5 things to know about multi-year mutuals


“The greatest wealth is health” – this popular quote from Virgil, considered Rome’s greatest poet, sums up the reality of life well. Despite this, a considerable proportion of the Indian population does not realize the importance of protecting their greatest wealth – their health. According to the NITI Aayog 2021 report, nearly 30% or 42 crore of its population is devoid of any type of health insurance. It is further estimated that the actual numbers could be even higher and unaccounted for. However, since the outbreak of COVID-19, Indians have become more aware of crises related to their health. Consequently, there has been a growing awareness of health insurance amid rising medical inflation and financial uncertainty.

Generally, most people opt for an annual policy which must be renewed every year. However, there is a much more convenient, cost-effective, and relatively lesser-known alternative to this: multi-year health insurance policies that are steadily gaining in popularity. Recent industry data suggests that around 23% of policyholders are now buying multi-year health insurance policies, up from 17% in 2020-21, with a peak of around 35% in June 2022. If you’re about to buying or renewing your policy, here’s everything you need to know about multi-year plans:

Premium locking edge

Health is a sector that has experienced major inflation, resulting in significantly higher medical costs for the consumer each year. As a rule, this has also led to higher premiums in the health insurance sector. Given this increase, rising costs could be a problem for the insured that can be solved with a multi-year plan. By selecting this plan, you can lock in the premium for a longer period. The multi-year policy is the only way to protect yourself against premium revisions and medical inflation.

Make the most of multi-year plan discounts

Buyers’ favorite reason for opting or switching to a multi-year policy is its cost-effectiveness. One can avail a discount of up to 10% for a two-year policy and up to 15% for a three-year plan. The gains are substantial in the long run as these plans come with a lifetime renewal option.

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For example, a 30-year-old man living in Delhi can opt for Niva Bupa’s Max Saver Rs 1 crore plan for an annual premium of Rs 10,488, but if he buys a three-year plan, he will only pay Rs. 29,104, thus saving Rs. 2,360. The discount is applicable for as long as the insured wishes. This helps them save more in the long run and is a major incentive to renew the policy.

No hassle of annual renewal

After purchasing a health insurance plan, an essential aspect is to remember to renew it on time, otherwise the policy is void. Since the grace period is not covered, you will not have any shields even if you recall the deadline during the grace period. Thus, during this period, if a medical emergency occurs, you will have to pay for the expenses yourself, as the claims will not be valid. However, you can stay covered longer by wisely choosing multi-year health insurance, which is usually available for two or three years.

EMI Advantage

If the discount is one aspect that makes buying the multi-year policy easier on your pocket, then the IRDAI-led EMI option just makes it smoother. Moreover, the frequency of installments to pay the health insurance premium in IMEs can also be according to the preference of the insured. If you are concerned about the cumulative amount over two or three years, simply opt for the EMI option. This makes it more convenient and reasonable for people to procure the policy.

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Tax benefit

Also under this plan, the policyholder can enjoy tax benefits under Section 80D of the Income Tax Act up to Rs 25,000 on health insurance premiums paid for him- himself, his spouse and his 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 the tax refunds all at once. On the contrary, you will have to claim a proportional amount each year according to tax regulations. Suppose you pay a premium of Rs 30,000 for three years, then you can claim up to Rs 10,000 every year for three years.

Multi-year policies are a great way to supplement your savings and strengthen the financial safety net provided by health insurance. To ensure better protection, always choose a global formula with a higher sum insured. Also, compare several health insurance policies online before making a final decision. Always read the terms and conditions and know the exclusions. There should be no surprises at the end, because fighting over politics is the last thing you need during a medical emergency.

(By Amit Chhabra, Head of Health Insurance, Policybazaar.com)


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