The beauty of an unlimited buffet is that you can refill your plate with food servings as many times as you wish after finishing each serve. What if the same thing applies to your health insurance cover? Yes, in a health insurance policy, the restoration benefit does that. It replenishes your health insurance cover after the initial cover has been exhausted from earlier claim(s). In this article, we will understand what the restoration benefit is, how it works, and why you should have it in your health insurance policy.
What is the restoration benefit?
The restoration benefit replenishes your health insurance cover after it has been exhausted by hospitalisation claim(s). In a health policy without the restoration benefit, the cover is restored at the start of the next policy year. However, in a health policy with a restoration benefit, the cover is restored in the same policy year once the initial cover has been exhausted due to previous claims.
The restoration benefit is referred to by various names, such as restoration, refill, replenishment, recharge, reinstatement, reset, etc. The restoration benefit acts like a backup. It kicks in once the initial cover has been used up.
For example, Rajesh has a health insurance policy with a sum assured of Rs. 5 lakhs. He is hospitalised and makes a claim of Rs. 5 lakhs, using up the entire cover. The restoration benefit reinstates Rajesh’s health insurance cover to Rs. 5 lakhs. During the same policy year, Rajesh is hospitalised again, and the bill is Rs. 3 lakhs. Rajesh’s claim was paid from the reinstated Rs. 5 lakhs cover.
Some health insurance plans have the restoration benefit in-built, while some offer it as an optional rider or add-on.
What is the need for the restoration benefit?
In India, medical inflation has been growing faster than the general inflation rate, mostly in double digits, year after year. Hence, if you don’t take an adequate amount of health insurance cover, a single hospitalisation claim can consume the entire or most of your cover.
What if there is another hospitalisation event in the same year, and you run out of your health insurance cover? In the absence of the restoration benefit, you will have to pay the bill amount from your own pocket. If the hospital bill is high, it can disrupt your financial planning journey and set you back by a few years or more. For some people, the impact can be severe, wiping out all the savings and investments. The worst that can happen, a person is left with no savings and has to take a personal loan to pay the partial or entire hospital bill.
However, with the restoration benefit, you can avoid the financial difficulties outlined above. The restoration benefit replenishes your exhausted health insurance coverage. In the event of multiple hospitalisations and initial cover being exhausted, the health insurance cover will still pay from the restored cover.
Types of restoration
Not all health insurance plans with the restoration benefit offer it the same way. The restoration benefit can be structured in different ways. Hence, it is important to read the policy wording to understand how the restoration benefit is being offered for that particular health insurance product.
Some ways in which the restoration benefit is offered include the following
A. Once a year or unlimited times: Some health insurance plans offer the restoration benefit only once in a policy year. On the other hand, some plans offer it unlimited times during the policy year. Plans that offer unlimited restoration provide better value than plans with restoration once a year. However, the premium for plans with unlimited restoration will be higher than those with restoration once a year.
B. Applies to the same illness or a different illness: Some health insurance plans allow the use of the restoration benefit for a different or unrelated illness. For example, suppose a person is hospitalised due to Tuberculosis (TB). Let us assume the cover got exhausted for the current hospitalisation bill settlement, and the restoration benefit has kicked in.
In this case, if the person gets hospitalised again during the same policy year due to TB, they cannot avail the restoration benefit. However, if the person is hospitalised again during the same policy year due to an unrelated or different illness (other than TB in this case), they can avail of the restoration benefit.
Some health insurance plans allow the restoration benefit to be used for the same illness. Suppose a person is hospitalised due to TB. Let us assume the cover got exhausted for the current hospitalisation bill settlement, and the restoration benefit has kicked in. In this case, if the person is hospitalised again during the same policy year due to TB, they can still avail the restoration benefit.
Health insurance plans that allow the use of the restoration benefit for the same illness provide better value than those that allow use for a different illness.
C. When does it apply — full or partial cover exhaustion: In some health insurance plans, the restoration benefit kicks in only after the entire health insurance cover has been exhausted. For example, suppose a person has a health insurance cover of Rs. 5 lakhs. In this case, the restoration benefit will kick in only after the entire Rs. 5 lakhs cover is exhausted.
In some health insurance plans, the restoration benefit kicks in even if the health insurance cover is partially used up. For example, suppose a person has a health insurance cover of Rs. 5 lakhs. The person is hospitalised, and the bill is Rs. 1 lakh. In this case, the restoration benefit will kick in, and the policy sum assured will be reinstated from Rs. 4 lakhs to Rs. 5 lakhs.
Health insurance plans with a restoration benefit for partial cover exhaustion offer better value than those with a restoration benefit for full exhaustion.
In the above section, we discussed the different types of the restoration benefit. Irrespective of the type, the restoration benefit kicks in automatically, with no steps required from the policyholder.
Restoration benefit: Points to consider
A health insurance policyholder needs to consider the following points regarding the restoration benefit.
- The restoration benefit usually kicks in after the initial health cover and the accumulated bonus has been exhausted. Check your policy terms and conditions to understand when it kicks in.
- The restoration benefit usually kicks in after the first claim during the policy year. For example, suppose the policy cover is Rs. 5 lakhs, and the first claim amount is Rs. 6 lakhs. The restoration benefit will not be available for the Rs. 6 lakhs claim settlement. It will kick in after the first claim of Rs. 6 lakhs is settled.
How does the restoration benefit help?
The restoration benefit in a health insurance policy helps in various scenarios. For example, suppose a policyholder suffers from a serious illness that requires hospitalisation multiple times in a year. The restoration benefit helps with the next hospitalisation event if the insurance cover was exhausted during the last hospitalisation event.
In a family floater plan covering multiple family members, multiple family members can be hospitalised separately during the year. In such a scenario, the restoration benefit helps when another family member is hospitalised, and the insurance cover has been exhausted during the last hospitalisation event of a different family member.
Premium for plans with restoration benefit Vs Plans without it
The premium for health insurance plans with the restoration benefit is usually higher than those without it. However, the benefits the restoration feature offers justify the higher premium paid for it.
For example, assume there are multiple hospitalisations in a year, and the sum assured has been exhausted in the previous hospitalisation. In this case, the current hospitalisation event in the same year will save the policyholder an amount up to the sum assured. Thus, the huge savings from the restoration benefit make it worth despite the higher premium paid for it.
Should you choose a health insurance plan with the restoration benefit?
The restoration benefit is an important feature of any health insurance plan. The benefit proves its importance when there are multiple hospitalisations in a year, for which the cumulative hospitalisation bill far exceeds, or is multiple times, the base sum assured. Hence, consider choosing a health insurance plan with the restoration benefit, even if it comes at a slightly higher premium.
You must check the policy wording to understand how the restoration benefit in your health insurance works. Check whether it applies once or unlimited times a year, for the same illness or a different illness, full or partial cover exhaustion, etc.