To make the health insurance policies more affordable for customers, insurance regulator IRDA in 2019 specified insurance companies to add additional frequencies of premium payment by filing minor modifications in the existing policies
You would want to buy a health insurance policy with substantial coverage, but shelling out a hefty premium in one go is not possible. So, you settle for a low premium policy with lower sum insured. But, you no longer have to compromise. Now, you can pay premium on your health policies in monthly, quarterly and half-yearly mode in addition to the yearly option. This will make health policies more affordable. So, if you can't pay the lumpsum yearly premium, you can take the EMI route on a high sum insured policy. Some insurers have already launched it, while others are in the process of it. But, before you go for the instalment option, you must look into the fine-prints to avoid negative surprises.
IRDA notifies insurers for instalment option
To make the health insurance policies more affordable for customers, insurance regulator IRDA in 2019 specified insurance companies to add additional frequencies of premium payment by filing minor modifications in the existing policies. All insurers are supposed to complete the process by September 30. Star Health Insurance, Religare Health Insurance, Bajaj Allianz General Insurance and HDFC Ergo have already introduced it for a couple of their products. "Other insurers are at various stages of technology adaptation because it's a fairly complex technology integration process," says Amit Chhabra, Head- Health Insurance, Policybazaar.com.
Impact on total premium outgo
The frequency of premium payments plays a role in fixing total premium on a health policy. Insurance companies are authorised to load some extra amount if you opt for the higher frequency instalment option. The higher the frequency, the higher will be the premium. So, monthly premium payment option will cost more than the half-yearly mode. "On the same policy for a similar profile of a customer, monthly option will cost 3 per cent more than the yearly option. Quarterly and half-yearly will range between 2-2.5 per cent," says Anand Roy, MD, Star Health Insurance.
Star Health introduced the instalment facility in March with the launch of its Aarogya Sanjivani policy. "Now we have launched it for a couple of other popular products. By month-end we'll have it for all policies," says Roy.
Bajaj Allianz last month launched it with its Health Guard Policy. It is yet to offer that on other policies. "There is a load factor of about 3.2 per cent on monthly mode and 2.8 per cent and 1.8 per cent, respectively on quarterly and half-yearly mode," says Rashmi Nandargi, Head - Health Retail Underwriting, Bajaj Allianz General Insurance.
Note that if you opt for a policy period of more than a year, your annual premium decreases for each year given you pay the full premium for all policy years in one go. "The additional amount depends on the tenure of policy (1, 2 or 3 years) and the payment frequency opted by the customer (monthly, quarterly or half yearly) and may vary from 2 per cent to 9.5 per cent for our Care Advantage product," says Ajay Shah, Director & Head- Retail, Religare Health Insurance.
Chhabra says HDFC Ergo does not charge extra load on premium if taking the instalment route.
What if you miss an instalment
If you have paid the policy premium in one go for a one-year policy, it stays active for the whole year. However, in monthly mode, you need to stay alert about the status of your policy. If you miss the premium payment by the policy due date, you will be given a grace period of 7-15 days (which is one month in case of yearly payment option). "If the insured fails to pay the premium within the 15 days of the relaxation period extended to the insured, the policy will lapse and he will lose the accumulated continuity benefit with respect to the waiting periods or cumulative bonus accrued," says Nandargi of Bajaj Allianz.
At Bajaj the relaxation period is 15 days, while it is seven days at Star Health.
Hospitalisation after paying 2-3 EMIs
If you have selected the monthly mode, and you get hospitalised in the fourth month of the policy period after paying three instalments, it doesn't mean that you don't have to pay EMIs for the rest of the year and the insurer will settle your claim. Either the insurer will deduct the premium balance from the sum insured or you'll have to pay it upfront.
"In case of hospitalisation during the policy year, the outstanding instalments are deducted from the claim amount and then the claim is settled. Once the same is done, there is no need for the customer to pay future instalments until policy renewal," says Shah of Religare Health Insurance.
However, Bajaj Allianz doesn't deduct it from the claims amount. "If monthly instalments so far have been paid without any delay within the due date or grace period, then the full claim will be settled and EMIs will continue for the remaining months. Since affordability is the reason why customers take the EMI route, we don't burden them with the upfront premium payment while they are hospitalised," says Nandargi of Bajaj Allianz.
Methods of making payments
Although health insurance companies have started offering the EMI facility now, customers did have an option to pay on monthly basis via their credit cards. The credit card issuer pays the full amount to the insurance company and the customer keeps paying EMIs to the credit card issuer. The process does incur some processing fee, but most of banks have started offering no-cost EMIs on premium payment. If you do have that option, and you are sure about no hidden charges, you may prefer it over the instalment option with the insurance company because the latter comes with extra load on total premium.
If you don't have a credit card, health and wellness marketplace Vital offers the monthly premium facility on all types of online transactions from credit cards, debit cards to UPI and NEFT transfer. "Apart from insurers, we also have key providers in pharmacy, dental, optical, fitness, diagnostic labs, hospitals, nutrition, skincare and mental health etc on our platform. Vital members can transact with these providers online with the option to convert big expenses into interest free monthly EMIs," says Jayan Mathews, Co-founder and Chief Product Officer at Vital.
The instalment facility is indeed a welcome step for customers that holds the potential to increase health insurance penetration in the country. "Monthly mode in life insurance has existed for four-five years and 90 per cent of all bookings now happen through this mode. The similar trend may repeat in the health insurance space," says Chhabra.