Is Multi-year Health Insurance Right for You? – Know Drawbacks & Benefits

A health insurance plan is an important arsenal against the rising costs of medical treatment and the increasing health risks amongst people of different age groups. Buying health insurance can mean paying regular premiums, which may seem like an unnecessary expense to some. But when an urgent medical situation strikes, no other financial resource can be as helpful as a health insurance policy. Buying a long-term health insurance plan can be advantageous in many ways, but may also have its drawbacks. Read on to know the pros and cons of buying multi-year health insurance.

What is a Multi-year Health Plan?

A multi-year health plan is a option that eliminates the need for yearly renewals by providing coverage for multiple years. This type of policy typically extends coverage for up to three to four years, offering policyholders convenience and peace of mind. By opting for a long terms plan, individuals can secure continuous coverage without the hassle of annual renewal procedures. One of the key advantages of multi-year health plans is their financial planning aspect, as policyholders can budget for healthcare expenses over an extended period. Moreover, these plans often come with locked premium rates, shielding policyholders from potential premium hikes during the policy term. This stability in premium costs adds an extra layer of financial security for policyholders. Multi-year health plans offer a convenient, cost-effective, and stable solution for ensuring continuous health insurance coverage over an extended period.

Who Should Buy a Multi-year Policy?

A multi-year health insurance policy is something, which offers convenience along with potential cost savings to an individual. Understanding the pros and cons of health insurance in India is needed and considered as important, before making an informed decision before investment. If you wish to buy a multi-year policy, you should consider a few factors, which are:

Cost Efficiency:

If you are looking for an option that helps reduce the overall premiums, you can consider a multi-year plan as insurance companies offer a discount on premiums in case long term policy premium is paid upfront in a single instalment.

H3-Premium Stability:

For those concerned about premium increases due to inflation, this multi-year plan helps you and locks premiums for a set duration, ensuring stability and predictability in financial planning.

H3-Convenience:

If you prefer to avoid the annual hassle which is often of reviewing, it is advised to go with a multi-year plan. It helps and simplifies the process, providing coverage for several years without even requiring every-year renewal.

H3-Flexibility:

If you anticipate a change in your insurance needs in immediate years ,or if you wish to switch insurers or products , you may have to wait until the existing policy term is completed to avoid loss of premium paid . Ultimately, whether a multi-year policy is suitable depends on individual preferences, budget, and long-term insurance needs. It's advisable to consult with a financial advisor to assess the pros and cons of health insurance in India and if such a policy aligns with your specific circumstances and requirements.

Benefits of Buying a Multi-year Health Insurance Plan

Reduction in Premiums

One of the major benefits of buying a long-term plan is that the aggregate premiums become considerably reduced. Though this depends upon the insurer, you are likely to incur reduced premiums because you are committing to the insurer for multiple years. This shows a certain level of loyalty on your part and the insurer may gift you with some savings in regard to the premium. *

No Hassle of Renewing Every Year

Even though the process of health insurance renewal has become easy over the years, it can still be a hassle sometimes to renew it every year. This is all the more prominent when you are responsible for renewing the health insurance plans of multiple people. With a multi-year health insurance plan, this hassle gets eliminated. All you have to do is pay the premium when buying the policy and you and your loved ones are insured for the next three to five years. The renewal process is to be carried out after the term ends.

Drawbacks of Buying Multi-year Health Insurance

May be difficult to port

When you buy a multi-year health insurance plan, you must remember that you are committing multiple years to one insurance company. If you are not satisfied with your insurance provider and wish to switch your plans in between terms, you may have to wait out to complete the policy term to avoid loss of premiums paid upfront .

Cumulative bonus may be difficult to calculate

For the uninitiated, the cumulative bonus is a feature wherein the policyholder receives an increase in their sum assured when they do not make claims during the policy tenure. The cumulative bonus, as its name suggests, is cumulative in nature. So, with each year that you do not raise a claim, the percentage of the bonus increases. With a multi-year health insurance plan, however, the process to calculate your cumulative bonus may be difficult. Getting clarifications with your health insurance provider regarding this subject matter is highly recommended. Whether a multi-year plan is ideal for you or not depends on your preferences and budget. If you are able to afford a lump sum premium payment and do not want the worry of yearly renewal, a multi-year health insurance plan may be the best option for you. Ensure to connect with a financial advisor and get their expert opinion before buying a health insurance plan.  

Can I Get a Multi-Year Health Insurance Tax Benefit in India?

In India, health insurance plans offer tax benefits under Section 80D of the Income Tax Act, 1961.. For a Multiyear Health insurance Policy , The tax deduction is calculated proportionately for each year based on the policy duration. For example, if a 3-year plan's premium is Rs. 60,000, the yearly premium deduction would be Rs. 20,000 against which the Tax benefit would be calculated. Additionally, for premiums must be paid through non-cash modes, and tax deductions are applicable only under the old tax regime. Tax benefits is subject to changes in tax laws. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

FAQs

What factors should I consider before buying a multi-year health insurance plan?

Before purchasing a multi-year health insurance plan, consider factors such as coverage adequacy, premium affordability, insurer reputation, claim settlement ratio, network hospitals, and any additional benefits offered.

How to claim multi-year health insurance?

To claim benefits from a multi-year health insurance plan, maintain regular premium payments throughout the policy tenure. In the event of a medical expense, file a claim with the insurer by submitting the necessary documents, such as bills, medical reports, and claim forms.

Can I switch to a different health insurance provider during the term of my multi-year policy?

Switching health insurance providers during the term of a multi-year policy is possible. However, it's essential to review the terms and conditions of your current policy the cancellation terms for premium refund and consult with the new insurer to understand any portability options available.   *Standard T&C apply. **Tax benefits are subject to change in prevalent tax laws. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.