Amid soaring medical expenses, a health insurance policy has become a must for everyone to meet any health emergency. You can buy a health cover for a year and keep renewing it annually by paying the renewal premium. However, with the help of multi-year health plans, you can eliminate the need to renew the policy every year. But does it make sense?
According to insurance experts, multi-year health plans make sense as health insurance is a product that you are probably going to need for a very long time. It has several advantages. But there are some disadvantages too. Let’s have a look:
Advantages of a multi-year policy
A multi-year policy comes with several perks, including discounts on premiums and protection from premium hikes during the tenure of the insurance policy.
“Some of the key benefits of a multi-year plan are that policyholders can save upfront on the premium. It removes the hassles involved with annual renewal, and one can easily cancel or terminate the policy,” says Indraneel Chatterjee, co-founder of RenewBuy, an online insurance distribution platform.
The multi-year policy also eliminates the required waiting period on renewals for comprehensive policies and comes with easy EMI options. Typically, a multi-year health insurance policy offers coverage for three years. As the premium can be paid for multiple years in one go, this cushions the insured from subsequent premium revisions. “Insurers also offer discounts for multi-year premiums, resulting in savings of 5-15%. Opting for multi-year health plans eliminates the risk of the policy lapsing if you miss paying the renewal premium,” says Vivek Chaturvedi, CMO and head of Direct Sales, Go Digit General Insurance.
Disadvantages of a multi-year policy
The biggest disadvantage of buying a multi-year policy is that you get locked in with a single insurer for multiple years. After buying a multi-year health policy, you will not be able to switch to another insurer until the policy term is over. “The only other alternative would be to buy a new policy from another insurer before the existing one expires,” says Chaturvedi.
The premium paid for multi-year health plans is eligible for tax deduction under Section 80D of the Income Tax Act. However, the premium needs to be proportionately split for each year to avail of the tax benefit.
Who should buy a multi-year policy?
The nature of coverage under annual health policies and multi-year health policies remains the same. However, a multi-year health policy may be suitable for individuals who want to avoid the hassle of yearly renewals of policies while also saving on the premium.
“Sometimes it becomes challenging for consumers to keep track of renewal dates of insurance policies. No policyholder would want his/ her policy to lapse or lead to heavy penalties in the process,” says Chatterjee.
After selecting a plan best suited for your needs, you may buy a multi-year policy. However, experts say it is necessary to go through policy documents and also compare similar plans of other companies before buying the best option.
- Buy multi-year health plans from general and standalone health insurers
- The insured gets locked in with the insurer for three years
- Insurers offer discounts for multi-year premiums
- The premium paid is eligible for tax benefits under Section 80D of the Income Tax Act
- It eliminates the required waiting period on renewals for comprehensive policies
Though a multi-year policy has a lot of advantages, one should go through the terms and conditions thoroughly and read through the information carefully.