Amid soaring medical expenses, a health insurance policy has become a must for everyone to meet any health emergency. You can buy a health cover for a year and keep renewing 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 it make sense? According to insurance experts, multi-year health plans make sense as health insurance is a product that you are probably going to need for a very long time. It has several advantages. But there are some disadvantages too. Let’s have a look:
Advantages of a multi-year policy
A multi-year policy comes with several perks, including discounts on premiums and protection from premium hikes during the tenure of the insurance policy.
Some of the key benefits of a multi-year plan are that policyholders can save upfront on the premium. It removes the hassles involved with annual renewal, and one can easily cancel or terminate the policy.
The multi-year policy also eliminates the required waiting period on renewals for comprehensive policies and comes with easy EMI options. Typically, a multi-year health insurance policy offers coverage for three years. As the premium can be paid for multiple years in one go, this cushions the insured from subsequent premium revisions. Insurers also offer discounts for multi-year premiums, resulting in savings of 5-15%. Opting for multi-year health plans eliminates the risk of the policy lapsing if you miss paying the renewal premium.
Disadvantages of a multi-year policyThe biggest disadvantage of buying a multi-year policy is that you get locked in with a single insurer for multiple years. After buying a multi-year health policy, you will not be able to switch to another insurer until the policy term is over. The only other alternative would be to buy a new policy from another insurer before the existing one expires.
The premium paid for multi-year health plans is eligible for tax deduction under Section 80D of the Income Tax Act. However, the premium needs to be proportionately split for each year to avail of the tax benefit.
Who should buy a multi-year policy?
The nature of coverage under annual health policies and multi-year health policies remains the same. However, a multi-year health policy may be suitable for individuals who want to avoid the hassle of yearly renewals of policies while also saving on the premium.
Sometimes it becomes challenging for consumers to keep track of renewal dates of insurance policies. No policyholder would want his/ her policy to lapse or lead to heavy penalties in the process.
After selecting a plan best suited for your needs, you may buy a multi-year policy. However, experts say it is necessary to go through policy documents and also compare similar plans of other companies before buying the best option.
Data from Insurance Regulatory and Development Authority of India annual report for the year 2020-21 show that for individual life insurance, insurers paid death claims to 10.84 lakh policies as against 11.01 lakh claims. The number of claims repudiated — a claim that has been processed and is found un-payable — was 9,527 for an amount of Rs. 865 crore and the number of death claims rejected was 3032 for an amount of Rs. 60 crore. The number of claims pending at the end of 2020-21) was 3055 for Rs. 623 crore.
The claim settlement ratio of LIC was 98.62% in2020-21 as compared with 96.69% in 2019-20 and the proportion of claims repudiated/rejected fell 1% in 2020-21 from 1.09% in the previous year. The claim settlement ratio of private insurers was 97.02% in 2020-21 as compared with 97.18% in 2019-20.
What are the types of Insurance?
So how can you ensure that your insurance claim is not rejected?
Disclose all information
Be transparent and disclose all the correct information regarding your health and medical conditions, family history, occupation, income, existing policies, lifestyle choices, etc in the proposal form (online or the physical one). It is best to fill up the form yourself. The insurance company will fix the premium based on all the disclosures. Read the policy document carefully and inform the insurer on any mistakes.
For a new life insurance policy, insurers insist on a medical test for those above 45. Experts say even those below that age should insist on a medical test to understand the medical condition and help the proposer to detect diseases early and go for treatment. If you suffer for some ailment after the policy has been issued, it must be informed to the insurer at the earliest.
Pay premium on time
It is important to pay the renewal premiums on time so that the policy does not lapse. If the premium is not paid within the due date, insurers give a grace period which is 15 days for monthly instalments and 30 days if premium is paid on a quarterly, half-yearly or yearly basis. The policy is still in force during the grace period and the nominee will be eligible for the claims. However, if the premium is not paid even during the grace period, the policy lapses and all the benefits covered under the policy will be terminated.
At times, hospital bills can be scarily high. Often, your insurance may not be enough to cover the entire bill. And then, if you do not have another policy, you need to pay the difference yourself.
If you do have multiple health policies, you can make claims from more than one policy.
While you still cannot claim more than the sum assured, it helps if you have the option of combining two policies to get as much of the claim settled as possible.That said, the process of making claims from multiple policies can be a bit complicated. So, it’s best to have a basic understanding now rather than begin reading up only when you need to use these policies.
How to claim from multiple insurers
Assume you have two health plans: one from your employer (office-provided) of Rs 4 lakh and the other a standalone family floater of Rs 5 lakh that you bought for yourself.
It’s always advisable to not depend entirely on your employer for health insurance. You don’t know if you might be out of a job temporarily and end up being hospitalised during that exact period.Now, if you get hospitalised and the bill comes to Rs 7.5 lakh, how do you go about making the claims?
