What does a moratorium typically imply in insurance policies?

A moratorium in insurance policies commonly refers to a specific period during which certain conditions, particularly pre-existing ones, are not covered. This means that if an individual has a health issue prior to taking out the insurance policy, that issue will typically not be covered for a specified duration, which is often the first two years of the policy. After this moratorium period, coverage for those previously excluded conditions may become available, provided that they have not recurred during the moratorium period.

This principle serves to manage the insurer's risk associated with covering potentially high-cost conditions that policyholders might otherwise seek to insure shortly after they are diagnosed or recognized. By excluding pre-existing conditions for a defined time, insurers can better balance their risk and ensure that they remain solvent while providing coverage for unforeseen health issues that arise after the policy becomes active.