Multi-Year Health Insurance Plans: 5 Reasons to Buy Them

What is Multi-Year Health Insurance?

Multi-year health insurance is a mediclaim policy that provides coverage for more than a year. These cost-effective plans are usually available for a policy tenure of 2 to 5 years. Unlike a regular health plan, the total premium of a multi-year mediclaim policy is to be paid as a lump-sum amount, thereby eliminating the need for yearly renewals. Moreover, these plans offer the lock-in benefit, where your health insurance premium remains unchanged for the entire policy duration.

Top 5 Benefits of Buying a Multi-Year Health Insurance Policy

Check out some amazing benefits of buying multi-year health insurance plans in India:

1. Avail Long-Term Policy Discounts

   Buying a multi-year mediclaim plan allows you to take advantage of the long-term policy discount. Most health insurance companies in India offer a health insurance discount of up to 10% on opting for a policy tenure of 2 years. Similarly, you can reduce your premium by up to 15% by choosing a health insurance policy with a duration of more than 2 years.

   For example, if the premium of your annual health insurance policy is ₹600 per annum, you can reduce it up to ₹540 per annum with a 10% long-term discount on your 2-year policy. Similarly, if you opt for a 3-year health insurance policy, you can reduce your premium to ₹510 per annum with a 15% long-term policy discount.

2. No Hassle of Renewing the Policy Every Year

   With a multi-year insurance policy, you will be free from the hassle of renewing your policy every year. In fact, you do not have to remember your policy due date as you can pay the premium for the entire policy duration at the time of policy purchase and rest assured for the next couple of years.

   This way, you will get medical coverage at all times and be free from the tension of losing the continuity benefits like the served waiting periods and the No Claim Bonus (NCB).

3. No Risk of Premium Hike Every Year

   Health insurance premiums can rise unexpectedly due to inflation, and the possibility of a hike increases as you age and become more susceptible to age-related issues. However, with a multi-year policy, your premium is locked in for the entire policy duration.

   This ensures that your insurer cannot raise your premium during the policy term, no matter how circumstances change. As a result, multi-year health insurance plans save you from annual premium adjustments and help you save significantly over time.

4. Allows to Pay the Premium in EMIs

   Just like an annual health policy, you can also pay the premium of your multi-year health insurance policy in instalments. This saves you from the trouble of arranging the premium amount for the entire policy term in one go. In fact, health insurance companies allow the payment to be made at the frequency of your choice. This means you can choose to pay the premium of your multi-year health policy in annual, semi-annual, quarterly, and monthly instalments.

   Related Insights: Everything About Health Insurance on EMIs

5. Enjoy Tax Benefits Every Year

   A multi-year health insurance policy offers tax benefits on the premium amount under Section 80D of the Income Tax Act, 1961. The total premium is distributed proportionately across the policy term, allowing you to claim tax deductions on a portion of it every year. However, to save on tax, make sure you pay the premium amount in any mode other than cash because premiums paid in cash are not eligible for tax deductions.

Can I Get a Multi-Year Health Insurance Tax Benefit in India?

Yes.

As per Section 80D of the Income Tax Act, if you are under the age of 60, you can save tax for up to ₹25,000 per financial year on the health insurance premiums covering yourself, your spouse and children. In the case of senior citizens, the tax deduction limit increases to up to ₹50,000 per financial year. Thus, you can earn a multi-year health insurance policy tax benefit on the premium amount paid to buy the policy.

How Tax Benefit Work with Multi-Year Health Insurance Plans?

In a multi-year health insurance policy, the premium for several years is paid as a single lump sum payment. However, the tax benefit for such a policy is distributed across the policy's duration.

As per Income Tax rules, you cannot claim the entire multi-year mediclaim premium in one financial year. Instead, as per Income Tax guidelines, you can claim a proportionate amount of the total health insurance premium based on the policy term.

For example, if you pay ₹54,000 as a premium for a 3-year policy, you can claim a tax deduction of ₹18,000 per year u/s 80D of the Income Tax Act for three years. This means that you can claim ₹18,000 in the first year, ₹18,000 in the second year and ₹18,000 again in the third year.

NOTE: To avoid any confusion, most medical insurance companies provide a tax certificate stating the amount that can be claimed under Section 80D annually.

Things to Know About Multi-Year Health Insurance Tax Benefit

If you are planning to claim tax deduction on premium paid to buy multi-year mediclaim policy, make sure you keep the following things in mind:

• For health insurance premiums paid to buy multi-year policy, the maximum tax deduction allowed is ₹25,000 per year. If the insured person is a senior citizen (above 60 years), this limit increases to ₹50,000.
• Some health insurance plans cover parents-in-law. However, note that the premiums paid for their coverage do not qualify for tax benefits.
• If you buy a multi-year health insurance policy, most insurers provide an 80D certificate that specifies the yearly amount you can claim as a deduction.
• To claim tax deductions u/s 80D, the premium must be paid using non-cash methods. Cash payments are not eligible for tax benefits.
• Tax deductions are available only for those following the old tax regime. The new regime does not allow any deductions under Chapter VI A of the Income Tax Act, 1961.