Should you opt for long-term health insurance?

The one-stop solution to such problems is a comprehensive health insurance policy.

A health insurance plan financially secures your family and yourself from hefty medical expenses.

“Despite the numerous advantages of health insurance, the task of getting your health insurance renewed every year can be cumbersome. To make this process hassle-free and to reduce the burden of yearly renewal, many insurance companies offer long-term health insurance policies," said Amit Chhabra, head - health insurance, Policybazaar.com.

“Long-term health insurance policies basically offer you coverage for more than one year. In India, there are policies which offer you the choice of continuous coverage for two or three years," said Gurdeep Singh Batra, head - retail underwriting, Bajaj Allianz General Insurance.

Let us now look at the advantages of buying long-term health insurance.

No renewal worries: Renewing your health insurance policy every year is an important financial task you need to do. “Once you buy long-term insurance, you are freed of the worry of policy renewal for two to three years. In the case of a usual health insurance policy, you would have to set aside some money for yearly renewal; also default of payment would result in cancellation of policy," said Chhabra. A long-term health insurance policy thus comes with more peace of mind.

Discounted premium: Long-term policies are cheaper than annual policies as long-term discount is applied on premium paid for multiple years together.

“Depending on the company you plan to go for, the premium for a two-year policy can range from 1.8x to 1.9x of single year premium. Similarly for a three-year policy, the premium range could be between 2.7x and 2.8x of single-year premium," said Harshad Chetanwala, co-founder MyWeathGrowth and a Sebi-registered investment adviser.

Also, under long-term health insurance plans, your premium gets locked for two to three years and becomes immune to revision in prices. “The constant increase in medical inflation is one of the most important reasons why people these days are looking for long-term health insurance plans," said Chhabra.

Let us take the example of Health Guard Policy offered by Bajaj Allianz General Insurance. In case of a Platinum Plan for one individual from Zone A, with inception of policy at 32 years, and a sum insured of ₹5 lakh, the premium for a one-year plan is ₹10,600; for a two-year plan (age 33 years), it is ₹20,352 and for a three-year plan (age 34 years), it is ₹29,256. Thus, a long-term policy discount of 4% is applicable if a policy is opted for two years and of 8% if a policy is opted for three years.

Long-term health insurance plans can also make sense for you in certain situations. “Usually, health insurance premium rates are set as per age range, where the premium will increase when you move from one age range to another, say, from 36-45 to 46-50. Here, if you opt for a two-year or three-year policy at the age of 45, there is reasonable savings in long-term plans," said Chetanwala.

 

However, even with discounted premiums, when you opt for a long-term health insurance plan, you have to fork out a larger one-time amount. A similar higher amount needs to be planned for every two to three years. Hence, you need to plan accordingly.

“Additionally, insurers offer the option of payment of health insurance premium in instalments," said Batra.

Tax matters: Health insurance premiums are eligible for deductions under Section 80D of the Income Tax Act. “As per government guidelines, where health insurance premium is paid for multiple years in one year, the deduction shall be allowed proportionately over the years for which the benefit of health insurance is available, subject to the limits of deduction as prescribed by Section 80D," said Batra. So, you cannot claim the entire premium paid under Section 80D but only a proportional amount every financial year.

Coverage given by a long-term policy is not very different from what an annual policy gives. The differentiating factors will be the tenure of the policy and the long-term discount offered on total premium. “My advice for buying any health insurance policy is that you should check the policy terms and conditions, understand what is covered and what is not. Opt for a policy based on your requirement and healthcare needs," said Batra.