With the healthcare costs rising sharply, it does not take long to understand the importance of adequate health cover in your insurance portfolio. However, health cover comes at a cost. Even though you may appreciate the benefit of adequate health cover, your budget may not permit you to purchase a health plan.
You may argue that you have health cover from your employer but there are many limitations with employer health cover. It is advisable to have a personal health cover.
If you find health insurance premium too high, I have a simple question for you. If you think you cannot afford insurance premium, how will you afford hospital bills? The idea should be to purchase health cover in some form.
In this post, I will discuss a few tips to reduce health insurance premium.
Tips to Reduce Health Insurance Premium
1. Opt for a lower cover
It is a practical choice. It is better than not having any cover at all.
If you cannot afford health cover of Rs 5 lacs, go for a cover of Rs 2 lacs. Get started.
You can enhance the cover when your cash flows improve.
2. Opt for Annual Deductible
Under a deductible option, the insurer bears the cost only in excess of a certain threshold.
Essentially, you purchase a super top-up plan.
Higher the threshold, lower the premium.
Let’s consider Health Companion Family Floater Plan from Max Bupa.
For a family of 4 (40, 38, 10, 4), the premium of family floater of Rs 10 lacs is Rs 27,436.
If you include a deductible of Rs 3 lacs, the premium is Rs 16,463.
With a deductible of Rs 5 lacs, the premium is 13,719.
You can see there are no free lunches. Even though premium is going down as you increase deductible, your potential liability per policy year is also going up.
You will have to bear medical expense up to threshold from your own pocket.
For instance, if you opt for Sum Insured of Rs 10 lacs with a deductible of Rs 3 lacs, you will have to manage Rs 3 lacs from your own pocket while any cost above Rs 3 lacs will be borne by the insurer. The insurer’s liability will be capped at Rs 10 lacs. And this is per policy year.
Hence, by opting for deductible of Rs 3 lacs, you are capping your liability per policy year to Rs 3 lacs (unless the medical bill exceeds Rs 13 lacs).
You need to see if this is acceptable to you.
Those who are covered under group health cover from their employers can consider this option. You can set the deductible value at the coverage provided by your employer. If your employer provides a cover of Rs 5 lacs, you can purchase a super top-up plan with a deductible of Rs 5 lacs. But you must remember, claiming from two policies is never without hassles.
3. Opt for co-payment
You can also opt to share cost with the insurer. If you plan has co-payment clause of 20%, you will have to share 20% of the medical bill accepted by the insurance company.
For instance, you run a hospitalization bill of Rs 4 lacs and Rs 3.5 lacs is acceptable under terms and conditions of the insurance plan. Out of Rs 3.5 lacs, you will have to bear Rs 70 lacs. Remaining Rs 2.8 lacs will be borne by the insurance company.
You will of course have to settle Rs 50,000 (difference between Rs 4 lacs and Rs 3.5 lacs) from your pocket.
Co-payment clause helps the insurance company in two ways.
- You share the cost of treatment
- Since you share the cost of treatment, you are expected to opt for less expensive hospitals to decrease outgo from your pocket.
And this reflects in lower premiums.
4. Avoid Maternity Benefit
Under maternity benefit, the insurance company covers the delivery expenses.
Maternity benefit goes against the basic tenet of insurance. Occurrence of any insured event typically affects the insured adversely.
Maternity benefit goes against this principle.
When the insurer issues a policy with maternity, it knows claim under maternity is likely to come sooner or later.
The insurer needs to price the policy accordingly.
If you do not foresee the need for maternity, it is better to avoid such plans. Elderly couple does not need a plan with maternity benefit.
Typically, the maternity benefit under the plan is capped (and is much less than the Sum Insured). There are conditions attached to this benefit. For instance, there may be waiting period of 2 to 4 before you can claim maternity benefit.
