How ‘restoration benefit’ in health insurance works

Most health insurance policies in the market offer built-in back-up plans for policyholders in the form of ‘restoration’ benefit. In this feature, the insurer fully reinstates the original sum insured (SI) once it is exhausted. This means, in a floater policy, if any other family member gets hospitalised even after the entire sum insured (SI) is used up in a policy year, there will still be a cover available to the extent of the full SI. This reinstatement of health cover is welcome, especially if your original cover is small. Restoration feature is also termed as refill, reset or reload depending on the insurer.

However, restoration benefits come with caveats and limitations. Here is what you should know.

The basics

While health insurers offer to reinstate your original SI, the restoration process varies with insurers. Some policies such as Manipal Cigna’s ProHealth policy, Activ Assure Diamond policy from Aditya Birla Health, ICICI Lombard’s iHealth Plus restore your original SI only after the existing cover is exhausted.

Let’s understand this concept with an example. Joe has ₹5 lakh as health cover and, on his first claim, this amount gets utilised. A few months later, he gets hospitalised for another illness, and his second claim is for ₹2 lakh. Given that his original SI is exhausted, his restored SI will be ₹5 lakh and the insurer will settle his claim (of ₹2 lakh).

Now, let’s take another case. Joe’s first claim is for ₹4 lakh; the balance SI will be ₹1 lakh. He makes a second claim for ₹2 lakh. The insurer will cover only ₹1 lakh and Joe will have to settle the balance from his pocket. The ‘restore’ benefit will not be triggered as Joe has not exhausted his SI completely. However, if Joe makes a third claim in a year, he will have ₹5 lakh as his SI.

There are health covers in the market such as Optima Restore from HDFC Ergo Health, Max Bupa’s Go Active policy and Lifeline by Royal Sundaram General Insurance that offer to reinstate the original SI even when the SI is partially exhausted.

For instance, let’s assume Joe has a health policy of ₹5 lakh and he makes a claim for ₹3 lakh (first claim). The insurer settles the claim and Joe’s SI balance is ₹2 lakh. His ‘restore’ benefit is triggered (available only for subsequent claims) and his SI balance for the year will be ₹7 lakh (existing balance of ₹2 lakh and SI restored is ₹5 lakh). What must be kept in mind is that a single claim in a policy year cannot exceed base SI. Which means, if Joe makes a second claim for ₹6 lakh, the insurer will pay ₹5 lakh only and the balance ₹2 lakh SI will be available for subsequent claims.

Note that, while most policies come with ‘restore’ benefit, it may be not available across all variants of a particular policy. For instance, in ICICI Lombard’s iHealth Plus, the ‘reset’ benefit is available from SI of ₹3 lakh and above only. Similarly, in Digit Insurance’s health plan, the ‘restore’ benefit is available for comfort variant of the plan only.

What’s the catch?

Since most insurers offer ‘restore’ or ‘refill’ benefit as an in-built feature in the policies, there are certain points that you as a policyholder should keep in mind.

One, ‘restore’ benefit is usually available only once during a policy year when insurers refill 100 per cent of the base SI. But there are policies in the market such as Pro Health policy (Manipal Cigna), Max Bupa’s ReAssure plan and Star Health’s Family Health Optima plan (SI is restored three times a year), that offer ‘restore’ benefit multiple times. Insurers also offer unlimited ‘restore’ benefits as a rider, like in Religare Health insurance’s Care plan and Activ Assure Diamond plan (Aditya Birla Health).

Two, as a norm, the ‘restored’ SI will be available only for subsequent claims made by the policyholder. That is, the ‘restore’ benefit will not be applicable on the first claim in the policy year. Also, most policies do not offer the ‘reinstated’ SI for the same illness for which you had made the claim in a policy year. However, some policies in the market such as ReAssure (Max Bupa) do cover for the same illness subsequently.

Three, your ‘restoration’ SI will not be considered for no claim bonus (a reward that policyholders receive from the insurer for staying healthy and not making any claim on the policy in a year) calculation.

Lastly, the SI reinstated during the policy year, if unutilised, will expire and cannot be carried forward to next year or at the time of renewal of policy.

Remember that your reinstated SI can be utilised only sequentially, that is, after exhausting the original SI, accumulated no-claim bonus (NCB) SI, additional or super NCB (if any opted), and additional SI through booster benefit (if any opted).

Our take

SI restoration benefit is offered by most health insurers as part of the basic cover. While this benefit can compensate if you are under-insured, relying on reinstated SI to make up for the gap is not advisable. Also, you need to understand the workings and applicability of this feature and choose a SI, accordingly, based on your need.