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Should you pay for health insurance in instalments?

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The impact of both these changes is that the average premium for health insurance has gone up. Under the circumstances, many people prefer to pay the premium in instalments. Policyholders get four payment options—monthly, quarterly, half-yearly and annually. 

The monthly payment option is suitable for many people, particularly the salaried, as it can help them take higher covers without paying significant premiums in one go. 

Limitations: The monthly payment option has its limitations. Some insurers impose a certain loading amount on monthly premiums. “Generally, insurers may charge interest ranging from 5.5% to 15% (on base premium) for the monthly instalment option,” said Yogesh Agarwal, founder of Onsurity. This increase in instalment-based premiums can vary, depending on the insurer and the policy taken. 

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Rakesh Goyal, director of Probus Insurance Broker, said, “The monthly option comes with a rider: A waiting period, wherein policyholders  will have to pay a certain number of instalments before they can make any claims. Besides, you may not get a high sum insured as you desire. You may not be eligible for specific discounts, which you could have obtained got with the annual premium payment option. 

With a monthly premium payment mode, you also get a shorter free-look period than with the annual payment option. During the free-look period, you can review and cancel your health insurance policy and get the premium back from the insurer,as per specific terms and conditions. 

Claim process: The insurer will have to process the reimbursement or cashless claim even if you have just paid the premium for two or three months.  Goyal said, “If the policyholder makes a claim before the entire premium is paid, then he or she needs to pay the outstanding premium before the claim settlement or else the insurer can deduct the premium amount from the overall claim amount if the policyholder does not pay the remaining premium.” 

Things you must know: While the terms, conditions and facilities remain the same, the insured needs to be careful about the instalment due dates and make sure that the premium is paid well in time. “In all situations, you must ensure that you have set up standing instructions via Electronic Clearing Service (ECS) for auto debit in the primary bank account. This will ensure that you don’t miss monthly payments and policies do not lapse,” said Mahavir Chopra, founder of Beshak.org. 

Existing policyholders can also change the option of payment mode at the time of renewal of the policy. For instance, if you want to pay premiums in the monthly mode for an annual premium policy, you can inform the insurer at the time of renewing the policy. This implies that you will not be allowed to change the mode of paying premium during the interim policy period. 

Who should opt for instalments? 

 Agarwal said, “Anyone who doesn’t have enough money to pay for an annual term at one go. This is particularly true in cases when one member earns and bears the entire expenses for the family. 

Also, it is recommended for salaried employees who can set a monthly budget for health coverage.” 

Echoing similar views, Chopra said that the monthly premium payment mode is a great option for salaried employees as it makes them split the payments across the year. 

Moreover, the option can also help pensioners as they can buy a decent amount of health coverage by paying from their limited monthly income. “In the long run, this will prove to be easier on the pocket,” said Chopra. 

Mint take: One should thoroughly consider the option that suits them the best. The premium payment depends on multiple factors. 

For instance, it depends on the number of family members, personal earnings, ability to pay premiums, ease of paying annually versus managing the payment every month, and so on. 

Thus, keeping all such factors in mind, monthly instalments can be considered a good option only if the instalment charges applied by the insurers are within manageable limits.

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