Multi-year health insurance can save you from rising premiums: Explained

In the past year, 52% of health insurance policyholders saw their premiums rise by more than 25%, according to a survey by LocalCircles. With 31% reporting hikes between 25-50%, many are feeling the pressure of increasing medical costs. As healthcare inflation escalates, policyholders face tough choices. But are there options to counter rising premiums?

 

There are various ways to help offset rising premium costs. One approach gaining traction is opting for a multi-year health insurance policy. "When you buy a three-year or five-year policy, you secure the premium rate for the entire period, preventing annual hikes due to age or inflation," said Siddharth Singhal, business head at Policybazaar.com. "This can save money, offering up to a 15% discount upfront, as the rate remains locked in until the end of the tenure."

 

Multi-year health policies have now expanded to offer coverage up to five years, giving policyholders a longer period of stability.

 

"These multi-year plans not only simplify coverage but offer savings, with discounts reaching 17-18%," Singhal added.  However, before opting for a multi-year policy, be mindful that it requires an upfront payment, which can feel steep. Once the policy term ends, you’ll have the option to renew, though the premiums may rise, reflecting factors such as your age, medical inflation, and any updates to the insurer’s pricing structure.

 

Key benefits of multi-year policies

 

  Locked-in premiums: Policyholders can fix their premium for five years, shielding them from rising healthcare costs.

Attractive discounts: Insurers offer up to 18% savings on multi-year plans, making extended coverage more affordable.

Less frequent renewals: Fewer renewals are ideal for non-resident Indians (NRIs) and frequent travellers who prefer hassle-free insurance.

 

Take a look at the health insurance plans for a 30-year-old in Delhi (1A, Rs 5 lakh sum insured):

 

Care Health - Care Supreme

Annual Premium: Rs 11,546

3-Year Multi-Year Premium: Rs 29,924

 

Niva Bupa - Reassure

Annual premium: Rs 13,489

3-year multi-year premium: Rs 37,432

 

Aditya Birla - Active One

Annual premium: Rs 8,528

3-year multi-year premium: Rs 23,028

 

ICICI - Elevate

Annual premium: Rs 8,052

3-year multi-year premium: Rs 23,171

 

Star Health - Super Star

Annual premium: Rs 8,667

3-year multi-year premium: Rs 24,051

 

Star Health's "Super Star" plan for a 30-year-old:

 

Plan name: Super Star

Insurer: Star Health

Premium: Rs 38,785 (for a 5-year policy term)

Coverage amount: Rs 10 lakh

Policy term: 5 years

 

What does a multi-year plan cover?

 

A multi-year plan stabilises costs and provides continuous health coverage without the need for yearly renewals. "It’s a way to avoid annual premium hikes and stay covered without interruption," explained Amitabh Jain, chief operating officer at Star Health and Allied Insurance. Many plans offer additional benefits, such as No Claim Bonuses, which can enhance the insured sum over time.

 

Additional perks often include wellness rewards, discounts at partner hospitals, and restoration of the insured sum after each hospitalisation, making multi-year policies a solid option for consistent health protection.

 

How does it work for claims?

 

In terms of claims, multi-year policies operate similarly to annual ones. "For each policy year, expenses up to the insured amount are covered," said Santosh Puri, senior vice-president at Tata AIG General Insurance. Terms, conditions, and waiting periods remain consistent with annual policies, though certain products offer flexibility in using benefits over any year within the policy term.

 

For example, Tata AIG’s MediCare Premier multi-year policy allows policyholders to use available restorations any time within the policy period for sums insured above Rs 50 lakh.

 

In another example, Star Health Insurance’s “Star Super Star” 5-year policy resets the Rs 10 lakh cover each year for five years, with premiums locked in from January 2025 until January 2029, unaffected by inflation or rate adjustments.

 

"Our standout feature is the automatic restoration of the sum insured for both related and unrelated illnesses within the same policy year," Jain said, noting that the 5-year policy maintains coverage despite large claims.

 

Star’s “Smart network discount” offers a 15% discount for treatments at preferred network hospitals. The policy also allows midterm inclusion of family members, such as new spouses, children, or adopted children, without needing a new policy.  Policy renewals 

The renewal process for both one-year and multi-year policies works the same way.

 

According to Puri, "Insurers give customers the option of auto-renewal. If you don’t select auto-renewal, they send reminders for renewal. If you choose auto-renewal, the policy is automatically renewed."

 

No change in tax benefits

 

Multi-year policyholders can claim tax benefits under Section 80D of the Income Tax Act, as in the case of a one-year policy. If premiums are paid as a lump sum for multiple years, the cost can be divided across the policy period for deductions. "For instance, if you’ve paid Rs 45,000 as a premium for a three-year policy, you can split this amount across the three years, claiming Rs 15,000 annually as a deduction under Section 80D of the Income Tax Act. This approach helps maximise tax benefits, even for lump-sum premium payments," said Singhal. 

That's how it works in the case of one-year policy too. 

 

What about senior citizens?

 

While multi-year health insurance is open to all age groups, it offers advantages for seniors. Fixed premiums prevent the sharp price increases often seen with annual renewals. Additionally, seniors can benefit from tax deductions of up to Rs 50,000 annually on multi-year premiums, as in the case of a one-year policy.

 

“These plans provide seniors with stable premiums, ensuring affordability and consistent coverage,” Singhal said.

 

Downsides of multi-year health insurance policy

 

Multi-year policies require upfront payment, which can be costly. This factor should be considered by potential buyers.

 

Another factor that policy buyers must keep in mind is that when a multi-year health insurance policy term concludes, they have the option to renew it. Premiums may then increase based on factors such as age, medical inflation, and any updates to the insurer’s pricing model.

 

"For instance, if someone purchased a three-year policy at age 30 with an annual premium of Rs 15,000, the renewal at age 33 might come with a higher premium, potentially reaching Rs 20,000 due to the age bracket shift and inflation adjustments," Singhal explained.

 

Medical inflation = Higher premiums

 

The primary driver of premium increases is medical inflation. According to ACKO’s India Health Report 2024, hospitalisation expenses in India rose by 11.35% over the last year, based on 60,000 health policy claims filed in FY 2023-24. The report notes a 14% rate of medical inflation, leading insurers to transfer higher costs to customers through increased premiums.