Should you buy multi-year health insurance?

A multi-year health insurance policy is a long-term alternative to an annual health policy. A multi-year policy, as the name suggests, will provide coverage for an extended period of two or more years. It generally allows policyholders to pay premiums in one go for the next two or three years at the time of purchasing the policy, thereby relieving them of the hassle of renewing it every year. While such policies have many advantages, one should also be aware that they also have certain limitations.

Benefits: The premium of a multi-year health insurance policy remains unchanged for the entire term of the policy. This is especially helpful because insurers revise their premium rates upwards on a regular basis. Thus, a policyholder is protected from any subsequent premium revision in the policy premium made by the insurer over the next few years.

Naval Goel, Founder and CEO, PolicyX.com, said, “In recent times, many health insurance companies have increased their policy premiums. Those buying multi-year policies are required to pay revised rates, at least for the next few years. No. Choosing a multi-year policy and paying premiums for a maximum of three years helps you lock the premium amount.”

Apart from this, you can also get a discount on premium while buying a multi-year policy. Pooja Yadav, Chief Product Officer, Edelweiss General Insurance said, “Insurers often offer discounts to customers on buying multi-year premiums. The discounts can usually be between 7% and 15% and can result in additional savings for buyers. Is.”

Goyal explains this with a suitable example: “Take the case of a 30-year-old man living in Delhi, for example, who wants to buy health insurance. 5 lakhs. If he buys an annual policy, he will have to pay a premium of 8,066 and it is set to increase every year. However, if he buys a three-year health policy, he will have to pay 21,778 in one go, which helped them save around 11% on premium. ,

Such policies also offer tax-saving benefits wherein you can avail a lump sum premium every year proportionately (out of two or three years) to avail the benefits. Anoop Bansal, Chief Investment Officer, Scripbox said, “Under Section 80D of the Income Tax Act, a person can avail the maximum tax benefit 25,000 on health insurance premiums paid for self, spouse and children. However, under a multi-year health policy, the lump-sum premium you pay can be divided proportionately each year to receive tax benefits for your health policy.” Has paid of 60,000 for a three-year multi-year policy, you can get a tax exemption of 20,000 annually till the policy lapses. Hence, it offers dual benefits: tax deduction (which ideally will not happen if the total premium exceeds the prescribed limit) as well as exemption for the same year.

Disadvantages: “It is possible that if you buy a multi-year health policy and then decide to cancel or port it after one year, you may incur losses,” Yadav said.

In addition, all health policies come with a waiting period, and the limits and benefits vary depending on the insurer and the terms and conditions of the policy. Some policies may cover certain diseases after two years, while others may cover the same illness after four years. In such a situation, switching to another policy can be cumbersome.

Also, porting will not help if the insurer reduces the premium rates over the next few years.

Who should buy?

The option of a multi-year policy is viable as it offers the flexibility to stay covered for a specified number of years without worrying about annual renewal.

Rakesh Goyal, Director, Probus Insurance Broker, said that multi-year policies are ideal for policyholders who want to avoid the hassle of paying annual premiums and the risk of missing the renewal date. Policyholders usually miss the renewal deadline and lose any benefits even if they do not renew their policy on time or skip the grace period. “Suppose you have a medical emergency during this time; You will be unable to make any claim and you will have to pay from your savings. Hence, such a policy protects you and your family from any medical emergency in the near future at the same premium amount.”

On the other hand, you should also understand that as you age, your insurance premium also increases. Hence, in such a case, a multi-year policy can be beneficial here as the premium remains the same throughout the policy term, irrespective of age. “If you buy a multi-year health policy, you can avoid higher premium revision till the coverage ends,” Bansal said. The policy can be renewed at the revised prices after the expiry of the policy term.

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