Recharge benefit
Also written Recharge cover
A health insurance feature that restores the sum insured to 100% once it has been reduced by a claim in the policy year — the counterpart to a restoration benefit, which restores on any exhaustion.
In plain language
A family floater health policy can run out of cover partway through the year if one member has an expensive hospitalisation. Without some kind of top-up, the rest of the family is left with a reduced, or exhausted, sum insured for the remaining months.
Recharge benefit is one of two features the workbook names to deal with this. It restores the sum insured to 100% once it has been reduced because of a claim.
How it works
The workbook names recharge alongside its close cousin, restoration benefit: in a restoration benefit, the insurer restores the sum insured to 100% on either partial or full exhaustion of the amount; in a recharge benefit, the sum insured is restored to 100% specifically when it gets reduced due to a claim.
Both features solve the same underlying problem — a single large claim, or a run of smaller ones, leaving too little cover for the rest of the policy year — but they are named and described as two separate benefits in the workbook, not as one benefit under two names. A policy has to state which of the two, if either, it offers.
A worked example
Illustrative figures. The Mehta family holds a floater health policy with a sum insured of Rs 10,00,000 for the year.
In April, Mr Mehta is hospitalised and the insurer settles a claim of Rs 6,00,000, leaving only Rs 4,00,000 of the family's cover for the rest of the year.
Under a recharge benefit, because this reduction happened due to a claim, the sum insured is restored to the full Rs 10,00,000 for the remaining months — protecting the rest of the family if, say, his daughter needs a Rs 3,00,000 procedure in October. Without recharge or restoration cover, the family would have gone into October with only Rs 4,00,000 left to draw on.
Why NISM asks about it
Chapter 3 (Features of non-Life Insurance Products), section 3.1.1, "Elements of Non-Life Insurance Products," lists restore and recharge as two named benefits available in health insurance policies. Expect a question distinguishing the trigger for restoration (any exhaustion, partial or full) from the trigger for recharge (a reduction specifically due to a claim).
Common exam traps
- Recharge and restoration are two distinct, named benefits in the workbook, not synonyms. A question naming one is testing whether you know the other exists and how the trigger differs.
- Both restore the sum insured to 100%, not to some partial top-up figure — the size of the restoration is not in question, only when it happens.
- Neither benefit is automatic on every health policy. Both are features a policy may or may not offer, alongside no-claim bonus.
Check yourself
1.What is the difference between the restoration benefit and the recharge benefit in health insurance?
- a)Restoration restores the sum insured to 100 per cent on either partial or full exhaustion, while recharge restores it to 100 per cent only when it gets reduced due to a claim
- b)Restoration applies only to family floaters and recharge only to individual policies
- c)Restoration applies to the premium and recharge to the sum insured
- d)They are two names for the same benefit
Show the answer
Answer: (a) Restoration restores the sum insured to 100 per cent on either partial or full exhaustion, while recharge restores it to 100 per cent only when it gets reduced due to a claim
In RESTORATION benefit, the health insurance company restores the sum insured to 100% in case of EITHER PARTIAL OR FULL EXHAUSTION of the sum insured amount. Alternatively, in RECHARGE benefit, the sum insured is restored to 100% ONLY WHEN IT GETS REDUCED DUE TO A CLAIM. Learn them by their trigger, because an option will simply swap the two words.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- No claim bonusThe benefit of a lower premium in later years for each claim-free year — in motor insurance a discount of up to 50% on the own-damage premium after five claim-free years.
- Portability of health policiesThe IRDAI facility that lets a health insurance policyholder switch insurer without losing accumulated no-claim benefits and waiting-period credit, provided the previous policy was maintained without a break.
- Sum insuredThe amount specified in a non-life policy that represents the insurer's maximum liability for claims made during the policy period - the ceiling on what the policy can ever pay.