Do you have to buy multi-year medical health insurance?

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A multi-year medical health insurance policy is a long-term alternative to an annual health policy. A multi-year policy, because the name suggests, will provided coverage for an prolonged duration of two or more years. It typically allows policyholders to pay the premium for the subsequent two or three years in a single go on the time of shopping for the policy, thereby relieving them of the effort of renewing it every 12 months. While such policies have many benefits, one must also know that these have some limitations as well.

Benefits: The premium for a multi-year medical health insurance policy stays unchanged for the complete period of the policy. This is especially helpful since insurers revise their premium rates upwards frequently. Thus, a policyholder is shielded from any subsequent premium revisions within the policy premium made by an insurer in the subsequent couple of years.

Naval Goel, Founder and CEO of PolicyX.com, said, “In recent times, many health insurers have increased their policy premium. Those that purchase a multi-year policy is not going to need to pay the revised rates for the subsequent couple of years no less than. Selecting a multi-year policy and paying the premium for a maximum of three years helps you lock within the premium amount.”

Besides, you might also get a reduction on the premium when buying a multi-year policy. Pooja Yadav, chief product officer, Edelweiss General Insurance, said, “Insurers often give discounts to customers for purchasing multi-year premiums. The discounts may typically range between 7% and 15% and end in additional savings for the buyers.”

Goel explains this with an appropriate example: “Take for example the case of a 30-year-old man living in Delhi who desires to buy a health cover of 5 lakh. If he buys an annual policy, he could have to pay a premium of 8,066 and that is certain to rise every 12 months. Nonetheless, if he buys a three-year health policy, he could have to pay 21,778 in a single go, helping him save around 11% on the premium. “

Such policies also offer tax-saving advantages wherein you may avail of the one-time premium proportionally every 12 months (out of the 2 or three years) to get the advantages. Anup Bansal, chief investment officer of Scripbox, said, “Under Section 80D of the Income Tax Act, one can avail tax advantages of as much as 25,000 on the medical health insurance premiums paid for self, spouse, and kids. Nonetheless, under a multi-year health policy, the one-time premium you pay might be proportionately split annually to avail the tax profit to your health policy.” As an illustration, if you have got paid a premium of 60,000 for a multi-year policy of three years, you may get a tax exemption of 20,000 annually till the policy lapses. Hence, it offers a dual profit: tax deduction (which might ideally not be the case if the whole premium exceeds the prescribed limit) in addition to a reduction in the identical 12 months.

Disadvantages: “It is feasible that you possibly can find yourself with a loss if you happen to were to purchase a multi-year health policy after which resolve to cancel or port it after one 12 months,” said Yadav.

Furthermore, all health policies include a waiting period, and the constraints and advantages differ 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 identical illness after 4 years. In such a case, switching to a different policy can turn out to be cumbersome.

Also, porting is not going to help if the insurer brings down the premium rates over the subsequent couple of years.

Who should purchase?  

Choosing a multi-year policy is viable because it offers the comfort of staying secured for a specified variety of years without worrying about annual renewals.

Rakesh Goyal, director, Probus Insurance broker, said that multi-year policies are perfect for policyholders looking for to avoid the effort of yearly premium payments and the danger of missing the renewal date. Policyholders often miss the renewal deadline and lose any advantages once they don’t renew their policy on time and even skip the grace period. “Suppose you have got a medical emergency during this time; you can be unable to make any claim and need to pay out of your savings. Hence, such a policy protects you and your loved ones against any medical emergency within the near future at the identical premium amount,” said Goyal.

Alternatively, it’s essential to also understand that as your age advances, your insurance premium also increases. So, in such a case, a multi-year policy might be helpful here for the reason that premium stays the identical throughout the policy period regardless of the age. Bansal said, “For those who were to purchase a multi-year health policy, you may avoid higher premium revisions till the coverage ends.” The policy might be renewed again on the revised prices after its term expires.

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