Is Multi-year Health Insurance Right for You? Benefits and Drawbacks

Posted on: Sep 25, 2023 | | Written by:

Is Multi-year Health Insurance Right for You? Benefits and Drawbacks

Published on September 25, 2023. EST READ TIME: 3 minutes

Multi-year Health Insurance: Pros and Cons

We all know that when medical bills play a villain, health insurance swoops in to save the day like a superhero. Despite the knowledge that it acts as a potent shield against the unpredictable costs of medical care and the escalating health challenges across age groups, people think that paying an annual premium is an unnecessary expense. Well, this concern is genuine as not everyone can easily afford the rising premiums. That's where the multi-year health insurance plan comes into the picture. It involves a one-time premium payment that provides coverage over several years. Let's delve deeper into the features of a multi-year health insurance plan to uncover its merits and potential pitfalls.

What is a multi-year health plan?

A multi-year medical insurance plan offers coverage for 2 or more years. The policyholder has to pay the total premium in one shot while purchasing the policy, thereby eliminating the hassle of renewing it every year as we normally do in the case of an annual health insurance plan. It is also known as long-term health insurance.

Benefits of buying a multi-year health insurance plan

1. Discounted premiums:

When you go for a multi-year health insurance plan, insurance providers generally give discounts on the premium ranging anywhere between 10% and 15%. If you opt for a 2-year policy, you can get a discount of up to 10%, and for a 3-year policy, the discount can be up to 15%. This will help you save on the premium.

2. Lock-in benefit:

In a multi-year health insurance plan, the premium amount gets locked or remains the same for the entire duration of the policy. Any hike in premium rates by the insurance provider will not impact you. This is particularly beneficial for older people because the premium increases with age. For instance, if you have opted for a 3-year policy, you should not worry about any revision in premium rates till your next policy renewal.

3. Continuity in coverage:

An annual healthcare plan should be renewed every year for uninterrupted coverage. Failure to renew on time will lead to policy lapse, leaving you with no protection. Any medical emergency during this period has to be borne by you. In a multi-year health plan, you can enjoy uninterrupted coverage for a longer duration.

4. Tax benefits:

You can claim a multi-year health insurance tax benefit on the one-time premium, but it will be split proportionately based on the policy duration. For instance, if you have paid Rs 60,000 for a 2-year policy, you can avail up to Rs 30,000 each year for 2 years. In the case of an annual health insurance plan, the tax benefit is up to Rs 25,000 on premiums paid for self, spouse, and children.

5. No annual renewal hassles:

A multi-year health insurance plan covers you and your family for multiple years at a stretch. This saves you from the hassles of renewing the policy every year, and you don't have to worry about losing coverage if the policy is not renewed on time.

6. Easy EMI options:

Policyholders have the option to pay the premium in instalments as per their convenience. To make the policy affordable and accessible for all, the IRDAI directed insurance providers to allow policyholders to pay the premium in EMIs.

Drawbacks of buying multi-year health insurance

1. One of the biggest drawbacks of multi-year health insurance is that you are locked with one insurer for multiple years. You may not be able to switch to another insurer till the end of the policy term. In case you are not satisfied with the current insurer and want to port during the policy term, you may not get any refund. The only option is to buy a new policy from another insurer.

2. In a multi-year health insurance plan, it may be difficult to calculate the No Claim Bonus (NCB) because the renewal is not done every year. NCB is the discount you get on your insurance premium at the time of renewal for not making any claims during the policy year. This discount increases every year and goes up to a maximum of 50% after 5 consecutive claim-free years.

Conclusion

A multi-year health insurance plan has a lot of advantages over an annual health insurance policy. If you are someone who doesn't want to go through the hassles of yearly renewal while saving on the premium and can afford to pay the premium in one go, then a multi-year health plan is the best option. Multi-year plans have a lot of advantages, but you should still read the terms and conditions of the policy thoroughly before buying family health insurance or the best health insurance.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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