What is multi-year health insurance? How is it beneficial?

Multi-year health insurance plans are long-term policies which provide coverage for an extended duration of time. Insurance companies offer such options to policyholders to pay the premium for more than one year (usually two- or three-year policy term) at-a-go so that they can continue enjoying the plan benefits for a longer time period than the typical annual plan which has to be renewed every year. Maintaining multi-year health insurance has several benefits which are listed below:
Advantages of having multi-year health insurance
1) Protection from premium hike: Medical inflation has been on the rise over the past few years, which has had a significant impact on the cost of health insurance. As a result of rising medical costs, Insurers have slowly but steadily hiked the premiums payable which makes it an expensive affair for the average person. By opting for multi-year health insurance, the policyholder is insulated from any potential subsequent premium increase during the policy term. This means that the premium remains unchanged during the policy term.
2) Premium discounts: Many insurance companies offer attractive discounts to policyholders for long-term plans. These could be as high as a 10% discount on a two-year health insurance policy term and a 15% discount on a three-year term. In the long run and especially on comparatively higher value plans, the differential amount would translate to a substantial saving for the policyholder, which could be utilized to fund other expenditures.
3) Hassle-free maintenance: An annual health insurance policy has to be renewed year-on-year, which means the policyholder must remember to keep the plan active every year by renewing it. Otherwise, the policy lapses and thereafter all the benefits accrued including the waiting periods that are served become nullified. By choosing a health insurance plan for two- or three-years term period, you are assured of continuous coverage without any hassles.
4) Tax Benefits: Multi-year health insurance plans’ premium amounts are also eligible for tax benefits under Section 80D of the Income Tax Act, same as annual policies. However, it must be noted that if you opt for a one-time payment for a long-term plan of say two years or three years, you will not be able to claim the entire amount all at once. Instead, you will have to account for proportionate amount per annum as per the regulations.
The flip Side
While multi-year health insurance plans are advantageous to the policyholder in all the ways listed above, there are some limitations to maintaining such plans. One such factor is that the policyholder gets locked in with the insurer for the entire term period. This means that you will be unable to port your plan or switch to another insurer till such time that the policy term ends. That being said, you can always purchase a new plan from an alternate insurer while continuing the multi-year policy that you already have.

The author is Health Insurance Specialist, SANA Insurance Brokers Pvt. Ltd