Four Things You Should Know About The "Restoration Benefit" Feature
Weigh the restoration benefit feature alongside other policy features - especially the claim settlement history of the insurer in question
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As the Health Insurance landscape becomes more competitive by the day, you can expect a number of features to be strapped on to existing products to "enhance" them. One such feature that it fast becoming a standard part of Health Insurance plans is the "restoration benefit" feature. Put simply, the restoration benefit feature promises to restore your Sum Insured one in a policy year, if your existing Sum Insured has been depleted and you require hospitalization again. Sounds too good to be true, right? Alas - when it comes to the world of Financial Services, there are no free lunches, and things are not always quite what they seem to be. Remember, the very purpose of underwriting is to tilt the risk/reward balance in the favour of the insurer, so that they can turn a profit. So, is the restoration benefit feature a nugatory one or a genuine value add? Here are 4 things about the feature that can help you decide.
It increases your premium
The Health Insurance industry has drawn some flak off late for the opacity and unevenness of pricing involved. A policy with a Sum Insured of Rs. 10 Lakhs can cost the same person Rs. 17,000 from one insurer, and Rs. 34,000 from another! Resultantly, decision making becomes difficult. One of the thumb rules is this - the more features that have been strapped on to the policy, the higher it's premium vis-à-vis its peers. Though the exact quantum of increase in pricing attributable to the restoration benefit feature cannot be computed, it does stretch your premium amount - this is the cost an insured person bears for the additional risk being taken on by the insurer.
It applies to unrelated conditions only
Say, you have a policy with a Sum Insured of Rs. 5 lakhs. You are hospitalised due to a kidney disease, and the treatment cost crosses 5 lakhs and hits 7 lakhs. In this case, the restoration benefit feature will, in fact, not kick in. The same condition applies if you were to be hospitalized for a second time due to a kidney related condition in the same policy year - the benefit will be voided and the Sum Insured will not be restored. Put simply, your insurer will only restore the Sum Insured in the event that you get hospitalized for a condition unrelated to the previous one(s) that depleted your Sum Insured.
For individual policies, you should opt for a higher Sum Insured instead
For individual plans, it makes sense to use the additional premium amount to opt for a higher Sum Insured, instead of a policy that provides a restoration benefit. The logic is simple - the chances of your getting hospitalized with two expensive unrelated conditions in a policy year are slim. The chances of incurring expensive treatment costs for one condition, or related conditions (example: heart, kidney, liver) in a 12-month period are far higher. As an individual, you'd want to stack the odds in your favour by opting for a higher Sum Insured over the Restoration Benefit.
It makes sense for Family Floater Plans
The feature does, in fact, add tangible value to Family Floater plans. For those who are less aware, the cover 'floats' between family members in family floater plans. In such policies, the restoration benefit feature comes in handy. Say, for instance, you have a floater plan with a Sum Insured of Rs. 5 lakhs, and your spouse falls ill - and the entire coverage is consumed. If, unfortunately, another one of your family members get hospitalized later in the same policy year, this feature would kick in and restore your Sum Insured, regardless of the condition that led to the treatment cost being incurred.
End Note: Weigh the restoration benefit feature alongside other policy features - especially the claim settlement history of the insurer in question. For individual policies, this is more or less a nugatory feature. For family floater plans, it's a valuable add-on to have.