What Does Cooling Off Period Means?

What is the cooling‑off period in health insurance?

If you've recently recovered from a serious health condition such as dengue or any heart-related complications, your insurer may ask you to wait for some time. This is known as a cooling period, where the insurer first assesses your risk of raising a claim right after recovering from a disease. A cooling-off period is a risk-control mechanism for insurers in cases of immediate post-recovery complications. However, cooling period limit meaning is quite different from the meaning of a waiting period. The waiting period starts right after you purchase a policy, and it prevents you from raising new claims till the period expires. During the cooling period, there is a fixed time frame that delays your claim only if you have recovered from a specific illness.

Also read what is corporate buffer in health insurance and steps to avail it.

Why Does The Cooling Period Exist?

There are two basic reasons why cooling-off period exists:

• The primary reason is that insurers do not want to underwrite immediately after a person has recovered from a serious illness.
• Another reason is to prevent misuse/fraudulent purchases intended for expected upcoming claims. During the post-recovery stage, a person remains vulnerable.

There may be residual symptoms or an undetected relapse. Cooling-off period ensures that you purchase a policy once you are in good health, which keeps premiums affordable. This also gives the insurers some space to re-evaluate the application and assess the actual risk before underwriting the policy.

What is the Cooling Period Limit?

The cooling period limit usually lasts from 15 to 90 days. Although this period can completely vary between insurers, as it depends on the seriousness of the health condition and expected recovery time. For example, in conditions such as ICU admissions, surgery, or a cardiac arrest, the cooling period can last up to 90 days.

In today’s time, many insurers reduce the cooling period. At Covrzy, we only require your previous claims report to process the claim. Our aim is to make insurance simple and affordable for all businesses across every single industry.

Why Do Insurers Impose Cooling Period?

Let’s check out the major advantages of a cooling period:

Higher Claim Settlement Ratio

It helps the insurers to keep their claim settlement ratios within a higher benchmark. This is especially applicable to anyone who is recovering from a serious illness.

Develops Early Purchase Habit

For most customers, it encourages a healthy habit of purchasing the policy early. This offers benefits such as better premiums, wider coverage, and a few others.

Improves Insurance Awareness

Cooling time also makes customers aware of buying health insurance, as delayed health insurance often reduces the coverage and increases the premium.

Serves the Purpose of Insurance

Insurance is meant to save during critical times, and not during planned disasters. A cool-down period creates a habit in people to buy insurance for protecting themselves against future health calamities, and not only when they need it.

Also read how to do EPF registration online, with a step-by-step approach.

Cooling‑off Period Vs Waiting Period Vs Free‑look Period

How Does Cooling Period Work in Practice?

The cooling period limit means a fixed time during which the patient cannot purchase a new health insurance after being hospitalized. Let’s simplify this with an example.

Let’s say an employee has been hospitalized for a serious disease for a month. If the employee tries to purchase a health policy right after recovery, they will be denied because of the existence of the cooling-off period. Once they recover, they or their employer can try to purchase a new health insurance policy. The insurer may ask for these details after the recovery period, such as:

• Identity proof
• Hospital discharge summary
• Latest diagnosis report
• Physical fitness certificate

It is only after the insurer is satisfied that the applicant has fully recovered that they will proceed with the underwriting process. Note that some cases may involve a few additional tests or a delay in policy issuance. Depending on the seriousness of the health condition, the cooling period could stretch longer.

Can The Cooling‑off Period be Skipped or Avoided?

Waiving the cooling period limit is not possible. If an insurer mandates a cooling period, you cannot possibly waive it through any means. Remember that the cooking period is a part of the insurer’s underwriting process and impacts their risk management model.

The best way to avoid a cooling-off period is to purchase your health insurance early. For young individuals, this is a necessary step as major lifestyle-related diseases soon surface as we get older. For HRs and startup founders, ensuring that your employees are enrolled in group health policies from Day 1 helps to waive off any cool-down period.

Special cases: COVID‑19 and other illnesses

When the Covid-19 pandemic had set in, few insurers imposed a cooling-off period for 6 months. The reason is that most of the infections that affected Indians during the phase of COVID-19 were critical. A popular news media reported that many Covid-19 patients were offered a period right after they had recovered from the onslaught of Covid-19. NITI Aayog informs that after COVID-19, life insurance claims increased by almost 5-10 times. Moreover, companies have understood the need for employee wellness more than ever. Post-COVID, business premiums have increased by 16% annually.

What is the Minimum Cooling Period in Health Insurance?

The minimum number of days of the cooling-off period typically varies, depending on the insurer's policy. It majorly depends on factors such as:

• The type of disease
• Necessity for hospitalization
• Policy terms of the insurer

For example, if a patient is diagnosed with a mild viral fever with only OPD care, they may face only a 7-day cooling-off period. While this is different from a patient who is affected with pneumonia or surgery, and may need a 30 to 60-day cooling time. IRDAI does not specify a fixed timeframe of cooling down, hence it entirely depends on the insurer you are with.

Also read the meaning, importance, and coverage of OPD care.

Other Definitions for Cooling Period

The cooling period limit is imposed by the insurer to assess the risk and underwrite the policy after one recovers from a health disease. In most cases, this time is a recovery period that starts right after the patient is released from the hospital. Although the insurer determines the exact number of days as the cooling-off period, it usually lasts between 15 and 30 days at a stretch. Note that cooling period starts before purchase of the policy, and acts as a preventive measure for insurers.

Conclusion

The cooling period is a safety layer that protects both the insurer and the insured. It ensures that a patient does not buy a health policy right after being discharged, but instead waits, as the risk remains high in post-hospitalization cases. While you onboard a new employee or have employees with recent medical history, taking note of the cooling-down period is vital.

Do not wait for a health calamity to strike you, and wait during the cooling-off period. Covrzy’s employee wellness plan is designed to suit your business teams, how small or large your team may be. Ready to save more on your employee insurance? Reach out to [email protected] to get our early bird discount!