Introduction: Holding more than one health insurance policy
Lot of people these days hold more than one health insurance policy. For those wondering why and how an individual can have multiple health insurance policies, here are some scenarios:
a) Health insurance cover from employer (you may be covered under a group health insurance policy by your own employer and / or spouse’s employer and / or father’s employer and / or mother’s employer)
b) Over and above the health insurance cover from the employer (as seen in point (a) above) you may have bought a personal health insurance cover (individual or family floater) because you did not want to depend on your employer’s health insurance cover solely.
c) You may have bought a health insurance policy some 10 years back and now feel the cover amount is less as health insurance costs have gone up significantly in the last few years and hence you bought one more health insurance policy to enhance your or your family’s health insurance cover
d) You may be covered under the group health insurance policy of your bank (provided to account holders as a benefit) or some state / central government scheme or some other association / club / group etc.
e) You may have bought a separate critical illness policy or added an critical illness rider to one of your life insurance policies to take care of critical illnesses
f) You may have bought a ‘hospital cash’ policy that pays a fixed amount on the happening of a specified event. This policy may have been bought to cover some expenses that may or may not be covered by a hospitalisation indemnity policy.
Now that we have seen the scenarios under which an individual may hold more than one health insurance policy, the next two questions that come to mind are:
a) If there is a claim, can the claim be made from multiple health insurance companies?
b) If yes, then what is the process?
Let us deal with both the above questions one-by-one
Can a claim be made with multiple health insurance companies?
As per IRDA (Health Insurance) Regulations, 2013, the answer to the above question is yes.
Let us try and understand this with the help of some scenarios
Scenario 1: When the claim amount is less than the sum assured of the policy against which a claim is made
Example: Ajay has the following 2 health insurance policies
Policy A from health insurer A for a sum assured of Rs. 2 lakhs
Policy B from health insurer B for a sum assured of Rs. 1 lakh
The claim is of Rs. 60,000
In this scenario, Ajay can make a claim from health insurer A or health insurer B.
So if Ajay decides to lodge his claim with health insurer A, since the claim amount of Rs. 60,000 is less than the sum assured of Rs. 2 lakhs, the entire amount will be settled by health insurer A. Similarly if Ajay decides to lodge his claim with health insurer B, since the claim amount of Rs. 60,000 is less than the sum assured of Rs. 1 lakhs, the entire amount will be settled by health insurer B.
Scenario 2: When the claim amount is more than the sum assured of the policy against which a claim is made
Example: Vijay has the following 2 health insurance policies
Policy A from health insurer A for a sum assured of Rs. 3 lakhs
Policy B from health insurer B for a sum assured of Rs. 1 lakh
The claim is of Rs. 3.6 lakhs
In this scenario, the contribution clause will be applied by the health insurers. Vijay can lodge the first claim with health insurer A or health insurer B.
So let us assume that Vijay decides to lodge his first claim with health insurer A. In this case health insurer A will pay its proportionate share of the claim. Vijay’s total health insurance cover from the two health insurers is Rs. 4 lakhs (distributed in the share 3:1 or 75%:25%). So health insurer A will pay 75% of the claim amount (i.e. Rs. 2.7 lakhs). After that, health insurer B will then pay its proportionate share of the claim i.e. 25% or Rs. 90,000. So the total payout received by Vijay from the two health insurers will be Rs. 2,70,000 + Rs. 90,000 = Rs. 3,60,000 (which is the total claim amount).
Please note if there are more than two health insurers from whom the claim is to be made, then the same process will apply as above.
Also you cannot profit by claiming the entire amount multiple times from multiple health insurers. Even if there are multiple policies involved, you cannot get paid more than the actual hospitalisation amount.
So as you can see, IRDA has made the process simpler and policyholder friendly. Now that we understand that a claim can be made with multiple health insurers, now let us address the next question: the process of making a claim with multiple health insurers.
What is the process of making a claim with multiple health insurance companies?
In the event of a claim, if there is more than one health insurance policy involved (let us assume there is health insurer A and health insurer B involved in this case), you need to take the following steps:
If there are more than 2 health insurers involved in a claim, then the same process needs to be repeated as mentioned above. Every subsequent claim can be made only after the previous claim is settled.
Policies with defined benefits
Hospital cash and critical illness policies are defined benefit policies. These policies pay a lumpsum amount on the happening of a specified event and the policy terminates. The amount paid under such policies is fixed in nature and is not related to the actual cost of treatment. In case the insured holds two such policies and the specified event has occurred, then the insured can make a claim with both the insurance companies for the specified amount (no contribution clause will be applied here).
Some points to consider
a) Always declare all your existing policies in force when applying for a new policy (not applicable for health insurance policy from employer). If the details of existing policies are not declared, then at the time of claim, the insurance company may reject the claim on grounds of misrepresentation.
b) When more than one health insurance policy is available for making a claim, preference should be given to your employer’s policy (or other group policy) first. This is because in case of such policies the claim processing is faster as compared to individual policies. Also in group policies there are fewer restrictions (like waiting periods may be lower or may not be there, pre-existing diseases may be covered) as compared to individual / family floater policies. If the entire claim can be settled from the employer’s policy itself, it will not affect the no-claim bonus (NCB) on your individual policy at the time of renewal.
c) If you don’t have an employer / group policy and have two of your own health insurance policies, then claim from the older policy should be made first. This is because in case of the older policy, the waiting periods for some diseases / treatment procedures may have been over.
It is ideal to have a single health insurance policy with a high sum assured amount so that you don’t have to go through the hassle of making multiple claims with multiple health insurers. It helps in avoiding excessive documentation and in avoiding running around to multiple health insurers and at the same time it saves on time and effort. The flip side to having a single policy is it may affect your no claim bonus (NCB) adversely in the event of a claim. While having a single health insurance policy with a higher sum assured is an ideal thing, we understand that practically this may not be a feasible solution for lot of us. To conclude, we sincerely hope that we have helped you to some extent in understanding how a claim can be made when more than one health insurance policy is involved.
The article has been written by Gopal Gidwani who is the owner of personal finance website www.bachatkhata.com
Extract of IRDA (Health Insurance) Regulations, 2013
i. If two or more policies are taken by an insured during a period from one or more insurers, the contribution clause shall not be applicable where the cover / benefit offered:
1. is fixed in nature;
2. does not have any relation to the treatment costs;
ii. In case of multiple policies which provide fixed benefits, on the occurrence of the insured event in accordance with the terms and conditions of the policies, the insurer shall make the claim payments independent of payments received under other similar policies.
iii. If two or more policies are taken by an insured during a period from one or more insurers to indemnify treatment costs, the insurer shall not apply the contribution clause, but the policyholder shall have the right to require a settlement of his claim in terms of any of his policies
1. In all such cases the insurer who has issued the chosen policy shall be obliged to settle the claim without insisting on the contribution clause as long as the claim is within the limits of and according to the terms of the chosen policy
2. If the amount to be claimed exceeds the sum insured under a single policy after considering the deductibles or co-pay, the policyholder shall have the right to choose insurers by whom the claim to be settled. In such cases, the insurer may settle the claim with contribution clause.
3. Except in benefit policies, in cases where an insured has policies from more than one insurer to cover the same risk on indemnity basis, the insured shall only be indemnified the hopsitalisation costs in accordance with terms and conditions of the policy.