Having health insurance has become almost a necessity, given the rising expense of healthcare. The majority of health insurance contracts must be renewed annually. The annual renewal of the policy, though, might be a hassle.
Many health insurance firms now provide multi-year health insurance coverage to simplify this process and lessen the pressure of yearly renewals. *
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Multi-year health insurance policy: Meaning
Basically, a long-term health insurance policy can be one that provides protection for a period longer than a year. Such insurance may provide coverage continuously for up to two or three years. *
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Let’s examine a few benefits of a long-term health insurance plan.
- No need to renew every year: Renewal of one’s health insurance plans can be among the significant financial responsibilities one has each year. The policy could be discontinued in case the premium is not paid on time. As a result, one needs to budget some money each year for the policy’s renewal.
One can pay a one-time premium to keep long-term health insurance coverage active for two to three years. *
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- Savings on premiums: Long-term health insurance policies also enable you to save money. As multiple years’ worth of premiums is paid at once, multi-year policies cost less than annual policies. You can verify this using any health insurance premium calculator.
Long-term health insurance policies are becoming more and more common these days because health insurance premiums frequently change each year.
Most health insurance products offer savings of 7.5 per cent to 12.5 per cent on premiums for two years and up to 15 per cent on premiums for three years in multi-year contracts. Customers also benefit from additional savings because any change in the product’s premium only affects current policies at the time of renewal.
- Tax considerations: In the case of multi-year policies, the tax benefits accrue proportionately.
If the premium for multi-year policies has been paid in one year, the deduction under Section 80D of the Income-tax Act, 1961 shall be allowed proportionately over the years. Kindly note that tax benefit is subject to change in prevalent tax laws.Tax benefit is subject to change in tax laws.
Example of premium split: For amulti-year policy, the premiums must be proportionately spread out over the years. For instance, let’s assume you buy health insurance for your family and pay a premium amount of Rs. 90,000 for a three-year policy. The limitations outlined in section 80D may apply to the deduction each year. In the aforementioned scenario, you may be qualified to use Section 80D to deduct Rs 30,000 annually.
You might not need to perform these calculations. The insurers typically send an 80D certificate specifying the amount you may claim as a deduction for health insurance premiums each year under Section 80D
Limitations of a multi-year policy
The most significant downside of purchasing multi-year health insurance plans would be that you get tied to a single insurer for several years. After buying a multi-year health insurance coverage, you would only be able to move to a different insurer once the policy term expires. *
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Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.