Amid rising healthcare costs, it is possible that a person's entire health insurance sum insured may get exhausted in a single hospitalisation. So, what is the solution? Should you buy another policy?

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Well, it is here where when the 'restoration benefit' of health insurance kicks in. Restoration benefit, also known as recharge benefit or sum insured restoration, in health insurance can help you in getting additional coverage on exhaustion of the sum insured. In other words, it is a coverage benefit that is restored, or refilled, once the original cover is replenished and serves as a backup.

Let’s understand this with an example—Mr X has a health insurance policy of Rs 5 lakh with restoration benefit. He had to undergo surgery and the entire sum insured of Rs 5 lakh gets exhausted. After a few months, he goes for some treatment and gets to know that there is another surgery that needs to be done and would cost Rs 3 lakh. Now, because he has the restoration benefit, the insurer will cover the cost of surgery.

How to use health insurance restoration benefit?

There is no special procedure for utilising the restoration benefit. The restoration takes place automatically, said Sanjiv Bajaj, Jt. Chairman & MD at Bajaj Capital Ltd while talking to CNBC-TV18.com.

“If your plan includes the coverage feature and the sum insured is depleted, the insurance company will automatically restore the sum insured for any subsequent claim. You are not required to follow any procedure to ensure the restoration benefit is implemented,” he said.

What are the types of health insurance restoration?

There are two different types of restoration. In the first type, the reward kicks in when there is complete depletion of the coverage and the entire sum insured has been used up.

In the second type, the benefit will come into force even with partial exhaustion of the sum insured, Bajaj said.

Difference in case of individual and family floater plans

Naval Goel, Founder and CEO at PolicyX.com told CNBC-TV18.com said that if a person is looking for the added sum insured for any big treatment then restoration benefit is helpful for them in case of an individual health insurance plan, and in family floater health insurance plans where it is likely to exhaust the sum insured in advance due to any emergency, the restoration benefit helps in getting seamless access to medical treatment without any burden.

Does this plan increase policy premium?

Yes. Selecting the restoration benefit may result in higher premium costs for the insurance, said Bajaj.

The more features you opt for with the policy, the higher its premium—the basic rule of insurance.

Is it applicable even in the first claim?

Restoration benefits exist only for future claims. It is never applicable on the first claim made in a policy year, Bajaj clarified.

What are the additional factors to consider here?

You cannot carry forward any unutilised restoration benefits to the following year. Additionally, it's important to know that the restoration benefit works when the entire sum insured amount is exhausted and the policyholder is not eligible to get the insurance claim for the same treatment twice.

However, with the increasing competition in the market, now a few companies are providing the restoration benefit with new conditions that say that the restoration benefit will get activated even if the entire amount doesn't get consumed (consumed partially) and the policyholder will be liable to get the claim for the same treatment twice.