Restoration Benefit in Health Insurance: What is it & How it Works?

A health insurance policy is vital for all. It gives you financial protection against the medical expenses that you may incur when you or your family members fall sick. But, every time when you file a claim, you use a part of the sum insured amount and eventually over a period you may use the entire amount.The sum insured is the maximum amount that the insurance companies pay to the policyholder during a medical emergency. So, if you have used up the entire sum insured will the insurance company deny coverage during an emergency? Maybe not if you have a health insurance restoration facility added to your policy.

The health insurance restoration facility allows you to restore or refill the entire sum insured amount and the accrued cumulative bonus after it has been exhausted within a calendar year.Let us understand this benefit with an example.Suppose you have purchased a health insurance policy with a sum insured of Rs.5 lakhs. Now, you are diagnosed with an ailment and you spend the entire amount on the treatment. Let say, in the same year, you get hospitalised again for another ailment and the medical bill comes to Rs. 3 lakhs.Without the restoration benefit, you may not be able to get coverage for the second hospitalisation, and you would have to pay the bill from your pocket. However, if you have a health insurance restoration facility added to your policy, the insurer will cover the entire cost of the second hospitalisation and you don’t have to face any financial burden.

The working of a health insurance restoration facility depends on the type of facility offered by the insurer. While some health insurance companies may allow you to restore the sum insured after you exhaust the full amount, including the no claim bonus, others provide this facility even if you utilise the amount partially. Additionally, the restoration benefit cannot be carried forward from one year to another. This means you may have to use the restored amount in one calendar year.

One of the thumb rules that the insurers follow while determining the health insurance premium is – ‘the more features you add to the policy, the higher the premium.’ And, since the restoration benefit acts like an add-on, buying the facility increases the premium.Thus, if you purchase the health insurance restoration facility, you will get an additional cover but at the same time you must bear an extra cost on the premium. Another critical thing you must know about the health insurance premium is that insurance companies are not allowed to charge a higher premium from the policyholders after they file for a claim. This rule applies to the restoration plans as well.

In India, the insurance companies offer two types of health insurance policies – individual healthcare plan and family floater plan. As the name suggests, the individual policy covers only one person. The family floater plan, on the other hand, provides coverage to all your family members under a single policy.If you have a family floater loan, the chances of using the sum insured is higher as you may have to file a claim each time a family member gets hospitalised. So, the restoration of sum insured will benefit you the most if you have a family floater plan. You need not face any last-minute hassles of arranging money if a medical emergency arises and you don’t have used up the sum insured.

Now that you are aware of the different aspects of the health insurance restoration facility and its benefits, you can consider adding to your policy. But, before you zero down on a policy, it is advisable to check if the policy covers the ailments for which you have already used the sum insured earlier.This is critical because under some policies, if you have used the sum insured for a specific disease like cancer, you cannot use the restored sum insured for the same problem within the policy tenure. However, the restored sum insured can be used by other family members for the same disease.So, read the fine print of the policy well before you sign the paper and make an informed insurance buying decision.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.