Almost everything nowadays comes with an option of payment, one time, or EMI. Most of the time, people end up choosing for part payments as it feels lighter on the pocket. But while opting for a health insurance policy, people who want to pay the premiums in installments might end up paying more than a one-time payment. This happens because if the premium is payed through installments, the policyholder might levy a nodal charge of 3-4%.
Mostly, health insurers take a one-time annual payment on health policies. Still, as the option to pay premiums in installments exists, insurance companies might take a hit in their income. Getting money through installments will make them lose a sizable amount of money that could be deployed for investment returns.
How are Health Insurance Premiums Calculated?
Health insurance premiums are calculated based on various factors—one of the major factors being age and underlying health conditions. For instance, if you buy a health policy at the age of 25, the premiums would be lesser than the amount you would have to pay at the age of say 45 because you are more prone to ailments at an older age.
The premium differs according to the concerned factors, but now, amidst the ongoing pandemic, the Insurance Regulatory and Development Authority of India (IRDAI) issued a circular on April 21, 2020. It stated, "All insurers are allowed to collect health insurance premiums in installments as specified in clause C (1.1) of Guidelines on Filing of Minor Modifications in the approved Individual Insurance Products offered by General and Stand Alone Health Insurers on Certification Basis as they may deem appropriate for any specific product(s)."
Effects of Health Insurance Premiums EMI on people
The move from IRDAI at such a crucial time is to benefit ordinary masses. With such intentions, this move can help middle-class policyholders to grow and benefit their claims.
This step will provide more accessibility to the product in rural areas and small towns as they will be able to buy such policies by paying premiums on a monthly or quarterly basis. This will increase the rate of insured people, which is 14.1% currently, from rural areas.
Moreover, even in urban areas where the population is increasing tremendously, a mere 18% of total inhabitants benefit from insurance policies, according to NSSO (National Sample Survey Office). Providing an option to pay the premiums monthly is a golden opportunity for insurance companies to outgrow their reach in the cities as well.
Benefits of Digitalization in Health Insurance Sector
The country is adapting to digitalization. With social distancing being the new trend, digitalization is set to take a peak in upcoming days. People are now making payments online for the smallest of things. Hence, paying premiums on time will not be a big deal for people with hectic schedules.
With the introduction of new payment modes, people also have the option to opt for different policies and change them for the higher sum assured shortly. In fact, those who are insured by such policies but not getting enough coverage will also be able to afford higher coverage, as lower premiums must be paid.
Also, if the health insurance companies get benefited from this move in the longer run, there are high chances that they will offer more products with better health options to stay ahead of the competitors. The companies will improve, the products will evolve, and the customer services will enhance for betterment.
Things to know if you are opting for EMI payment
Issued in the pandemic view, which has cost a lot of people their jobs, this step helped ease their burden on making a one-time payment. But before opting for this premium option, one should know that at the time of claim settlement, some complications might come up. When a policyholder pays the annual payment of premium, he can examine the merits of the claim and decide to approve it. But while opting for other payment modes, the policyholder will have to adjust the balance premium installments against the claim amount.
Also, in this option of payment, the total premium will be higher than the amount paid in lump-sum. Opting for this method will also restrict policy buyers to change the payment mode until renewal.
Bottomline on Installment payment of Health Insurance Premiums
Investing in a good health insurance policy is the need of the hour. With the ongoing pandemic crisis and many other diseases on the rise, people should look for options available in the market. With the IRDAI issues statement, the process has been further simplified, and the payment opinions have been modified. To pay a lump-sum amount or to pay the premiums in EMI should be dependent on the customers as they are aware of the pros and cons of both. But the best way to choose is to buy a health insurance policy that covers all your expenses for at least a couple of years so you can live stress-free.