Automatic Restoration Of Sum Insured Or Unlimited SI: What To Take?

When given an option between ‘Automatic Sum Insured Restoration’ versus getting an ‘Unlimited Sum Insured’ for a health insurance plan, what would you choose? Star Health Insurance, in collaboration with Policybazaar, recently launched a new modular long-term health insurance plan called Super Star. Designed for both individuals and families, this plan boasts a flexible and customisable coverage that adapts to policyholders’ needs over time. It is a ‘digital-only’ product available through the Policybazaar website and Star Health’s online portal.

Read More: Should You Pay Premiums In Advance?

The long-term 5-year policy for individuals and families alike has come out with some key features such as

- Freeze Your Age: Locking premiums at the entry age till the first claim is made, and;

- Automatic restoration of the Sum Insured after every claim in a given policy year

The policy also extends the option of ‘Unlimited Sum Insured’ meaning the plan would provide unlimited coverage to customers for healthcare treatment.

The sum insured (SI) by a health insurance plan refers to the maximum amount a person can avail for healthcare treatment. Typically, health insurance policies come with an SI amount of Rs 5 lakh, Rs 25 lakh, Rs 1 crore, and above. However, in the case of Unlimited SI, there is no capping on the amount under the said insured plans. This feature allows customers to avail of healthcare treatment without worrying about any costs.

Understanding Automatic Restoration of Sum Insured

Under the Super Star plan’s ‘Automatic Restoration of Sum Insured’ feature - the coverage amount will be restored after each hospitalization claim during the policy period. Once the sum insured (SI) is partially or fully exhausted after a claim, the policy automatically restores the full coverage amount for subsequent hospitalisations, whether for the same or different illnesses.

This Is How It Works:

For instance, two insured members under this policy, each with an SI of Rs 10 lakhs, make multiple claims in a single policy year (look at picture 1).

The Insured Member 1 has an SI of Rs 10 lakhs with no No Claim Bonus (NCB), leaving them with a total available amount of Rs 10 lakhs for claims. Insured Member 2 has a sum insured of Rs 10 lakhs, along with an NCB of Rs 5 lakhs, bringing their total SI amount to Rs 15 lakhs.

1. First Claim (Rs 5 Lakhs)

- Both members make a claim for Rs 5 lakhs.

- After this claim, the sum insured is restored, as the policy allows for partial utilization of the sum insured to trigger the restoration.

- The amount is restored to its full Rs 10 lakhs in both cases, meaning both insured members now have Rs 10 lakhs available for subsequent claims.

2. Second Claim (Rs 10 Lakhs)

- Both members then make a second claim of Rs 10 lakhs.

- Since the full sum insured is utilized in this claim, the restoration feature kicks in again. Both insured members get their SI restored for future claims.

- The restoration ensures that for any future claims, the policyholder still has access to Rs 10 lakhs in coverage.

3. Third Claim (Rs 10 Lakhs)

If either insured member makes a third claim of Rs 10 lakhs, the sum insured is restored again up to 100 per cent, ensuring that the policyholder is still protected.

Please note: The unutilized restored sum insured cannot be carried forward to the next policy year as per policy details. Moreover, this option is not available if you choose Unlimited SI.

Unlimited Sum Insured: What You Get

On the other hand, the Unlimited Sum Insured option promises theoretically limitless coverage for medical expenses. However, some key benefits that might seem crucial for long-term policyholders, such as the No Claim Bonus and Super Star Bonus, are not available if the customer opts for the Unlimited SI.

Freeze Your Health: The Long-term Premium Lock

Under this plan’s “Freeze Your Age” feature - When a person buys the policy, their age is locked at entry. Premiums will be based on this age until a claim is paid under In-Patient, Day Care, or AYUSH treatments. Post-claim, premiums will be charged as per their age at renewal. However, this feature is available only up to the age of 50 years.

For example, if the insured buys the policy at 30 years old, they will continue paying the premium applicable for a 30-year-old at each renewal, until a claim is paid or up to the age of 55 years. After the claim is paid, the premium charged will be as per the insured’s current age and will continue to change according to the age at renewal.

This benefit would cease once the insured attains the age of 56 years irrespective of whether the claim has been made or not. On attaining the age of 56 years the premium charged will be as per the insured’s actual age on the date of renewal and thereafter the premium applicable will be as per the insured’s age at each subsequent renewal thereon.

1. Is this applicable to long-term plans?

Yes, in the case long long-term policies (tenure >1 year), the premium for the entire term will be charged as per the customers' entry age. No additional premium will be charged in the middle of the tenure in case of claims.

However at the time of renewal (in case you made a claim), the premium will be charged as per your age at such renewal date. From this point onwards, the premium applicable will be as per your age at each subsequent renewal.

2. How does the ‘Freeze Your Age’ work in the case of floater policies?

If a floater policy, splits into multiple policies, then the insurer will carry forward the locked age at which the floater policies were taken by individuals. If a claim is incurred for any insured member in the floater policy then the insurer will unlock the age for all the insured members covered under the policy.

In the case of a multi-individual policy, the age will unlock only for the individuals who claim.

Who Should Consider It?

If you are a young individual looking to buy a health plan, ‘Freeze Your Age’ could be an attractive feature since younger cohorts are unlikely to make a claim for many years. It would allow you to lock in lower premiums over the long term, providing savings that compound with each renewal.

However, those approaching 50/55 or those with existing medical conditions might not see as much benefit from this feature.

What Should You Choose: Automatic Restoration or Unlimited SI?

Automatic restoration could be an ideal option for families or individuals who expect to need coverage for multiple, unrelated hospitalisations in a year. It would provide peace of mind for those who may face recurring medical issues but are not anticipating single, large claims exceeding their initial sum insured.

However, individuals or families with a higher risk of requiring extensive medical treatment or those willing to pay a premium for absolute financial security can go for Unlimited SI. High-net-worth individuals or those with a family history of chronic or critical illnesses may find this option more attractive.

Please note that various added features such as Super Star bonus, limitless care, cumulative bonuses, voluntary deductible option, discount on parents / parent-in-laws policy are not applicable if the customer opts for Unlimited Sum Insured.

Also, the Unlimited SI is only being offered up to the age of 65 years, this condition is applicable at the time of inception of the policy.

While making the choice between the two, you should assess your individual health risks, family needs, and potential treatment costs to find the most suitable coverage option.