New Delhi: A lower health insurance premium can appear attractive, particularly when families are reviewing policies for ageing parents or trying to reduce annual expenses. However, switching to a cheaper plan without checking its impact on accumulated benefits could expose policyholders to a significant risk.

A recent report highlights an important aspect of health insurance that may not always receive sufficient attention during sales discussions: the five-year moratorium period. Under Insurance Regulatory and Development Authority of India (IRDAI) rules, a health insurance policy generally becomes non-contestable after 60 months of continuous coverage, except in cases of established fraud.

This protection can become particularly important when a policyholder has an existing medical condition or discovers that an earlier insurance application contained an omission. If the existing policy is discontinued and replaced with a completely fresh policy, the accumulated continuity credit may not automatically carry forward.

The distinction between buying a new policy and formally porting or migrating an existing one could therefore make a substantial difference to a family’s financial protection.

Why the five-year moratorium matters

The moratorium period refers to the first 60 months of continuous health insurance coverage. After this period, an insurer cannot contest the policy or a claim on grounds of non-disclosure or misrepresentation, except in cases of established fraud.

The rule is intended to strengthen policyholder protection and provide greater certainty to people who maintain health insurance over several years.

For example, consider a family that has maintained a health insurance policy for six years. The policy covers a sum insured of ₹5 lakh, and the insured person has a history of high blood pressure that was not mentioned in the original application.

If a claim arises for a heart-related procedure, the insurer cannot simply reject or contest the policy on the basis of an omission after the applicable moratorium period. It would have to establish fraud to challenge the claim on that ground.

However, the protection does not mean that policyholders can deliberately conceal medical information. If a person knowingly provides incorrect information about a material medical condition, the insurer may raise a fraud-related objection. The circumstances, evidence and applicable policy rules would matter.

The distinction between an honest mistake and deliberate concealment is therefore important. Policyholders should always provide accurate medical information when purchasing or renewing insurance.

Buying a fresh policy can restart the clock

The concern arises when a policyholder cancels an existing plan and purchases a new one simply because another insurer offers a lower premium.

A fresh policy does not automatically inherit the continuity history accumulated under the previous contract. The five-year moratorium period may begin again, leaving the policyholder without the same level of accumulated protection during the initial years.

A Gurugram-based textile startup founder, who discussed the potential loss of benefits when switching insurance providers.

His observation highlights why the premium should not be the only factor in a switching decision. A family may save money on annual payments but lose continuity benefits that took years to build.

For people insuring elderly parents, this consideration can be particularly significant. Older policyholders may have existing medical conditions, previous claims or a longer history of treatment. Losing accumulated benefits could create uncertainty at a time when health coverage is especially important.

Portability and migration can preserve continuity benefits

Policyholders who want to change their insurance arrangements have two important options.

Portability allows a person to move an eligible health insurance policy from one insurer to another. Migration refers to moving from an existing product to another suitable product offered by the same insurer.

These options can preserve eligible benefits accumulated under the previous policy, including credits relating to the moratorium period, waiting periods for pre-existing diseases and specified treatments, and no-claim bonus, subject to applicable rules and policy terms.

IRDAI’s health insurance framework provides for portability and migration. The transfer is not the same as abandoning an existing policy and buying a completely new one.

Under the current portability process, policyholders should generally apply between 30 and 60 days before the existing policy’s renewal date. The new insurer assesses the proposal under its applicable underwriting rules. Therefore, customers should not assume that a switch is automatically approved or that every feature of the old policy will remain unchanged.

It is important to obtain confirmation from the new insurer about the continuity credits being transferred before allowing the existing policy to lapse.

Increasing the sum insured requires extra attention

Another important point concerns policyholders who want to increase their health insurance coverage while switching.

Suppose a person has an existing policy with a sum insured of ₹5 lakh and wants to move to a new plan offering ₹10 lakh of coverage.

The accumulated continuity benefits can apply to the eligible existing coverage. However, the additional ₹5 lakh may be subject to a separate moratorium period and other applicable waiting periods under the new policy.

This means that the entire ₹10 lakh should not automatically be assumed to have the same accumulated protection as the original ₹5 lakh.

Policyholders should ask the insurer to explain how waiting-period credits and moratorium benefits will apply to the existing sum insured and the additional coverage. They should also check whether any new exclusions, room-rent restrictions or disease-specific limits apply.

A super top-up may be another option

Families seeking greater financial protection do not necessarily have to replace their existing base policy.

One alternative is to retain the current health insurance policy and purchase a separate super top-up plan. Such a plan can cover eligible medical expenses above a specified deductible, subject to its terms and conditions.

For instance, a family with a ₹5 lakh base policy could consider additional protection through a super top-up arrangement. The base policy would continue to retain its existing continuity history, while the additional cover would provide a higher financial cushion for eligible hospitalisation expenses.

However, customers must understand the deductible, exclusions, waiting periods and claim conditions of the super top-up policy before purchasing it. It is not a substitute for checking the adequacy of the base policy.

What policyholders should check before switching

Before accepting an agent’s recommendation to move to a cheaper health insurance plan, customers should compare more than the annual premium.

They should examine the following:

  • Moratorium credit: Confirm whether the years of continuous coverage under the existing policy will be recognised.
  • Waiting periods: Check how credits for pre-existing diseases and specified treatments will be transferred.
  • Sum insured: Understand whether continuity benefits apply to the entire proposed cover or only the existing eligible amount.
  • Exclusions: Read the new policy’s exclusions and disease-specific restrictions carefully.
  • Room-rent limits and co-payments: Check whether the new plan requires the insured person to bear a larger share of hospital expenses.
  • Hospital network: Verify whether preferred hospitals and nearby medical facilities are included.
  • Medical disclosures: Provide complete and accurate details of existing illnesses, treatment and previous claims.

Customers should also retain copies of the proposal form, medical disclosures, policy documents and written communication confirming the benefits carried forward.

Lower premiums should not come at the cost of protection

A cheaper health insurance policy can be a sensible choice when it offers comparable or better coverage. However, the decision should be based on the overall value of the policy rather than the premium alone.

For families with several years of continuous coverage, preserving accumulated benefits may be more important than securing a small reduction in annual costs.

Before making a switch, policyholders should ask whether the proposal involves portability, migration or the purchase of a completely fresh policy. They should also obtain written clarification about the treatment of the five-year moratorium credit.

The central lesson is that health insurance is a long-term financial safeguard. A carefully planned switch can help reduce costs without unnecessarily sacrificing accumulated benefits, while an uninformed decision could reset protections that took years to earn.