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Monthly premium for health insurance now allowed: Can you claim after paying for 2 months?

Till recently, health insurance policy premiums were only payable on annual basis.

, ET Online|
Updated: Oct 16, 2019, 12.18 PM IST
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If you are an existing policyholder and want to change the mode of premium payment, you can do that.
You will now get the option to pay your health insurance premiums on a monthly, quarterly or half-yearly basis in addition to the current option of paying premiums on an annual basis. Till recently, health insurance policy premiums were only payable on annual basis unlike premiums for life insurance policies which could be paid monthly, quarterly, half yearly or annually.

However, what will happen if the insured (who opted for monthly premium payment mode for health insurance policy) requests the insurer for reimbursement claims for his/her health insurance policy after having paid only 2 months premium? Will the insurer settle the insurance claim in such a scenario?

Also, will the free-look period be shorter for the insured if he/she opts to pay the premium via monthly mode at the time of buying the policy? The free look period is a time period (normally 15 days of receiving the policy document) within which the purchaser/policy owner of a new health insurance policy can stop/terminate the policy without paying any penalties (except for proportionate risk premium for the coverage period), such as surrender charges, etc., to the insurer.

Kapil Mehta, CEO, SecureNow.in, a Delhi-based Insurance broker, said, "At the time of purchasing the policy if you opt for the monthly premium payment option, the free look period provided to you will be shorter than that in the annual payment option."

As per the circular issued by regulator (Insurance Regulatory and Development Authority) IRDAI dated September 20, 2019, "The premium mode (frequency) proposed to be added may be monthly, quarterly or half-yearly and the resulting premium amounts under each mode (frequency) are consistent with premium amounts under other premium modes (frequencies) of the underlying product."

Will you face problems if you put in a claim before paying the full year's premium?
An insurer has to process the claim even if an insured bought health insurance with monthly premium paying mode, paid only two months premium, and filed an insurance claim for reimbursement. However, in such a case, the insured has to either pay the remaining premium in one go or the insurer can deduct the remaining premium from the total claim amount payable.

Rashmi Nandargi, Head - Retail Health, PA and Travel Underwriting, Bajaj Allianz General Insurance said that these installment-based premiums will not impact the claim settlement process for the insured. If there is a claim in the interim period then the insured has to either pay the remaining premium upfront or the balance premium would get deducted from the claim amount by the insurer, she said.

Mahavir Chopra, Director - Health, Life & Strategic Initiatives, Coverfox.com said that one of the possibilities is that the insurer will deduct the annual premium (outstanding amount) from the claims payout and make the payment. "Insurers are likely to ask for mandatory standing instructions on credit card or Electronic Clearing Service (ECS) on bank accounts as a precondition to issuing a monthly premium paying policy," he said.

Will the premium amount change if paid in installments?
The regulator has allowed insurers to collect premiums on a monthly, quarterly or a half-yearly basis against the annual collection done earlier. The payment in installments should not lead to change in basic premium (which depends on age) as approved for the individual product by IRDAI.

However, insurers are allowed to marginally increase the total premium (which is calculated depending on the statistical data that exists about life history and health of the policyholder along with the age factor) if the policyholder opts for quarterly/month premium payment option as compared to the annual premium payment option. This increase in premium can vary on a plan to plan basis.

Mehta said, "The (total) premium does increase slightly as you move from annual to quarterly to monthly premium payment mode. However, the effective increase generally will not be that significant."

The IRDAI circular said, "There shall be no change in the basic premium table and charging structure under the approved individual product to which new premium payment mode (frequency) is being added. Factors applicable, if any, to allow the change of premium payment mode (frequencies) shall be fair and reasonable."

Can existing policyholder change the premium option of their running policy?
If you are an existing policyholder and want to change the mode of premium payment, you can do that. However, you can change the premium payment mode of the policy only at the time of renewal of the policy. You may not be allowed to change the premium payment mode in the interim period. Also, if you want to change the mode of premium payment, you need to mention it in the form provided to you by the insurer at the time of renewing the policy.

Amit Chhabra, Head- Health Insurance, Policybazaar.com said that customers will get the flexibility to change premium payment mode thereby enabling ease of premium paid towards health insurance. "For instance, if you already have a running policy, you can change the option to pay using monthly or quarterly mode at the time of renewal. This process will be applicable to existing policyholders and new customers both," he added.

Is monthly/quarterly premium payment a useful option for you?
Annual premiums often burden the wallet of the common man. So, the move to allow multiple frequencies for premium payments can be viewed as facilitating measure for policy buyers. Chopra said, "This will help increase the adoption of health insurance among people. More premium frequency options will help people to buy a larger cover, which till date was either postponed due to shortage of funds or a compromise was made at the cost of lowering the health cover. Senior citizens will also benefit as they can now buy health cover by paying from their limited monthly income."

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