She was insured for 11 years with not a single hospitalisation claim but no premium discount in appreciation of a profitable customer was forthcoming. So, my friend did not renew her hospitalisation policy.

Mistake. One because she did not have a fallback policy. But, more so because, in this policy, she had accumulated something. In fact, a goldmine of invisible benefits.

The policy had accrued the maximum bonus sum insured possible due to all those claim-free years. That is, instead of a cash discount, she had been given extra insurance value for the same premium.

She had also availed periodic free or subsidised master health check-ups through the years. And her time-bound exclusions were exclusions no more since the waiting periods were long over.

Expanded coverage

In other words, the scope of her coverage had expanded over time as she persisted with the policy.

We tend to value visible rewards. But rights and benefits accumulated over time, though invisible until you need them, can be far more valuable. Not for nothing is insurance called an intangible product. It is not just a money equation of premium and claims.

Lifelong renewability

Another unseen benefit is ‘lifelong renewability’ of hospitalisation policies.

Insurance Regulatory and Development Authority of India (IRDAI), the insurance sector regulator, has made this mandatory for standard hospitalisation policies without fresh medical tests.

Accordingly, your insurance company cannot refuse renewal or hike your individual premium due to your health setbacks or claims provided you have paid your premiums on time and kept the policy active.

Exceptions are cases such as proven fraud, intentional misrepresentation, false claims, moral hazard and so on.

All these benefits and the real downside of difficulties in getting new policies as age advances makes a strong case for not throwing the baby out with the bathwater.

I only wish this friend had called before her renewal or even during the grace period. She could have kept her coverage and her well-earned benefits intact. She did contact the insurer a couple of months later to renew but it was a no go. And that is as per hospitalisation policy norms.

Losing all

Misreading, or not reading, her policy was a mistake. A bigger misstep was letting it lapse and losing it all. Both she and her agent lost something of value.

She lost her coverage; the agent lost a sale and a customer. He ought to have told her what she stood to lose. The lesson? You may have doubts and questions about the value of your insurance policy, but don’t throw it away without an expert once-over.

Now, all I could tell her was to buy a policy afresh and start from square one. Harder when you are 11 years older.

Since you will be assessed anew, health status could have deteriorated and higher risk levels perceived making underwriting more difficult. They may offer you restricted cover and higher premium. Medical tests will almost certainly be required and certain risks can even be declined citing age and company guidelines.

You have to go through the waiting periods for pre-existing diseases all over again and there could be more of them.

Ditto for waiting periods for specified procedures and day-care surgeries. You will have to go through claim-free years again for the bonus in the form of extra sum insured to start accruing.

The Tirukkural says it best: Think before you act; there is little point in deliberating afterwards.

And this is not just about hospitalisation insurance. There are plenty of insurance decisions, acts of omission and commission, that people come to regret. I will share some of those stories in the next instalment of Between the Policy Lines.

What you are letting go

1) Accumulated bonuses

2) Waiting periods for excluded coverage

3) Right to renew

4) Loyalty and continuity benefits such as free medical check-ups and access to health and fitness apps/ trackers

5) Anchor policy to increase sum insured

6) Base policy to build coverage with a top-up or super top up

7) Track record with the insurer and relationships built

(The writer is a business journalist specialising in insurance & corporate history)