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How to Make Claims if you have Multiple Health Insurance Policies?

Know more about Co-Contribution Clause in a health insurance policy in detail and know why it is a good idea to convey to the new insurer about the other insurance policies?

With healthcare costs on the rise, many people wish to take advantage of health insurance to get themselves, their families and relatives proper financial protection arising out of accidents or illnesses. But for people holding multiple policies, voluntary disclosure of multiple subscription is an idea that has not taken root.

Why people buy multiple policies?

Sometimes, group health insurance covers provided by their employers may not be adequate in these days of medical inflation. In these scenarios, people buy health insurance policies separately from their own pocket with a higher sum assured to get peace of mind in case of any medical emergencies.

Besides, depending on the age and health of individuals and family members, insurers may not be willing to go beyond a certain sum assured. In that case the individual may decide to go for multiple coverage to improve coverage.

But is it a good idea to disclose the existence of other insurance policies to your new insurer? The new regulations brought in by Insurance Development and Regulatory authority of India (IRDA) suggests that customers should disclose the existence of other policies to benefit from the co-contribution clause if the claim amount is higher than the sum assured in any of the policies.

What is co-contribution clause?

For example, if Arun, a 40-year old executive has a health insurance cover of Rs. 1 lakh from his employer (insurer A) and is hospitalized for TB. He also holds a private health insurance of Rs 2 lakh from another insurer (insurer B). Suppose his treatment costs come to Rs. 1.5 lakh. Then the insurer which has enrolled him in the group insurance cover can invoke the c-contribution clause. This means Arun first has to submit the original of his medical records to insurer A, get a settled certificate for Rs. 1 lakh, and submit Xerox copies of the records to insurer B and get the rest reimbursed. This is the co-contribution clause which can be invoked by an insurer if they have knowledge of a parallel policy.

By informing the existence of other health insurance plans, the insured makes it known to the other insurers that he is less risky in terms of coverage as the co-contribution clause can be invoked. If he knowingly doesn’t declare such information, under the terms and conditions of the policy, he may be accused of misrepresentation. It also reduces the financial burden on the insurers.

Choice of making a claim lies on the insured

But in case the claim amount is within the sum assured, the insured can choose which one of the insurers should make the claim. Suppose Arun’s claims would have been Rs. 80,000. In that case Arun can choose either insurer A or B to settle his claim and the insurer cannot impose the co-contribution clause.

In case of critical insurance policies where cashless/reimbursement clause does not apply, and have no connection to cost of treatment, the co-contribution clause will not apply and the insured can make the claim from all the insurers. In case of defined/critical illness cover, the compensation is not related to treatment but to diagnosis, and on confirmed diagnosis of the critical illness the sum assured is paid and the policy terminates. Suppose Arun has taken a critical insurance policy for Rs. 10 lakh that covers cancer from another insurer C. Now, at some time during his treatment, his is diagnosed for cancer. He can still claim reimbursement of treatment from insurers A & B and the lump sum benefit from insurer C.

Changes in regulation

IRDA has made some changes to regulations involving claims from multiple policy holders. Earlier ratio of coverage would determine how the claims were settled, but now if the claim amount is lesser than sum assured, co-contribution cannot apply. In case it is more, but existence of policies is not mentioned, the insurer’s liability only extends up to the sum assured and the extra amount has to be settled from the insured’s own pocket.

Hence it is in the interest of multiple policyholders to disclose their subscription of multiple policies to insurers and reduce their risk perception. Then only, the assumption to get benefitted from multiple policies holds good.

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Ryan Lewis is a seasoned Financial Adviser by profession, with an experience of 12+ years in Personal Finance sector. When not working, he does write-ups on various financial topics like Insurance, Investment, Tax, Retirement Planning, Frugal Living and more.

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