Why Young Indians Skip Health Cover

Young buyers often underestimate future health risks.

A recent survey by Niva Bupa Health Insurance found a high rate of abandonment of health insurance policies among young buyers.

Fifty-five per cent of buyers aged 24 to 34 discontinued their policies within the first three years.

Around 34 per cent of those who allowed their policies to lapse did so because they believed they were healthy.

Affordability is the most commonly cited reason for lapse, with 46 per cent of those who discontinued naming it as a factor.

• You can post your health insurance related questions HERE

Flawed perception of no value

Young Indians often overestimate their health.

"They confuse the absence of disease today with good health over the long term," says Nimish Agrawal, director, digital business unit, Niva Bupa Health Insurance.

Young buyers often underestimate future health risks.

"Illnesses, infections, accidents, lifestyle disorders, and sudden surgeries can happen even at a young age," says Narendra Bharindwal, president, Insurance Brokers Association of India.

Arun Ramamurthy, co-founder, Staywell.Health adds that the lack of health insurance coverage results in high out-of-pocket healthcare expenditure in India.

Financial impact of illness

Young individuals in the early stages of their earning journey are especially vulnerable to health-related shocks.

A hospitalisation for dengue, viral complications, appendicitis, or kidney stones can lead to a significant hospital bill.

A road accident, a short stay in an intensive care unit, or a critical illness can deal a massive financial blow.

"The average claim size for a young policyholder is around Rs 1.8 lakh." says Agrawal.

Bharindwal adds that medical expenses often create acute debt stress.

Cross waiting periods while young, avoid loading

Most health insurance policies have several waiting periods.

"Buying a policy early means waiting periods are completed before treatment is needed later in life," says Bharindwal.

Premium loading refers to the additional cost insurers charge when they identify higher health risk in a buyer.

"Buying health insurance early helps avoid such loading," says Agrawal.

Bharindwal adds that delaying the purchase can also result in exclusions and restrictive policy provisions.

Avail of tax benefits

Buyers enjoy tax deduction on premiums under Section 80D in the old tax regime.

"A deduction of up to Rs 25,000 is available for premiums paid for self, spouse and children. If the insured person and spouse are senior citizens, the deduction is Rs 50,000," says Agrawal.

An additional deduction can be claimed for premiums paid towards insuring parents: Rs 25,000 for non-senior and Rs 50,000 for senior-citizen parents.

Super Top-Up Cuts Premiums

Here are a few tips to help young buyers manage the premium burden.

Combine base plan with super topup

Buy a base health insurance policy and combine it with a super topup.

"A super top-up covers hospitalisation bills beyond the threshold chosen by the insured," says Arti Mulik, chief technical officer, Universal Sompo General Insurance.

One individual may buy a Rs 25 lakh base policy, while another may buy a Rs 10 lakh base policy with a Rs 15 lakh super top-up.

"The person buying the latter combo will likely pay 30 to 50 per cent less in total premium," says Abhishek Kumar, Sebi-registered investment advisor and founder, SahajMoney.com.

A super top-up costs less because it is triggered only after the base plan pays the initial Rs 10 lakh.

Mulik suggests that the deductible should be equivalent to the cover already available.

Choose policy with no-claim bonus

A no-claim bonus (NCB) rewards a policyholder for every year in which no claim is made.

"Most health policies reward claim-free years by increasing the sum insured by a specific percentage without charging an additional premium," says Mulik.

Only a few policies offer a discount on the renewal premium.

Kumar says that NCBs can reduce the per-unit cost of insurance.

Check the annual percentage increase in NCB, which can range from 10 to 50 per cent.

"Verify the maximum cap up to which the sum insured can be enhanced," says Kumar.

The maximum increase can be as high as 500 per cent over the policy's lifetime.

"Many policies reduce the accumulated bonus significantly after a claim," says Kumar.

But some premium plans do not.

Use monthly premium option, wellness discounts

Monthly premium options can improve affordability by spreading the annual premium across smaller payments.

"However, even one missed instalment risks policy discontinuation," says Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan.

She informs that wellness benefits can reduce renewal premiums by 5 to 10 per cent.

Policyholders can also pay premiums for up to three years upfront.

Multi-year payments often come with discounted pricing.

Arora cautions that policyholders should be confident about the insurer and the policy before they choose this option.

• You can post your health insurance related questions HERE

Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

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Feature Presentation: Ashish Narsale/Rediff