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Cut premium outgo with longer-term health covers

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THERE are periodic reports that insurance companies could end up raising the premium rates for medical insurance. If this happens, policyholders would end up paying more for the same amount of cover. While looking at this entire issue, it is important for individuals to ensure that they are looking at the right factors in making any decision because medical coverage is something that has to be a part of your basic financial planning. Here is a look at the issue and what can be the steps that are taken to tackle the entire position.


Medical insurance: Unlike life insurance policies, which are in the nature of long-term contracts with premium fixed for the entire tenure, the situation is different when it comes to health insurance. These are mostly one-year policies with renewal required every year. At this point of time, individuals end up paying the premium that is applicable for the year.


This makes the change of premium very important because there will be a direct rise in the cost for them. Even predicting this is very difficult because it is not possible to know when and by how much the insurance company could end up raising the premium.


Company impacted: At a specific point of time the immediate impact that individuals will witness is in the form of a specific company or a few companies actually raising the premium rates. Often the government-owned companies raise the rates making their policies costlier than before. On the whole, however, such raises actually end up impacting the entire industry due to the fact that the other companies, which include the private companies, also go in for regular revision of their rates depending on the conditions that they face in their workings. Over a longer period of time, there is a convergence in the trend of the rates and individuals who are buying the policy across different insurance companies feel the rise in the cost.


Longer term: One of the ways in which individuals can ensure that there is a larger element of control and knowledge about the position on the premium front is by going in for longer term policies. Several insurance companies now offer insurance policies for health for a period that is more than a year and, hence, individuals can go in for that option.


However, this is just a stop-gap arrangement in the sense that there will still be a rise in the cost that they will face once the initial time period is over because the rate that is applicable at the time of the renewal will determine the amount that will have to be paid.


Tracking: Another aspect that is also important for individuals is that they need to track the situation when it comes to the premium situation because they should know the position that will arise for them. If there is a rise in rates that are on the horizon then individuals should follow the position, as they will need to calculate their situation when the policy comes up for renewal and payment.


This is something that needs some work but it will ensure that they will be able to have the right information to make any decision that is required when such rises are encountered.

Happy Investing!!

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