Should You Choose a Multi-Year Health Insurance Plan for Your Parents?

Posted on: Sep 17, 2024 | 3 mins | Written by: HDFC ERGO Team

Should You Choose a Multi-Year Health Insurance Plan for Your Parents?

Multi year health insurance policy for parents

When it comes to your parents, you naturally want to make sure that they have the best possible health care and support. Health insurance is an essential part of that security, but choosing the right plan can be a bit overwhelming. One option that you might have come across is a multi-year health insurance plan for your parents. But is it really the best choice? Let's understand the pros and cons together so you can make an informed decision.

What is a Multi-Year Health Insurance Plan?

A multi-year health insurance policy will ensure that your parents are covered for more than one year, in most cases, two or three years, with a single premium pay. This kind of plan garners wide popularity among families who intend to secure their Parent’s health insurance hassle-free for a longer period without the constant process of annual renewal.

Pros of Multi-year health insurance plan for your parents:

1. Lower Premiums:

One of the best benefits of a multi-year health insurance policy for your parents is the discount on premiums. Suppose a one-year premium costs ₹20,000, a two-year policy will lessen the cost for the year with a 10% discount, while a three-year policy is going to be even more economical with a 15% one. It's like getting a discount on something you were already planning to buy! With time, these savings can accumulate, allowing you to save that extra money for other things your parents might need.

2. Benefit Lock-In:

Another major benefit of this is that the premium rate will be locked in for the policy term. These days, everything appears to cost more each year, and parent’s health insurance premiums are no different. But with a multi-year plan, you won't need to worry about those annual hikes. This is especially good as your parents grow older, as premiums usually go up with age. Just knowing that the premium won't rise helps set your mind at rest.

3. Tax Benefits:

You already know that you can claim deductions against health insurance premiums under Section 80D of the Income Tax Act. One more upside to going multi-year for your parent's health policy is that you can claim these tax benefits even if you are paying this premium in one go. The deduction is accordingly spread throughout the policy. This way you save the maximum possible tax amount and also make sure that your parents are covered.

4. Continuity in Coverage:

The biggest disadvantage of an annual policy, perhaps in most people's minds, is the tendency to forget its renewal. Life can remain quite busy, and it is easy to forget to renew your policy in time. Yet, missing such a renewal implies staying uninsured just when one needs it the most. So, a multi-year health insurance plan for your parents guarantees a larger period of continuous coverage worldwide.

5. Easy EMI Options:

Worried about the upfront costs? You're not alone. Many hesitate to choose one because of the huge initial payment in opting for a multi-year plan. But the good news is that many insurers offer easy EMI options toward the valuable policies, many spreading the cost over manageable instalments. This makes the policy more accessible and ensures that you don't strain your finances to provide the best parent’s health insurance.

Cons of Multi-year health insurance plan for your parents:

1. Inflexibility:

One of the biggest disadvantages of a multi-year health insurance plan is the commitment. If you have opted for a multi-year policy, you are invariably tied to that scheme and insurer for that period. You may not get the chance to shift in case you are not satisfied with the service of the insurer, or if you find better offers from others. Some policies may grant a refund for not utilising the services within a year; nonetheless, there is no guarantee that you will be able to get your money back from the unwanted policy, and you will wind up buying one that your parent does not need.

2. Issues with NCB (No Claim Bonus):

When purchasing multi-year health insurance coverage, the calculation process of the No Claim Bonus (NCB) can be a bit tricky. NCB is the discount that is given to you on your premium amount if you are not making any claim during the policy year. That's not all; with annual plans, this discount gets incremented with every claim-free year and, sometimes, reaches up to 50% after five consecutive years of no claims. Now, with multi-year policies, since you wouldn't be renewing annually, it could turn out to be rather tricky to keep track of these bonuses and use them.

Conclusion

Whether or not you should opt for a multi-year health insurance plan for your parents is simply down to your financial situation and how they feel about their health needs. If you are easily able to afford the upfront cost and if not having to renew a policy every year is convenient to you, then a multi-year plan could be very good. On the other hand, if you are concerned about the upfront cost or if you feel that your parents' health needs are likely to change shortly, then it's best to have an annual policy. Ultimately, it will boil down to what will make sense for you and your family.

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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