How to save big on your health insurance premium

Having higher medical coverage is the order of the day. That's because medical costs are rising faster than average inflation. With medical treatment set to grow at 8.6 per cent this year, as per Global Medical Trends Survey of 2023, a hospital bill of Rs 5 lakh today will double in eight years' time. Hence the need for higher medical coverage.

But a higher insurance policy is accompanied with affordability issues, more so because premiums increase with age. Since this can burn a hole in your pocket, we explore four options that can save a sizable chunk on your premiums.

Option 1: Basic medical policy

If health cover: Rs 15 lakh. The insurer will cover your medical bill up to Rs 15 lakh.

Option 2: Basic policy with deductible

If health cover: Rs 15 lakh; Deductible: Rs 25,000. You pay the initial Rs 25,000 before your insurance policy kicks in.

Option 3: Basic policy with super top-up

If base health cover: Rs 5 lakh; Super top-up: Rs 15 lakh. The super top-up will come into effect once you exhaust the basic plan.

Option 4: Basic policy with deductibles and super top-up

If base health cover: Rs 5 lakh; Deductible: Rs 25,000; Super top-up: Rs 15 lakh. You first pay the deductible from your pocket, then exhaust your basic policy and finally use the super top-up policy.

Now that we understand the four options, let's consider which plans will give you significant health coverage at a lower premium. To provide a real-life example, we considered HDFC Ergo. Refer to the table 'Four ways to get a health cover'.

Clearly, the basic policy with deductibles and super top-ups (Option 4) can save you 37-39 per cent on your annual premiums compared to a vanilla health policy (Option 1). That said, each of these policies has its share of pros and cons.

Basic medical policy (Option 1)
Pros: Convenient and no complications.
Cons: Annual premiums are very high.

Basic policy with deductibles (Option 2)
Pros: 15-25 per cent lower premiums than option 1.
Cons: Need to pay deductible amount from your pocket. Not all insurers provide this option.

Basic policy with super top-up (Option 3)
Pros: 18-22 per cent lower premiums than option 1. Treated as two policies; helps you and your spouse save tax.
Cons: Super top-ups come with a few strings attached, such as limits on hospital room rent. Treated as two policies, so need to file your claim twice.

Basic policy + Deductible + Super top-up (Option 4)
Pros: Pay the most affordable premiums. Treated as two policies; helps you and your spouse save tax.
Cons: Pay the deductible amount from your pocket. Treated as two policies, so need to file your claim twice. Super top-up plans can insert sub-limits, such as a cap on hospital room rent.

What you can do

We think all four options are viable and usable. You can pick the one that suits you best.

• Choose a basic health policy if you prefer convenience over cost.
• Choose a basic plan with deductibles provided the limited options you get here suit you on other dimensions. For most people, a small deductible component won't burn a big hole and yet reduce your annual premium by a considerable amount.
  Additionally, a lot of people can be financially vulnerable to one major episode of hospitalisation, and that is exactly what health insurance is there for. Even though there's a small deductible, the utility of a large health policy remains intact.
• Choose a basic plan with a super top-up if you want to:
  a) enhance your health coverage and protect yourself from galloping medical inflation.
  b) get additional tax benefits. Since a basic plan and a super top-up plan are considered separate policies, you and your partner can individually claim tax benefits of up to Rs 50,000 (under Section 80D).
  
  The best practice is to buy a super top-up plan from the same insurer. However, check the super top-up's fine print, as they may have certain sub-limits and clauses.
• Choose a basic plan with deductibles and a super top-up if you are looking to pay the most affordable annual premium and receive benefits mentioned in the above point, but of course, with certain conditions that come attached with a super top-up plan as explained above.

Also read: How to increase your life insurance cover