Are Long-Term Health Insurance Policies More Beneficial?

A majority of country’s population now understand the importance of having health insurance policy in place to combat the soaring inflation rate. However, when it comes to choosing the right coverage, many a thing may hover over your mind. One of them being long-term health insurance. 

As health insurance is a lifetime requirement, the idea of a long-term or a multi-year policy may have crossed your mind.

But are they really helpful? 

Does having a long-term health insurance policy make sense? 

While the advantages of having a long-term policy are many, there are a few things that you need to be aware of. 

But before dive deep into today’s topic, let’s understand what long term health insurance is!

Long-Term Health Insurance

A long-term health insurance policy, as the name suggests, is a health plan for a longer duration. It is purchased for 2-3 policy years. This means that, unlike regular health plans that have a tenure of 1 year, a long-term health plan is a multi-year plan. You do not have to renew the plan every year to continue the services. You can relax for 2-3 years, depending on the tenure of the plan

Now question arises “are long-term health insurance policies more beneficial”?

Yes, they are!

Advantages of Buying Long-Term Health Insurance Policies 

Whether you should opt for long-term health insurance or not, it depends on your insurance needs. In order to help you make a decision, here are a few benefits of investing in a long-term health insurance policy:

1) You Save More 

Usually, a long-term health insurance policy has a lower premium rate as compared to a 1-year policy. You may get up to a 10%-15% premium discount for a multi-year health insurance policy. Thus, when you buy for long term policy, it helps you save on premiums. 

2) Unlock the lock-in Advantage

Mostly, in long-term health insurance, you have to pay the premium only once. So, you pay the premium for a few years at once. This means you do not have to worry about rising premiums during your policy tenure since you do not have to pay one. This is called the lock-in advantage of the health insurance premium. 

3) Save Yourself  from annual renewals

Renewing a health plan every year can sometimes be troublesome. If you want to skip the task of yearly renewal of the plan, a multi-year plan may be best suited for you. Since you have paid the premium at once, you no longer have to go for a yearly renewal option.

Pay Premiums on EMIs A long-term health insurance policy requires you to pay the premium for a set of years at once, and this, obviously, needs you to accumulate a high amount. Since most people are not financially comfortable paying a premium of 3 years at once, IRDAI introduced the option of EMI (Equated Monthly Instalments) in 2019. Hence, you can choose a preferred installment frequency and pay the premium through EMI without any hassle.

4) Enjoy Tax Benefits

Long-term health insurance offers you tax benefits just like other health insurance plans. Under Section 80D of the Income Tax Act of 1961, policyholders below 60 years of age can avail of a tax deduction of ₹25,000, and senior citizens can get a tax deduction of up to ₹1 lakh. 

There is a slight difference between the tax advantage of yearly health plans and that of a long-term health insurance policy. In a long-term plan, you can claim tax deductions only on the yearly premium amount and not the total premium paid for the multi-year plan. 

Let’s understand with an example here-

Saroj purchased a 3-year health insurance plan from Care Health Insurance for ₹30,000 premium. At the time of claiming a tax deduction, Saroj can only claim for ₹10,000 (1-year premium). Similarly, she can claim the rest of ₹20,000 in the upcoming 2 years.

Things to Keep in Mind when Opting for Long Term Health Insurance

Before you go for a long-term commitment with your health insurance, make sure to keep the following points in mind: 

1) The Lump-sum Premium might be Heavy on Your Pocket

Yes, the long-term plan will save you money in the long run, but at the same time, you’ll have to pay a lump sum amount when purchasing the policy. 

2) It might be an option for Senior Citizens

Long-term health plans may not be an option for senior citizens, and they may have to go for annual renewals only.

3) Renewal is the Only Time for Porting 

The IRDAI allows you to port to another insurance plan or company if you are not fully satisfied with the current one. But, when you commit to a long-term health plan, you will have to remember that porting is allowed only at the time of renewal, or else you’ll lose out on the acquired benefits. 

Before You Take Off

When it comes to coverage, the nature of an annual plan is very similar to a long-term health insurance policy. It is only the tenure that is the distinct feature. If you are someone who finds it taxing to keep track of the renewal date, then a multi-year policy might be the best option for you. A long-term commitment can be extra helpful for you as you can save yourself from the troubles of a lapsed policy. Missing the due date can bring a break in the coverage. In case you have received a bonus or have some surplus money, you can invest in a long-term policy and get a good deal on the premiums. 

There is no denying that long-term health insurance comes with a long list of benefits. However, it is recommended that you carefully go through the terms and conditions of the policy that you wish to invest in a plan and then make a well-informed decision.

>> Also Read: Short Term or Long Term Health Insurance

Disclaimer: Plan features, benefits, coverage, and underwriting of claims are subject to policy terms and conditions. Please refer to the brochure, sales prospectus, and policy documents carefully.