What is a cancellation in Health Insurance?

The best way to invest in your health is to buy health insurance. A health insurance benefit starts from hospitalisation expenses, no-claim bonus and continuity benefits.

What will happen to the premium during the cancellation of the health insurance policy? Before diving into the answer. Let us get information about the cancellation of the policy.

The health insurance policy can be cancelled from both ends. Either the insurance company or the policyholder can cancel the policy. It is essential to know about the cancellation processes. The policyholder has the liberty to cancel the policy at any time with prior notification.

Types of Cancellation in Health Insurance

Cancellation of the policy is differentiated into the following types,

Cancellation in the free look period

Cancellation in the free look period is where the policyholder can cancel the policy within a free-look period of the policy mentioned in the policy document.

Most health insurance policies come with a free look period. The free look period is the time given to the policyholder to reflect on the policy terms and conditions and decide whether to continue the policy or cancel it.

Suppose the policyholder wishes to cancel the policy in the free look period. Then, 100% of the premium amount will be refunded. Some insurance companies reduce the premium for the expenses incurred for the medical screening at the time of inception of the policy.

Short rata cancellation 

This may affect the premium. If the policyholder decides to cancel the policy after the free look period, then there will be a reduction in the premium.

If the policy is cancelled within a month, the insurance company will refund 75% of the premium.

If the policy is cancelled within 3 months, the insurance company will refund 50% of the premium.

If the policy is cancelled within 6 months, the insurance company will refund 25% of the premium.

The insurance company retains the entire premium if the policy is cancelled after 6 months. No premium will be refunded.

Flat cancellation

This is the cancellation of the opted health insurance policy before its effective date or before the policyholder is liable for the health coverage. In flat cancellation, the whole premium amount will be refunded as the policyholder is not covered under the policy.

Pro-Rata cancellation

Under pro-rata cancellation, the insurance company will refund the unearned premium amount without additional charges if there is no claim made under the policy. 

The insurance company can also cancel the policy by the following conditions:

• The policy can be cancelled in the event of misrepresentation or non-disclosure of the material facts.
• If the policyholder indulges in fraud activities. 

Make the right choice while buying the policy. Take the time to understand the policy’s inclusion and other benefits. Go for a policy that has comprehensive coverage and benefits.

Summing up

Cancellation of the policy can be made both by the Insured and the Insurer. Reasons for cancellation can include nonpayment of premiums, fraud or changes in the policyholder’s health status, etc.

Cancellation of a policy can leave the policyholder without coverage, so it is important to understand the terms of the policy and the cancellation process.

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