The beauty of an unlimited buffet is that you can fill your plate with food as many times as you want after each serving. What if the same applies to your health insurance cover? Yes, in a health insurance policy, reinstatement benefit does this. It replenishes your health insurance cover after the initial cover from earlier claim(s) has been exhausted. In this article, we will understand what reinstatement benefit is, how it works, and why you should have it in your health insurance policy.
What is restoration benefit?
Restoration benefit replenishes your health insurance cover after the hospitalization claim(s) have ended. In health policies without reinstatement benefits, the cover is reinstated at the beginning of the next policy year. However, in a health policy with reinstatement benefit, the cover is reinstated in the same policy year if the initial cover is exhausted due to previous claims.
Restoration benefits are referred to by various names, such as restore, refill, replenishment, recharge, restore, reset, etc. The restore advantage acts like a backup. It turns on after the initial cover has been used.
For example, Rajesh has a health insurance policy with a sum assured of Rs. 5 lakhs. He is admitted to the hospital and claims Rs. Rs 5 lakh using full cover. With the reinstatement benefit, Rajesh’s health insurance cover will again be Rs. 5 lakhs. During the same policy year, Rajesh was again admitted to the hospital, and the bill amounted to Rs. 3 lakh. Rajesh’s claim was paid from the recovered Rs. Cover of Rs 5 lakh.
Some health insurance plans have restoration benefit built-in, while some offer it as an optional rider or add-on.
What is the need for reinstatement benefits?
In India, medical inflation has been rising faster than the general inflation rate, mostly in double digits year on year. Therefore, if you do not take adequate health insurance cover, a hospitalization claim may wipe out all or most of your cover.
What if there is another hospitalization in the same year and your health insurance cover lapses? In the absence of reinstatement benefit, you will have to pay the bill amount from your own pocket. If the hospital bill is high, it can hamper your financial planning journey and push you back by a few years or more. For some people, the impact can be severe, wiping out all savings and investments. The worst that can happen is that the person is left with no savings and has to take a personal loan to pay part or all of the hospital bill.
However, with reinstatement benefits, you can avoid the financial difficulties mentioned above. Restoration benefits replace the health insurance coverage you have lost. In case of multiple hospitalizations and the initial cover expires, the health insurance cover will still be paid from the reinstated cover.
types of restoration
Not all health insurance plans with reinstatement benefits provide it in the same way. Restitution benefits can be structured in a variety of ways. Therefore, it is important to read the policy wordings to understand how the reinstatement benefit is being offered for that particular health insurance product.
Some ways to offer reinstatement benefits include the following
A. Once a year or unlimited times: Some health insurance plans offer reinstatement benefits only once in a policy year. On the other hand, some plans offer unlimited time during the policy year. Plans that offer unlimited restores offer better value than plans with once-a-year restores. However, plans with unlimited reinstatement will have higher premiums than plans with once a year reinstatement.
B. Applies to the same disease or a different disease: Some health insurance plans allow the use of reinstatement benefits for a different or unrelated illness. For example, let’s say someone is hospitalized because of tuberculosis (TB). Let us assume that the cover for existing hospitalization bill settlement has ended, and the reinstatement benefit has started.
In this case, if the individual is hospitalized again during the same policy year due to TB, they cannot avail the reinstatement benefit. However, if the individual is hospitalized again due to an unrelated or different illness (other than TB in this case) during the same policy year, they can avail the reinstatement benefit.
Some health insurance plans allow the reinstatement benefit to be used for the same illness. Suppose a person is admitted to the hospital due to TB. Let us assume that the cover for current hospitalization bill settlement has ended, and the reinstatement benefit has started. In this case, if the person is hospitalized again during the same policy year due to TB, they can still avail the reinstatement benefit.
Health insurance plans that allow use of restoration benefits for a single illness offer better value than plans that allow use for a different illness.
C. When does it apply – Full or partial cover termination: In some health insurance plans, reinstatement benefits are available only after the entire health insurance cover is exhausted. For example, suppose a person has a health insurance cover worth Rs. 5 lakhs. In this case, reinstatement benefit will be available only after the entire Rs. The cover of Rs 5 lakh has ended.
In some health insurance plans, reinstatement benefits are available even if the health insurance cover is partially utilised. For example, suppose a person has a health insurance cover worth Rs. 5 lakhs. The person is admitted to the hospital, and the bill is Rs. 1 lakh. In this case, reinstatement benefit will be triggered, and the policy sum assured will be restored from Rs. 4 lakh to Rs. 5 lakhs.
Health insurance plans with reinstatement benefit for partial cover termination offer better value than plans with reinstatement benefit for complete termination.
In the above section, we discussed different types of restore benefits. Regardless of the type, reinstatement benefits are triggered automatically, with no action required from the policyholder.
Restoration Benefits: Points to Consider
A health insurance policyholder needs to consider the following points regarding reinstatement benefits.
- Restoration benefits usually commence after the initial health cover and accumulated bonuses have been exhausted. Check the terms and conditions of your policy to understand when it will be applicable.
- Restoration benefits usually commence after the first claim during the policy year. For example, suppose the policy cover is Rs. 5 lakh, and the first claim amount is Rs. 6 lakhs. Reinstatement benefit will not be available for Rs. Claim settlement of Rs 6 lakh. This will start after the first claim of Rs. A settlement of Rs 6 lakh was reached.
How does Restore Advantage help?
Restoration benefit in a health insurance policy helps in various scenarios. For example, suppose a policyholder suffers from a serious illness that requires hospitalization several times in a year. If the insurance cover had lapsed during the previous hospitalization event, the reinstatement benefit helps cover the next hospitalization.
In a family floater plan covering multiple family members, multiple family members may be admitted to different hospitals during the year. In such a scenario, reinstatement benefit helps when another family member is hospitalised, and the insurance cover has lapsed during the last hospitalization of another family member.
Premium for plans with reinstatement benefit vs. premium for plans without it
Health insurance plans with restoration benefits typically have higher premiums than plans without benefits. However, the benefits provided by the restore feature justify the high premium paid for it.
For example, suppose there are several hospitalizations in a year and the sum insured has been exhausted on the last hospitalization. In this case, the policyholder will save up to the sum assured in the event of current hospitalization in the same year. Thus, the huge savings from reinstatement benefits make it worthwhile despite the high premium paid for it.
Should you choose a health insurance plan with restoration benefits?
Restoration benefit is an important feature of any health insurance plan. This benefit proves its importance when there are multiple hospitalizations in a year, for which the cumulative hospitalization bill is much or many times more than the basic sum insured. Therefore, consider choosing a health insurance plan with reinstatement benefit, even if it comes at a slightly higher premium.
You should check the policy wording to understand how the reinstatement benefit works in your health insurance. Check whether it is applicable once a year or unlimited times for the same illness or different illness, complete or partial cover termination etc.
