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What happens to health insurance when the policyholder dies?

Team AckoOct 27, 2021

Health insurance is helpful when you wish to cover the cost of treatment by filing claims. But what happens to your insurance if you are no longer around and the policy is still active? The answer depends on many factors like type of health plan, age of the family members, the nominees you appointed, and more.

Through this article, we aim to clear the confusion regarding the death benefits of each type of health insurance policy. Let's get started.

What Happens to Health Insurance When the Policyholder Dies?

How to check the policy document for death benefits?

You can read your health insurance policy document to see what happens to your coverage in case you are no longer around. A death benefit clause may also provide for the continuation of coverage with family members. There could be listed dependents who are qualified under the policy to receive coverage even after your death. The dependants are generally qualified to get health insurance coverage based on their age and income.

For example, Mr. John and immediate family members are covered under a Family-floater Health plan. Unfortunately, he suffered a cardiac arrest and passed away. The death benefit of the policy mentioned that other family members would continue to get health insurance coverage in case of Mr. John's death. The policy was helpful when his aging mother was hospitalised after his passing.

A typical health insurance policy mentions a clause that states — if an insured person dies, all benefits of the policy are to be paid to the beneficiary named in either the death certificate or in the health insurance policy.

If you are worried about the financial well being of your loved ones, then buying a Family-floater plan can ensure that they have adequate insurance coverage in case of your absence..

Examples of how death affects health insurance

Take a look at a few examples of how one can get affected financially if they are not aware of the death benefit clause of a health insurance policy.

  • Ms. Taniya was covered under a Family health plan where her father was the primary insured member. He died of natural causes during the policy period. After a month Taniya had a minor accident. Note that the health insurance policy is still active but she was not aware of the coverage benefits. The death benefit of her father's policy allowed continued health insurance coverage for Ms. Taniya, her two siblings and her mother. But, since she was unaware of her father's coverage, she paid for the cost of treatment out of her pocket.

  • Mr. Kedar bought a health insurance policy where he was the sole insured member. He had appointed his wife, Mrs. Kedar as the nominee. Unfortunately, Kedar had a major accident and was hospitalised. He succumbed to the injuries 12 days after hospitalisation. Mrs. Kedar was eligible to get the claim for hospitalisation expenses as she was the nominee of Kedar's health plan. If he had not appointed Mrs. Kedar as the nominee, she would not have directly received the claim amount. In such cases, the insurance company seeks a succession certificate from the court of law and pays the claim amount to the next of kin.

  • Some health insurance plans offer coverage to two individuals under the same policy. For example, say Vivan and his wife, Tina were covered under health insurance with a sum insured of Rs. 10 lakhs (Rs. 5+5 lakhs for each insured person).  Sadly, Tina passed away during childbirth. In this case the health insurance policy will continue to cover Vivan up to Rs. 5 lakh until the plan expires. He can then choose to buy a new plan to cover himself and the newborn. Tina's hospitalisation expenses for delivery will be paid to Vivan as per policy terms.

Types of health insurance policies and effects of death

Let’s understand how each health insurance policy deals with the policyholder’s death and what exactly happens to the coverage?

Family-floater health plan

Related family members are covered with health insurance benefits under a Family-floater Health plan. The sum insured is used by all members until exhaustion.

Death benefit

A Family-floater health insurance policy continues offering coverage to the remaining insured members in case of death of the primary insured member. In case the person paying the premium suffers death, then the next of kin must contact the insurance company and inform them about the same. The insurer will try to make an endorsement in the current policy and send the updated policy details.

Group Health Insurance Policy

A Group Policy is usually offered by an employer to the employees. It is similar to a Family-floater health plan, but the employer has major control over the policy and its benefits. This is because the employer pays the premium for basic health insurance coverage.

Death benefit

If the employee suffers death, then the policy ceases to exist. The coverage cannot be offered to the dependants unless explicitly mentioned in the policy. If there is a death benefit clause in the policy, then the next of kin may receive a lump sum amount.

In another situation where a family member dies, the policy will be endorsed, i.e. updated with the list of remaining dependants. Thus, the rest of the family members can continue to avail health insurance coverage.

Critical Illness Plan

This particular health insurance policy offers a lump sum payout to the insured member upon the diagnosis of a listed illness.

Death benefit

Usually, a Critical Illness plan does not offer a death benefit. In fact, the insured person must survive for a fixed number of days after diagnosis to be able to make a claim. The policy becomes void if the insured member suffers death during this window.

Senior Citizen Health Insurance

This type of health insurance plan is similar to an Individual Health insurance policy. However, the benefits are offered to a person above the age of 60 years.

Death benefit

The policy ceases to exist if the insured person suffers death.

Also, check: Medical Insurance for Senior Citizens

Takeaway

The death of the insured member may not terminate health insurance coverage. But this largely depends upon the type of health plan you and your loved ones are covered with. The policy may continue as long as premiums are paid and the information given to your insurer is accurate. As mentioned earlier, the premium can be paid by another insured member after informing about the unfortunate demise to the health insurance company.

On the other hand, it is also incorrect to assume that health insurance coverage will continue as before even after the death of the insured member. As negative as it sounds, it becomes crucial to be informed about the death clause of your health insurance policy and inform the family members about the finality of your health plan.

Frequently asked questions

Here is a list of common questions about death’s implications on a health insurance policy. You can get in touch with ACKO by sending an email at [email protected] in case of more questions.

Will the premium of my health insurance policy increase if I am not around anymore?

Usually, the premium may remain unchanged if the sum insured amount is not increased or decreased. The person paying the premium after your death can decide if they want to make changes to the policy and its benefits in case of the primary person’s death.

Is a death certificate of the policyholder required to raise a health insurance claim?

Yes, the next of kin or the beneficiary of the health insurance policy must produce the death certificate of the policyholder while making a claim. This document will also be necessary to continue availing of health insurance coverage if applicable.

How to claim the cost of treatment for the deceased insured member?

The next of kin can raise a claim (either cashless or reimbursement claim) to cover the cost of treatment of the deceased insured member based on the policy type. The insurance company must be informed about this event as soon as possible. It is also important to understand the next course of action in such cases.

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CIN: U66000KA2016PLC138288

IRDAI Registration No: 157

Category: Non-Life Insurance

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