Most of the policyholders are not aware that health insurance premium is dynamic in nature i.e. it keeps changing every year. If you buy term insurance or life insurance plan then premium remains fixed for the policy term. The reason being life insurance benefit is one-time payout i.e. sum assured is paid only in the event of the death of the policyholder. On the other hand, health insurance benefits are recurring in nature i.e. I can avail the benefits multiple/any no of times during the policy term.
Therefore, for an insurance provider, health insurance is high-risk policy and is dependent on the health of the insured. It’s a known fact that health deteriorates with the age thus risk increase and so as health insurance premium. In my post, How to choose the best health insurance plan i promised readers that i will come up with a post on how to save health insurance premium. As the health insurance premium keeps increasing, therefore, it is important for the policyholder to review health insurance premium once every three years.
Health Insurance Premium – Are You Paying High Premium
Typically, the premium is linked to the benefits and features attached to the policy. Once you fixed your requirement. You may buy a policy that fulfills your requirement at a lower premium (not necessarily lowest). Now, it is not a case of fill it, shut it and forget it. There are cases wherein people don’t make any claim for years and pay the premium every year thus they might be paying a high premium.
Let me add that health insurance provider is not doing any charity. Most of them are private sector players and like any other company they want their operations to be profitable. The health insurance premium varies across insurance providers. It is not only dependent on policyholder but on overall claims settled by the insurer, the cost of operations, the cumulative risk profile of policyholders of the insurer, corporate client base etc. For example, if the insurance provider has large no of corporate clients then my observation is that premium for the retail segment is normally higher. Corporate clients is a volume business and no of claims are high. Normally it is highly competitive and non-profitable segment. Similarly, insurance provider heavily dependent on the offline channel will charge a high premium because of the high cost of operations.
The point i am trying to make is that though you bought the best policy at the time of availing the same but over a period of time, your premium might have increased due to some external factors. Therefore, after every three years, you should do the following exercise to check whether you are paying a right premium or not.
(a) Check out your renewal premium
(b) Check the premium offered by your insurance provider to new customers. You can check online by entering your dummy details
(c) Check the premium offered by other insurance providers for policy with same benefits
Preferably, (a) should be lowest among all three. If (c) is lowest then you may opt for health insurance portability. I will explain it in point no 10 of next section. On the contrary, if (b) is lower than (a) then you may check with your insurance provider, the reason for the same.
Health Insurance Premium – 11 Ways & Tips To Save The Premium
1. Family Floater Plan:
Family floater plan is always cheaper compared to the individual policy. Secondly, you can always avail/get higher cover. It is highly unlikely that more than 1 member of the family floater plan will make a claim during the same year. In my case, the premium for coverage of 9L for 4 members was Rs 17,000. The premium would have skyrocketed if i would have availed individual cover of 9L for each member. On the contrary, if i keep health insurance premium constant, the coverage for each member under the individual plan will be much lower. In my case, it was approx 3L but it also depends on age and insurance provider
2. Renew the Policy for 2 Years:
Recently my health insurance policy came up for renewal. The insurance provider offered me a 2-year renewal at approx Rs 35,000 and annual renewal at around Rs 18,500. Thus i saved on health insurance premium by renewing my policy for 2 years. Secondly, i hedged against any increase in premium next year. The only disadvantage is that next FY i cannot claim income tax deduction on health insurance premium as i paid a premium in advance during current FY.
Also Read: 7 Free or Cheapest inbuilt insurance covers
3. No Claim Bonus:
Normally, the policyholder gets confused between No claim bonus and cumulative bonus. Both are offered in case of claim free policy period. No claim bonus is an upfront discount in premium whereas cumulative bonus is an indirect discount that we will discuss in next point. No claim bonus is typically 5% – 10% of Basic Premium. In other words, the insurance provider incentivizes policyholder to stay fit. At the time of availing policy, you should check whether the insurance provider offers No Claim Bonus at the time of renewal or not.
