Restoration benefit in health insurance: Know the limitations

Your health insurance policy covers you for the hospitalisation up to the sum insured. So if you get hospitalised during the policy year, your health plan will take care of it. But, what if you get admitted the second time during the same policy year? If your policy has a restoration benefit, it will cover you the second time also.

How does restoration benefit work?

A policy with restoration feature reinstates the sum insured after you have exhausted it. So, if you have used up the full sum insured during the first hospitalisation, the insurer recharges your policy with the same sum insured. In case you get hospitalised the second time, you will still have insurance coverage. “Restoration feature works as a backup plan. If the sum insured is consumed entirely in one treatment, this feature ensures that the sum insured is sufficient with a quick recharge facility. It helps the customers manage their sum insured throughout the year to easily get access to medical treatments in case of repeated medical emergencies,” says Naval Goel, Founder & CEO, PolicyX.com.

Does it cost extra?

Restoration benefit is an in-built feature in the health policies. You cannot opt in or opt out of it. “Since it is an in-built feature, the policyholder is not charged an extra premium,” says Goel.

Know the fine-prints

So far so good. Restoration benefit ensures that the policyholders do not get worried about the inadequate sum insured or buying an additional policy. However, there are some downsides that you must know.

Namit Awasthi (name changed) had restoration benefit in his policy of Rs 5 lakh coverage. His first hospitalisation cost him Rs 4 lakh. The second hospitalisation during the same year resulted into hospitals bill of Rs 6 lakh. Going by the restoration benefit, up to Rs 5 lakh should have been covered by the policy. However, the insurer settled claims worth Rs 1 lakh. It explained that exhausting the full cover is the prerequisite for restoration benefit to trigger. Since Rs 1 lakh cover was remaining after first hospitalisation, the insurer did not recharge the policy for the second hospitalisation. It would have done it for the third hospitalisation.

“Restoration gets activated only in the scenario where the entire sum insured is exhausted. However, there is a feature of partial exhaustion in which sum insured is restored even if partial coverage is remaining.” Says Goel.

Shashank Chaphekar, chief distribution officer, ManipalCigna Health Insurance Company says that restoration does not get triggered for the first claim in the policy year. If your policy cover is for Rs 5 lakh, and you get hospital bills worth Rs 7 lakh, only Rs 5 lakh will be covered in the first claim. The insurer will not recharge the sum insured during the first claim itself.

Similarly, if you get hospitalised for the same illness twice in a year, the policy will cover you only the first time. Most insurers offer it only on different diseases. In case of family floater policies, some insurers may not refill the sum insured in case of the same family member getting hospitalised twice.

Max Bupa ReAssure and Health Companion offer it for same or different diseases and for the same or different policy members.

Chaphekar of ManipalCigna says that the restoration benefit cannot be carried forward to the next year. “If the individual did not use it in the same policy year, it will expire and cannot be carried forward for the next year or at the time of the renewal of policy,” he says.