Moratorium or Full Medical Underwriting?

Most private medical insurance companies offer you two ways of taking out their policies: either with full medical underwriting or by what is known as moratorium. These terms are related to how and when you declare any pre-existing conditions and the impact this has on the health cover that you can get. This article looks at both types of underwriting and explains their advantages and disadvantages.

Firstly what does underwriting mean?
The Financial Times Dictionary of Insurance definition for it is: The process of evaluating and pricing risks proposed for insurance.

Moratorium Underwriting
With moratorium underwriting you only have to give very brief information about you and your family's health and lifestyle. You could say that its only when you make a claim that your policy is underwritten as this is when you medical history is investigated.

Any condition (or symptoms leading up to it) that you had for a set period of time (usually five years) prior to signing for your health cover will not be covered for two consecutive years from the start of our policy. This includes any condition for which you had symptoms for but had not been diagnosed.

After the two year period is up you may receive cover for any condition that you had prior to the set period lead-up to the start of your cover providing you have not had a recurrence of the condition or its symptoms within the two preceding years.

Advantages
-This is advantageous for those with no previous medical history as they do not need to worry about filling in lengthy forms.
-The application for this type of underwriting is simple and speedy as you will not have to wait for the policy to be underwritten.
-There is no condition that is not covered once your period of moratorium is up (unless it is already excluded by the policy in the first place).
Lower premiums

Disadvantages
-Moratoriums have been criticised for providing a platform by which people may hold off seeking advice or treatment for symptoms of a condition because they want to wait until their two year period is up so that they can make a claim. This is dangerous and potentially life-threatening.
-The medical underwriting on a moratorium policy is done at the time you make a claim. This can create delays in the processing of your claim at a time when you will be feeling most vulnerable.
-You may not know in advance which conditions are covered by your policy as you will not have made a full declaration at the beginning.
-No lower premium rewards for healthy clients

Full Medical Underwriting
This involves you filling out a full medical questionnaire (also known as a Medical History Declaration). It is important to answer all questions fully so that your medical insurer can provide you with a detailed picture of the health cover that you can expect to receive and any exclusions that apply to you. Full medical underwriting may also involve your GP being asked questions that help to clarify your situation. This is always done with your consent.

Advantages
-You know in advance of any exclusions that will apply to you
-quicker claim processing time
-healthy people with positive lifestyles can be rewarded with lower premiums

Disadvantages
-You will have to fill out a lengthy medical form.
-The main onus of disclosure is on you. If you have omitted any information you run the risk that your claim may not go through or ultimately that your policy will be invalidated.
-You run the risk that any pre-existing condition you have had will never be covered by your policy or even being denied cover altogether
-Higher premiums