4. Cumulative Bonus:
This option is more beneficial for policyholders who would like to increase their coverage without an increase in premium. It eliminates the need of top up policy if you don’t make any claim for X consecutive years. For example, in my case the coverage is 9L. If i don’t make any claim during a year then i receive 1/3rd cumulative bonus i.e. 3L. In other words, my sum insured will increase to 12L without an increase in premium. Assuming, i don’t make any claim for 4 years then the insurance provider will offer call option i.e. my base sum insured of 9L will increase by accumulated cumulative bonus of 9L. In other words, my base sum insured will be 18L but i will be paying a premium equivalent to a premium of 9L policy. It is indirect savings or discount.
5. Price Discount:
Some of the insurance providers offer price discount say family discount if no of family members insured are 4 or more. There is a special girl child discount for covering a daughter. I consider it as a noble step from an insurance provider as i personal observed the people don’t insure girl child. It is quite sad.
Therefore, you should also check any price discount offered as it will help to save health insurance premium in long run. For any comparison of health insurance premium, you should consider net premium after adjusting all the discounts and rebates offered.
I discussed this point in detail in my previous posts on health insurance. Normally, the co-payment is 15% or 20% and you can voluntarily opt for it. The policyholder gets confused between co-payment and deductible amount. Co-payment is % of claim and there is no upper limit. For example, if i claim 8L and co-payment clause is 20% then i need to pool 1.6L from the own pocket. You can hedge your risk of payment from the own pocket by opting for deductible amount. Though each one has its own disadvantages. The only advantage is that it will help to save on health insurance premium.
7. Deductible Amount:
The deductible amount is the fixed amount the policyholder is willing to pay from the own pocket in case of hospitalization. Say i selected 1L as deductible amount. In this case, though my health insurance premium will reduce drastically but the policyholder fails to understand its financial impact. In layman terms, any mediclaim of less than 1L will not be processed by the health insurance provider. If my claim is of 1.5L then i will pool 1L and insurance provider will pool balance 50k. Personally, i have not opted for co-payment and deductible amount.
8. Add-ons / Riders:
It’s a no-brainer that add-ons, riders, and additional features add to the cost of the policy. Though, in order to gain market share some of the insurance providers include these add-ons/riders for free. If you get any good deal you may go for it otherwise, you can save health insurance premium by not opting for these add-ons and riders. Some of the common riders are critical illness and personal accident cover. The features i don’t find useful are OPD and health checkup.
9. Fix your requirement:
I discussed this point in detail in my previous posts. Depending on your health condition and age, you may fix your health insurance requirement. A feature like cumulative bonus takes care of future requirement. If you are hale and hearty then you may opt for the cover with low sum insured. Claim free years will help to increase the coverage without additional premium. Thus you can save on health insurance premium.
If you feel that your premium is high and there is no other way to save premium. Similar to mobile no, you can transfer your health insurance policy to some other insurer offering lower health insurance premium. Please note that you will not lose out on any benefits of the existing cover. On the contrary, this option resists insurance providers to charge a high premium from existing policyholders.
11. Stay Healthy:
Last but not the least, there is no better way but to stay fit and healthy to save your health insurance premium :).
Words of Wisdom:
There is no second thought that we need health insurance policy. The premium is dynamic and depends on various internal and external factors. In layman terms, It is important to opt for the policy that provides a maximum incentive to the policyholder for staying healthy. It will also help to save on medical bills and overall healthcare cost. I will never suggest you to buy health insurance policy based on your friends and family members recommendation. Each policyholder has a different requirement. You may end up paying high health insurance premium.
In my case, my friends, and brother suggested Policy A and Policy B. I decided against both as i plotted matrix of premium, features, and factors discussed in this post. I bought Policy C. There is NO Perfect financial product in the world. You have to compromise on some factors. If your insurance policy satisfies the features and factors you cannot compromise on and at lower/lowest cost then please go ahead.
Copyright © Nitin Bhatia. All Rights Reserved.
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