What is moratorium period in health insurance?

livemint.com:

—Name withheld on request Moratorium period is also referred to as the look-back period in insurance. This is a safeguard clause built-in for the policyholders. Once the moratorium period is over, insurers cannot reject a claim on the grounds of non-disclosure, or misrepresentation.

Insurers have to establish a case of fraud to reject a claim. For health insurance claims in personal policies, insurers often question disclosures made by the policyholders at the proposal stage. This is especially true for chronic ailments such as diabetes, blood pressure or arthritis.

Many policyholders do not necessarily maintain historical health records, so they disclose information on best available basis in the proposal form. At the time of claim, insurers scrutinize these disclosures. They tend to match these disclosures with any commentary made by the treating doctor in the discharge summary.

Any variation in the disclosure leads to disputes in claim. Once the moratorium period is over, insurers lose the right to reject claims on such grounds. It also increases the onus of insurers to do a thorough underwriting at the proposal stage, before accepting premium payment.

The moratorium period used to be eight years earlier but was recently reduced to fove years. Free-look period is the initial period after receipt of the policy document. During this period, the policyholder can review the policy wordings and choose to cancel the policy.

In such a case, the insurer is obliged to return the full premium. Insurers can only deduct risk premium for the period of coverage and administrative cost such as health underwriting. Free look period is also a safeguard clause for the policyholders to curb mis-selling.