‘The greatest wealth is health’ – this popular quote by Virgil, regarded as Rome’s greatest poet, aptly summarizes the reality of life. Despite this, a considerable proportion of the Indian population does not realise the significance of shielding their greatest wealth – their health. As per the NITI Aayog 2021 report, nearly 30 percent or 42 crores of its population is bereft of any kind of health insurance. It is further estimated that the actual numbers might be even higher and unaccounted for. However, ever since the COVID-19 outbreak, Indians have become more mindful of crises pertaining to their health. Therefore, there has been a growing sense of awareness around health insurance amid rising medical inflation and financial uncertainty.
Generally, most people opt for an annual policy that needs yearly renewal. However, there’s a much more convenient, cost-effective and relatively lesser-known alternative to this – multi-year health insurance policies that are steadily gaining popularity. Recent industry data suggests that around 23 percent of policyholders are now buying multi-year health insurance policies compared to 17 percent in 2020-21, witnessing a spike of about 35 percent as of June 2022. If you are on the verge of buying or renewing your policy, here’s all that you need to know about multi-year plans:
Premium Lock-in Edge
Healthcare is a sector that has witnessed major inflation, translating to significantly higher medical costs for the consumer every year. As a rule, this has also led to premium hike in the health insurance sector. Given this hike, the rising cost could be an issue for the policyholder which can be solved with a multi-year plan. By selecting this plan, you can lock in the premium for a longer time period. Multi-year policy is the only way that helps you shield against premium revision and medical inflation.
Make the best of discounts on multi-year plans
The most preferred reason for buyers to opt or switch to a multi-year policy is its cost-efficiency. One stands to avail of up to 10 percent discount for a two-year policy and up to 15 percent for a three-year plan. The gains are substantial in the long run because these plans come with a lifelong renewal option.
For instance, a 30-year-old living in Delhi can opt for Niva Bupa’s Max Saver Rs 1 crore cover plan for Rs 10,488 annual premium but if they buy a three-year plan, they’ll pay only Rs 29,104, thereby saving Rs 2360. The discount is applicable for as long as long the policyholder wishes it to continue. This helps them save more in the long run and is a major incentive to renew the policy.
No hassle of yearly renewal
After purchasing a health insurance plan, an essential aspect is to remember to renew it on time, else the policy gets cancelled. Since the grace period is not covered, you will have no shield even if you recall the deadline during the grace period. Thus, during this period, if a medical emergency strikes, you will have to bear the expenses on your own, as the claims will not be valid. However, you can stay covered for longer by wisely choosing multi-year health insurance, which is generally available for two or three years.
If discount is one aspect that makes purchasing the multi-year policy easier on your pocket, then the IRDAI-directed EMI option only makes it smoother. Moreover, the frequency of instalments to pay the health insurance premium in EMIs can also be as per the policyholder’s preference. If the accumulated amount of two or three years is a concern for you, just opt for the EMI option. This makes it more convenient and reasonable for people to procure the policy.
In this plan too, the policyholder can avail of tax benefits under Section 80D of the Income Tax Act for up to Rs 25,000 on the health insurance premiums paid for themselves, their spouse, and children. What’s different with multi-year plans is that if you opt for a one-time payment for all your premiums in a single year, you won’t be able to claim tax rebates all at once. Rather, you will have to claim a proportional amount every year according to the tax regulations. Let’s assume you pay Rs 30,000 premium for three years, then you can claim up to Rs 10,000 each year for three years.
Multi-year policies are a great way to top up your savings and strengthen the financial safety net that health insurance provides. To ensure better protection, always choose a comprehensive plan with a higher sum assured. In addition, compare multiple health insurance policies online before making a final decision. Always read the terms and conditions and know the exclusions. There should be no surprises in the end because battling over the policy is the last thing you need during a medical emergency.
(By Amit Chhabra, Head-Health Insurance, Policybazaar.com)