After five years, insurance companies cannot reject claims based on old information

Even if you have held a health insurance policy for more than seven years and have been paying premiums regularly, an insurance company can still reject your claim application on the grounds that you did not disclose any pre-existing illness at the time of taking the policy. However, the 'moratorium clause' in your policy can now provide protection against such arbitrary claim rejections. According to a report by The Economic Times, this rule limits the ability of insurance companies to question a policy on the grounds of non-disclosure or misrepresentation after a certain period has elapsed.

The Insurance Regulatory and Development Authority of India (IRDAI) had first introduced an 8-year moratorium period in 2019. However, to further strengthen the protection of long-term policyholders, this period has been reduced to 5 years (60 months) in 2024. A moratorium period means a period after which, upon completion of continuous 60 months of coverage, an insurance company cannot challenge the policy or a claim on the basis of non-disclosure or misrepresentation of information.

This rule covers both fixed benefit policies and indemnity-based policies. Fixed benefit policies are those that pay a pre-determined amount upon diagnosis of a covered illness, while indemnity-based policies reimburse actual hospitalisation expenses, subject to terms such as sum insured, co-payments, deductibles, and sub-limits. In simple terms, once a policy completes five continuous years, insurance companies generally cannot reject claims on the pretext of not disclosing pre-existing conditions like diabetes or hypertension. Often, companies do not just reject claims on the grounds of non-disclosure, but may also cancel the policy based on a breach of the principle of 'utmost good faith'.

The moratorium period is calculated based on years of continuous coverage. If you port your policy to another insurance company, the moratorium period does not start from zero again; that is, you do not lose the benefit of the period previously obtained. IRDAI rules clarify that after completion of continuous 60 months of coverage (including portability and migration), no policy or claim can be challenged on the grounds of non-disclosure or misrepresentation, unless it is a proven case of fraud.

For policyholders, this clause is not a guarantee of every claim being approved, but it provides an additional layer of protection against claim rejections. If fraud is proven, insurance companies can still raise objections to a claim, but the responsibility to prove fraud lies with the insurance company. If an insurance company rejects a claim even after the 5-year period has elapsed, the policyholder has a strong basis to challenge that decision in the Insurance Ombudsman or other grievance redressal forums.