How to reduce health insurance premiums

Anil Rego shares six tips to help you bring down your cost of owning an insurance policy

Illustration: Dominic Xavier/Rediff.com

Having enough health insurance protection is non-negotiable. However, health insurance premiums can be high when one ends up taking protection for one's family as well as parents.

Are there some ways in which one can invest in a smart manner such that the health insurance premiums can be reduced? Read on to know more.

1. Starting early

This is the basic tenet for any financial investment which one makes. When a person buys medical insurance early, the annual premium charges are lower because as far as the insurer is concerned, the risk involved in the person falling sick in the next few years is low.

As the saying goes, the early bird catches the worm!

2. Using top-up plans

Top-up plans are medical plans which can be used after a basic threshold limit. A top-up policy is usually bought in order to enhance the medical coverage of a person without having to fresh policy.

It is both cheaper and more beneficial as one can set the threshold limit as the existing medical coverage that one has. 

For example, Ramesh has a medical insurance cover for Rs 2 lakh. He purchases a top-up plan for Rs 7 lakh with the deductible threshold set at Rs 2 lakh.

He has a heart surgery and his hospital bills come to Rs 4.5 lakh. In such a scenario, the insurer for his basic plan will take care of bills worth Rs 2 lakh while the remaining Rs 2.5 lakh will be taken care of under his top-up policy.

It has to be noted here that higher the deductible threshold value, lower will be the cost of the top-up plan.

3. Buying floater policies

When a person is looking to cover the health of all his/her family members, it is a wiser move to buy a floater policy at it provides medical coverage for all the people of the family under a single policy and hence the premium is lower than compared to taking individual policies for each one of them.

However, the flip side is that all the members are together eligible for the amount insured and if two people of a family end up getting hospitalised in the same year, the protection may not suffice.

Floater policies are a good choice when a family is healthy. If there is any one in the family, who is likely to get hospitalised often, then an individual policy should be bought for that person while the rest are protected under the floater policy.

4. Opting for co-payment

Under the co-payment option, the insured person has to bear a part of the claim under the health insurance policy. This percentage is in between 10-25 per cent. The premium is low for such policies.

However, if an individual tends to fall ill often and needs hospitalisation or in case of senior citizens, the co-payment option does not cover their expenses completely and they will be shelling out a lot from their pockets.

5. Buying two-year medical policies

The annual premium costs of two-year healthcare policies are lesser than one year plans. So, it is a smart move to opt for them.

6. Research before buying

There are a wide range of medical policies available in the market today. The least expensive policy may not be the best. It will stand the investor in good stead to compare the available products, their costs, the benefits that they offer, and the network of hospitals provided before opting to buy a healthcare policy.

One should not end up buying a cheap policy and then end up paying much more during the times of need: a classic case of penny wise and pound foolish.

Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.