare inflation, the importance of lifetime renewability has only increased.

Revised Policy Guidelines

Until recently, most insurance companies had a cap of 65-70 years of age for health insurance. As per the revised guidelines of the IRDAI, all health insurance policies are to feature lifetime renewability.

As a mandate, insurers must increase the entry age up to 65 years for renewing a health insurance policy. It also means that after the insurer issues a health insurance policy, they will have to keep on renewing it until the insurers’ lifetime. The IRDAI has further stated that the insurer will not be able to charge extra premium from such policyholders without any valid reason.

The policy guideline revision for renewal by IRDAI is a welcome move. However, it is important to remember to renew your health insurance policy periodically; failing to do this will result in lapse of policy and loss of associated benefits. Any claim made for expenses incurred during the lapsed period will not be reimbursed.

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