Why Reinstatement Of Medical Insurance Cover Is Crucial

There are many important terms when it comes to health insurance, but most people tend to ignore these till they actually come face-to-face with its real-life application. By this time, it is already too late to do anything to change the final impact. This is why knowing details beforehand and then working on them is important for proper usage.

Reinstatement of insurance cover is one such term and this needs careful attention so that its benefits are utilised effectively.

The term 'reinstatement of cover' itself suggests its meaning, which is that the insurance cover for an individual is reinstated or restored. There are times when the individual makes a claim on a health insurance policy and, when this happens, the amount till the limit of the sum assured is used up.

Normally, the sum assured is the total amount up to which claims can be made during the policy term and this period is usually a year. If any limit is used up, then this will be normally restored at the renewal of the policy, which will be after the completion of the initial term.

However, in case of a second or multiple claims, the sum assured might not be enough and, hence, this is where the reinstatement facility comes into play.

Several companies offer this reinstatement facility whereby the limit of the person insured is reinstated before the end of the term of the policy. This has its benefits as the person who is insured has the peace of mind that even though, they have used the health policy due to a claim, there is still adequate protection that is present for them which can still be used.

It becomes useful when a claim is made and can be especially beneficial when there is a situation of multiple claims, especially on a floater policy. 

The most important feature, as far as the facility of reinstatement is concerned, deals with the time period when this facility kicks in. There are two ways in which this can happen. One is the situation where there is an immediate reinstatement.

This means that, for example, there is a policy of Rs 5 lakh and there is a claim made for Rs 3 lakh. Here, the moment the first claim is settled, the remaining policy cover is Rs 2 lakh, but due to the reinstatement clause, this will be restored to Rs 5 lakh immediately.

The second way in which this works is that the limit will be restored only when the total limit is fully exhausted. This means that till the total claims do not amount to the limit of the policy, this will not be restored. It could lead to a situation where for some period, the available limit for use remains very low for the person insured.

So, for example, in our earlier case, the limit remaining will stay at Rs 2 lakh till there is a further claim up till this amount and only once this is exhausted, will the Rs 5 lakh limit be restored.

The facility is a useful one, but as usual, there are some finer points that any person looking to buy health insurance needs to know. One is that do not assume that there is a reinstatement facility on the policy. It is not automatic and there is no such facility for every policy. So, if you are looking for this feature, then you will have to search for policies that offer this specific feature.

The second point is that the premium will vary and rise for this facility, though the extent of the rise depends on the manner in which this is triggered and the overall sum assured.

The third thing is to look at whether this feature is going to be useful and see its cost as compared to say a top-up cover. This will enable the individual to know the exact situation and then make the required decision about its suitability for their needs.

The writer is the founder of Moneyeduschool.