Guidelines were issued by the Insurance Regulatory and Development Authority (IRDAI) on Tuesday for the introduction of a short-term health insurance policy, which would offer protection from COVID-19, which the regulator said was the need of the hour. All insurers (Life, General and Health) are now allowed to offer COVID-19 specific short-term health insurance policies.
A short-term policy is one for which the term of the policy is less than a year. As per the guidelines, it can be offered for a minimum of three months and a maximum of 11.
“Optional covers that enhance the health insurance coverage are permitted to be offered for the same policy duration,” the guidelines stated.
The waiting period, which is the amount of time a person has to wait before the full coverage kicks in (you may not be able to make claims during the waiting period), has been reduced to not more than 15 days for the short term insurance policy.
Health insurers are only allowed to offer benefit-based policies, but general and life insurers are allowed to offer both benefit based as well as indemnity-based policies.
In a benefit-based plan, the full amount that is insured is paid to the policyholder if the defined event takes place, which, in this case, would be testing positive for coronavirus. This means that if you have a policy with total sum insured of up to Rs 2 lakh, on testing positive for COVID-19 and being hospitalised, you will receive Rs 2 lakh in lump sum, irrespective of the costs incurred through the treatment.
Indemnity-based health policies are those insurance policies where the insured is reimbursed the actual expense incurred during hospitalisation up to the total sum insured agreed under the policy.
These guidelines will remain valid for issue of short-term policies till March 31, 2021, unless extended further.
Sanjay Datta, Chief of Underwriting & Claims, ICICI Lombard, told Business Standard that the benefit-based product is likely to be more expensive than the indemnity-based clause.
“The logic behind two products is: let’s say, if anyone has a normal health product then they can take the benefit-based product and on testing positive, one will get a lump sum amount. Benefit based products can be taken as a supplementary product. But, if you do not have a product, then opting for the indemnity-based product makes sense”, he told the newspaper.
This policy will be helpful for those who do not have any insurance cover at all, said Parag Ved, Executive Vice President and Head of Consumer Lines, Tata AIG General Insurance to Economic Times.
“This announcement will benefit consumers who do not have health insurance cover at all or cannot afford health insurance or are looking for some additional cover. It will offer medical coverage specific to coronavirus (COVID-19) disease and will solve the purpose during emergency to fulfil short term gaps. In the current scenario this is a very customer centric initiative by the regulator, however customers should still evaluate going for a regular health insurance policy with comprehensive coverage and full benefits,” he told the business daily.