Distributive policy

Hedging Yourself: Should You Buy a Multi-Year Health Plan?

In a context of booming medical expenses, a health insurance policy has become essential so that everyone can face any health emergency. You can purchase health coverage for one year and continue to renew it annually by paying the renewal premium. However, with the help of multi-year health plans, you can eliminate the need to renew the policy every year. But does that make sense?

According to insurance experts, multi-year health plans make sense because health insurance is a product you’ll likely need for a very long time. It has several advantages. But there are also disadvantages. Let’s look:

Advantages of a multi-year policy

A multi-year policy has several benefits, including premium discounts and protection against premium increases for the life of the policy.

“Some of the key benefits of a multi-year plan are that policyholders can save premium upfront. This eliminates the hassle of annual renewal and one can easily cancel or terminate the policy,” says Indraneel Chatterjee, co-founder of RenewBuy, an online insurance distribution platform.

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The multi-year policy also eliminates the waiting period required for full policy renewals and comes with simple EMI options. Typically, a multi-year health insurance policy provides coverage for three years. As the premium can be paid for several years at one time, this protects the insured from subsequent premium revisions. “Insurers also offer discounts on multi-year premiums, which translates into savings of 5 to 15%. Opting for multi-year health plans eliminates the risk of policy expiration if you miss paying the renewal premium,” says Vivek Chaturvedi, CMO and Head of Direct Sales, Go Digit General Insurance.

Disadvantages of a multi-year policy
The biggest downside to buying a multi-year policy is that you’re locked in with one insurer for several years. After purchasing a multi-year health insurance policy, you will not be able to change insurers until the policy term is over. “The only other alternative would be to purchase a new policy from another insurer before the existing one expires,” Chaturvedi explains.

Tax implications
The premium paid for multi-year health plans is eligible for a tax deduction under Section 80D of the Income Tax Act. However, the premium must be distributed proportionally for each year to benefit from the tax advantage.

Who should buy a multi-year policy?
The nature of coverage of annual health insurance policies and multi-year health insurance policies remains the same. However, a multi-year health insurance policy may be suitable for people who want to avoid the hassle of annual policy renewals while saving on premium.

“Sometimes it becomes difficult for consumers to keep track of insurance policy renewal dates. No insured would want their policy to expire or face heavy penalties in the process,” Chatterjee says.

After selecting the plan that best suits your needs, you can purchase a multi-year policy. However, experts say it’s necessary to scour policy documents and compare similar plans from other companies before buying the best option.

Multiple benefits

Buy multi-year health plans from general and stand-alone health insurers
The insured is locked up with the insurer for three years
Insurers offer discounts for multi-year premiums
The premium paid qualifies for tax benefits under Section 80D of the Income Tax Act
It eliminates the waiting period required for full policy renewals

Although a multi-year policy has many advantages, it is worth going through the terms and conditions carefully and reading the information carefully.