Here’s how you should go about claiming your health insurance:
Raising both claims, proportionately
You might be wondering if you can just raise claims with the two insurers simultaneously for proportionate amounts, so as to avoid putting in your own money.
The answer is you can’t.
You need to make a claim first with one insurer and if the total claim exceeds the sum assured, then seek reimbursement of the balance from the second one.
And if, for some reason, you must get treated in a non-network hospital, then you will have to clear the entire bill on your own first and then get reimbursed by both insurers. In such a case, it is always advisable to clear one part of your hospital bill from one insurer, get payment and proof of the amount cleared and then go to the second insurer to get the pending bills cleared. Despite insurance policies, have an emergency corpus in place
It is for this reason that it’s advisable to have an emergency fund in place.
You may need to go to a non-network hospital in emergencies. If you have a financial cushion in place, at least you can afford to pay the bills first and then run around for reimbursements. For older people, it is extremely important to have a medical contingency fund in place, in addition to health insurance.
How much insurance do I need?
Make sure you have a family health insurance cover of at least Rs 15-20 lakh. This should be in addition to any corporate health insurance coverage that you already have.
If buying a large cover is not feasible, then purchase a smaller base plan and enhance it with a super top-up policy. For instance, you can buy a Rs 5 lakh base cover and then a top-up policy of, say, Rs 20 lakh.
In the last few years, India has witnessed considerable growth in medical technology which made it possible to cure diseases that weren’t curable. However, with the progress in healthcare facilities, the cost of healthcare has been sky-rocketing too. India’s medical inflation was as high as 14% in FY 2021 and healthcare inflation has surpassed overall inflation. Therefore, there is all the more need to buy a comprehensive health insurance plan to safeguard yourself and your family in case of a health emergency.
A health insurance plan provides coverage against medical treatment of the policyholder during an exigency in exchange of a premium that is paid monthly or annually to the insurer. It provides numerous coverage such as specialized procedures, OPD, health check-ups, pre and post hospitalization, domiciliary treatment etc.
Nowadays, treatment of a heart disease can cost around Rs 10 lakh to Rs 30 lakh in metropolitan cities. Imagine paying this amount from your own pocket at the time of a crisis? For many middle class families, it can use up all their hard-earned savings. A health insurance plan comes to the rescue in these difficult circumstances.
What is co-payment?
Most of the times, when buying an insurance policy, we tend to miss out reading the terms and conditions properly. It is imperative to understand each and every clause in the policy in order to take an informed decision. One such clause in health insurance is co-payment. The portion of the medical expense that a policyholder needs to pay from his own pocket is called a co-payment. The remaining portion is borne by the insurer. For instance, Mr. Y has a health insurance cover of Rs 10 lakh with a 20% co-payment. During a health emergency, Mr. Y files a medical claim of Rs 5 lakh with the insurance company. In this case, Mr. Y will have to pay Rs 1 lakh as co-pay and the remaining Rs 4 lakh will be covered by the insurance company.
The co-payment amount is pre decided by the insurance company on a particular medical treatment, service or procedure. It has to be paid every time you avail the health care service. Most policies with a co-payment clause have a lower premium amount, whereas policies that don’t have a co-pay, have a higher premium amount.
Types of co-pay
Insurers impose co-pay in various forms depending on situations. A few scenarios in which co-pay is applicable are listed below:
Some health insurance plans have co-payment in case hospitalization happens outside a network hospital. If you are unable to find a network hospital nearby for treatment, it is always advisable to contact your insurer before getting hospitalized.
Hospitalization in a different city:
Co-pay is applicable if hospitalization happens in tier-I city on a health insurance policy purchased in a tier-II city. This is because the cost of hospitalization in a metropolitan city is higher than a non-metro city.
Some health insurance plans have co-payment on coverage for pre-existing disease. So, choose your plan carefully if you specifically want to avail entire coverage for pre-existing disease after the waiting period is over especially when buying a plan for the elderly.
Treatment in swanky hospitals:
A few insurers impose co-payment for treatment in expensive hospitals. These hospitals usually have a higher room rent and surgery charges. Claim amount for hospitalization usually depends on room rent, type of room and procedures. Typically, room rent in a tier-I city hospital these days is Rs 6000-10,000 per day. Therefore, before buying a policy, it is suggested to check the share of co-pay in room rent and surgery if you don’t want to end up paying from your own pocket at the time of hospitalization. Co-payment works well for youngsters who want a lower premium and have less chances of getting hospitalized. However, senior citizens are more prone to diseases and, therefore, they should opt a health insurance policy that doesn’t have a co-pay. This is because the chances of medical claims for the elderly are higher. If their policy has a co-payment, they will have to shell out money from their savings. Lastly, health insurance policies are designed for people to save themselves from paying heft hospital bills in an emergency situation. Therefore, they should choose co-pay if they feel that they can share the risk along with insurer during a medical exigency. If they are convinced that the benefits of the policy balance the risk element, they can opt for co-pay.