Health insurance moratorium

A health insurer can normally question a claim, or even the validity of the policy itself, if it later discovers something the policyholder should have disclosed. That power does not last forever.

Once a health insurance policy has run for 5 continuous years, with premiums paid throughout and no break in cover, the policy enters what the workbook calls the moratorium period.

After 5 continuous years of unbroken premium payment, no claim can be contested by the insurer, with only two exceptions: proven fraud, and a permanent exclusion specifically named in the policy.

The clock is not fixed forever at the policy's inception date. If the basic sum insured is enhanced at any point, a fresh 5-year moratorium clock starts running from the date of that enhancement, but only for the enhanced portion of the cover.

A break in continuous payment resets the benefit — the moratorium protection depends on unbroken cover, not merely on the policy having existed for 5 years in total.

Illustrative figures. Mr Chandran has held a health policy with a Rs 5,00,000 sum insured for 6 continuous years, paying every premium on time. His insurer cannot now contest a genuine claim on the original Rs 5,00,000 of cover, except for proven fraud or a permanent exclusion the policy itself names.

In year 4, he had enhanced his sum insured to Rs 10,00,000. The additional Rs 5,00,000 of cover only completes its own 5-year moratorium in year 9 — even though the original Rs 5,00,000 crossed the moratorium line back in year 5. A claim in year 6 against the enhanced portion could, in principle, still be questioned on grounds that would no longer apply to the original sum insured.

Chapter 1 (Basics of Insurance), the discussion following Section 45 of the Insurance Act on when a life policy cannot be questioned, separately covers the health insurance moratorium under the IRDAI Master Circular on Health Insurance Products (2024). Expect a question naming the 5-year figure and the two named exceptions, and a question testing what happens after a sum insured enhancement.

• Only two exceptions survive the moratorium: proven fraud, and a permanent exclusion named in the policy. Ordinary non-disclosure that is not fraudulent no longer lets the insurer contest the claim.
• An enhancement of the sum insured restarts the 5-year clock for the enhanced amount only, not for the whole policy.
• The moratorium requires continuous payment for 5 years — a lapse and later revival does not automatically carry the accumulated years forward.
• This is a health insurance-specific rule, distinct from Section 45 of the Insurance Act, which gives life insurance policies a similar but separately worded 3-year protection.