With rising medical costs, a multi-year health cover helps to lock-in premiums for three to five years. It also minimises the risks of missing renewals and losing coverage.
Multi-year health insurance plans are structured to reward long-term commitment. Insurers offer discounts of up to 10% for a two-year plan and up to 20% for a three- to five-year plan. The total premium is lower than the yearly renewals.
Lock-in premium
As the premium is locked in at the time of purchase, insurers cannot revise it mid-term, even if claims are made during the policy period. This shields policyholders from the impact of medical inflation, as premiums remain unchanged regardless of rising healthcare costs.
As policyholders age, premiums usually increase. A multi-year plan secures the premium based on your age at the start, preventing increases due to shifting into a higher age bracket during the term.
The no claim bonus — a bonus in sum insured for claim-free years — continues to accumulate without interruption over the multi-year term. The insured is guaranteed continuous coverage without any gap, which is crucial for handling large, unexpected medical expenses.
Though multi-year health cover policies require a larger initial payment, many insurers offer monthly instalments or quarterly/ half-yearly payment options to make the upfront cost manageable.
Settling claims
Claims are handled the same way as in the annual policies. The insured can raise them during any policy year without restrictions arising from the multi-year structure.
It is worth noting, however, that where coverage is defined on a per-year basis, the sum insured resets at the start of each policy year. “For instance, if a policy offers Rs 5 lakh in coverage per year, the full Rs 5 lakh becomes available again at the beginning of each new year, regardless of claims made in the previous one,” says Siddharth Singhal, head of Health Insurance at Policybazaar.
Ideal for young people
Multi-year health insurance is superior for young people because it locks in lower premiums for three to five years, protecting against age-related rate hikes and rising medical inflation. Early purchase allows the insured to complete the waiting periods for specific diseases while he is generally healthy. “Young adults are considered lower risk, resulting in lower base premiums that remain fixed for the policy term, ignoring inflation or age-related hikes,” says Shilpa Arora, co-founder & COO, Insurance Samadhan.
For young individuals, the premium rates are relatively low due to lower health risks. Locking the premium rates early helps one save in the long run and avoid future age-related issues. “In addition, bundled pricing makes it more cost-effective than renewing on an annual basis,” says Sarita Joshi, head, Life & Health Insurance, Probus.
Buying a multi-year health insurance policy allows you to claim tax deductions under Section 80D proportionately each year for the premium paid, up to the annual limit of Rs 25,000 (below 60) or Rs 50,000 (senior citizens). The total lump-sum premium is divided by the number of policy years, and this proportional amount can be claimed annually, provided the insured opts for the old tax regime.
