With the onset of the pandemic, the demand for health insurance has gone over the roof. In fact, there has been a rise in coverage by 69.8 percent for Health Insurance plans from April-Sep 2020 as per the Ministry of Finance.

Live TV

Loading...

With the financial hardships which many individuals faced due to the coronavirus pandemic and the subsequent lockdowns, the concept of instalment premiums in health insurance was introduced. This was primarily to give the consumers a respite and opt for higher health insurance coverage without having to feel the pinch too hard!

What changed?

Earlier, health insurance premiums were payable in a lump sum only. Whether you bought annual plans or long term plans, the aggregate premium was supposed to be paid at once, at the time of buying or renewing the policy. However, in a circular issued in September 2019, the Regulator had allowed instalment premiums in health insurance plans, which was then reiterated in April 2020 after the onset of the pandemic.

Like life insurance companies, health insurers too were asked to offer policyholders the benefit of half-yearly, quarterly and monthly premium payment modes. The premium payment frequency was supposed to be selected at the time of purchase or renewal, not during the tenure of the coverage.

Development during the COVID pandemic

Since the payment of a lump-sum premium might have proved difficult amidst the financial hardships due to the pandemic, the Regulator had issued another circular in April 2020. This circular directed health insurers to offer the facility of instalment premiums to their policyholders whose policies were up for renewal between April 2020 and March 31, 2021.

This directive was issued to make premium payments affordable for policyholders struggling with their finances due to the pandemic. Here’s what the Regulator directed –

1. The instalment premium facility should be offered immediately

2. It would be offered on policies falling due for renewal till March 31, 2021 and then it could be increased as per the insurer’s discretion.

3. Insurance companies might allow instalment premium payments on a permanent basis. However, if they are unwilling to do so, they would have to, at least, offer this benefit for one year till March 31, 2021

4. The instalment facility should be offered to all policyholders, without any type of discrimination

5. The policyholders should agree, specifically, to the conditions of premium payments in instalments

This directive gave the much-needed financial breather to most policyholders allowing them to renew their health plans without any financial difficulties.

The new financial year 2021 – the road ahead

Though the Regulator asked insurers to offer the instalment premium till 31st March 2021, it was done only for those policies that were due for renewal during the period. As per the earlier circular of September 2019, the facility of instalment premium has been introduced in health insurance plans.

Today, almost all health insurance policies allow instalment premium payment facilities. You can buy a new health insurance plan or renew an existing one and choose the instalment facility to pay the premiums easily.

Here are a few things that you should keep in mind though –

1. The instalment premium might be a tad bit higher than the annual premium. This is because of the increased administrative costs of the insurer in recording the premium multiple times.

2. You can enjoy the instalment facility at the time of renewals too

3. In the case of claims, the outstanding instalment premium might get deducted from the claim amount.

What’s in it for you?

The facility of instalment premiums is a boon for policyholders. Here are some reasons why –

A. Affordability

Instalment premiums make health insurance plans very pocket-friendly and affordable. This also has the potential of increasing health insurance penetration in India as individuals find it easy to invest in a suitable plan.

B. Optimal coverage

You can opt for high sum insured and pay the associated premium in instalments without pinching your pockets. This allows you to enjoy a comprehensive cover and reduce your out-of-pocket expenses.

C. Tax benefits

There would be no difference in the tax benefits that you can avail through health insurance plans. The instalment premiums would also earn you tax benefits up to Rs 25,000 (or Rs 50, 000, if you are a senior citizen,) under Section 80D of the Income Tax Act, 1961.

D. Lower probability of lapse

As health insurance premiums become affordable, there would be a lower probability of lapse and you can enjoy renewal benefits as well as lifelong coverage.

The regulator’s directive for instalment premiums is a step in the right direction. It might also motivate individuals who are on the fence to invest in health insurance policies. With the rise in the incidence of illnesses and the obvious need for health insurance coverage, this facility is like a blessing, especially for the middle-income group.

The author, Dhirendra Mahyavanshi, is a co-founder at Turtlemint ( an InsurTech Company). The views expressed are personal