Plans with maternity benefit are quite expensive (and rightly so). And the numbers don’t add up. Personally, I wouldn’t pay excess premium of Rs 15,000 per year for three years for a benefit which is capped at Rs 50,000.
5. Decide between family floater and individual plan
A family floater may be good option for young families instead of individual plans for each of the family members. A family floater for 10 lacs for a family of four will cost much less than 4 individual plans of Rs 10 lacs each.
Hence, you may consider family floater plan rather than individual plan for each of the family members.
Or you can customize health coverage based on your needs.
You can purchase individual plan for one of the members and a floater plan for the remaining.
Under a family floater plan, the premium depends on the age of the eldest member.
Similarly, if one of the members has an illness, the loading will apply to all the members in the family floater.
The choice between multiple individual plans or a family floater will depend on such factors.
Hence, you need to review if you need to move out one of the members (from family floater to an individual plan) because of old age or an existing illness.
By doing so, you may actually reduce health insurance premium.
I have covered this aspect in detail in the following post.
6. Port to a different insurer
If you think your current insurance plan is expensive, you do have an option to port your policy to a different insurer. The new insurer may offer cover at a lower premium and help you reduce health insurance premium cost.
You also get the credit for waiting period served in the earlier plan.
For instance, you have served a waiting period of 2 years under your current health plan. If you port to an insurance plan with a different insurer with waiting period of 3 years, you will have to serve a waiting period of just 1 more year.
However, the new insurer will conduct a fresh underwriting exercise. Hence, the new insurer can load premium based on any illness that you were diagnosed with since the inception of the coverage with the current insurer.
Claims based loading is not permitted as per IRDA regulations. Hence, your existing insurer cannot load your premium based on illnesses diagnosed (or any claims) after commencement of health cover. The current insurer can’t but the new insurer can.
Do note the new insurer can even decline to issue the cover. Porting is not your right. You cannot force the new insurer to accept you in a plan of your choice.
You need to keep this aspect in mind.
While porting, benefit of no-claim bonus is lost. With the new insurer, you will have to pay for this extra coverage.
In my opinion, portability works only for the young and healthy. Hence, you can’t always rely on portability option.
7. Making premium payment for 2 years
Almost all insurers give you a discount of 5% to 10% if you pay insurance premium for two or more years.
Premium for family floater (Max Bupa Health Companion) for Rs 10 lacs (40, 38, 10, 4) costs Rs 27,436. If you choose to pay for two years at the same time, you will have to pay Rs 52,641, resulting in saving of Rs 2,231.
In my opinion, it is not prudent to think too much about this option. It is much ado about nothing.
You could have simply put the extra money (Rs 52,641 – Rs 27,436) away in a fixed deposit for a year and you could have ended up with premium for the second year (or thereabouts) after 12 months. You are unnecessarily tying yourself to the same insurance company.
This approach could be useful if you (or eldest member in the family) is moving to a higher age bracket.
Additional point to note is that you get benefit under Section 80D only in the year of payment. Hence, even though you may have paid the premium for next year, you will get tax benefit in only this year.
8. Avoid features such as hospital cash or outpatient treatment
Insurance companies will sell many additional riders at the time of purchase. Avoid riders such as hospital cash and OPD coverage. If you have an emergency corpus, you do not need hospital cash feature. OPD coverage is quite like maternity benefit. The numbers don’t add up. You pay too much for little too less.
Points to Note
- I have picked up insurance plan at random. It shall be in no way be considered my recommendation for a health insurance plan.
- Premium information is for healthy individuals. In case you or any family member has an adverse medical condition, the insurance company may load the premium.
We have looked at various ways to decrease health insurance premium. Under every method (except smart choice between individual and family floater), you have to give up some coverage or assume a share of the hospital bill. So, it is a give and take.
A few features are simply not worth having. For instance, maternity benefit or OPD coverage is a clear avoid.
For others, you need to make a choice.
Image Credit: The original image and information about usage rights can be downloaded from Flickr.