The primary purpose of health insurance is financial protection against medical expenses. In exchange for financial security, you have to pay a premium. However, many people consider the regular payment of the premium as a waste of money when they cannot get any return or refund for not making any claim during the policy tenure. This is where the ‘return of premium’ is gaining attention. It is a relatively new feature in health insurance and is currently offered by only a few insurers.
Introduction
If you have health insurance and maintain optimal health, your insurer will reward you. While no claim bonus (NCB) is rewarded every year during policy renewal for not making any claims during the policy year, a return of premium (ROP) is another benefit that you will receive after remaining claim-free for several years. Read on to understand what is return of premium in health insurance and whether you should consider it.
Understanding Health Insurance
Health insurance works as a financial safety net by covering your hospital expenses in times of emergency, such as an accident, or if you need treatment due to a medical condition. It offers several benefits, including expenses incurred for hospitalisation, pre- and post-hospitalisation care, daycare procedures, domiciliary care, AYUSH treatments, annual health check-ups, and more.
When you purchase individual health insurance or health insurance plans for family, you have to pay a premium and the insurer, in exchange, agrees to pay for healthcare expenses as per the terms and conditions of the policy. The premium needs to be paid on time to avail of the policy benefits. Failure to renew on time will lead to policy lapse.
What is Return of Premium in Health Insurance?
Return of premium in health insurance is a money-back benefit. This feature refunds or returns the first year’s base premium if you don’t make any claims for five consecutive years. In other words, the insurer will return your first year’s premium after every five consecutive claim-free years.
Apart from the money-back benefit, ROP has many other features such as:
- Loyalty boost: If you remain claim-free for seven consecutive years, the sum insured of your health policy will be doubled.
- Infinity boost: Irrespective of claims, your sum insured will increase by 100% every year.
- Unlimited care benefit: During the policy term, the insurer will cover one hospitalisation without any sum insured limit.
- Instant coverage: Pre-existing conditions like diabetes, asthma, and hypertension are covered instantly without any waiting period.
- Optional add-ons: To enhance your health insurance coverage, you can opt for add-ons such as OPD cover, maternity cover, tenure multiplier, cancer insurance, and unlimited recharge booster.
However, not all health insurance policies offer the ROP feature. Also, the terms and conditions of ROP can vary among insurers, so it’s essential to carefully review the policy document.
Should You Consider ROP?
This depends on your health conditions. If you have no chronic health issues and are confident of not making any claims for five consecutive years, it makes sense to opt for this feature. Remember, this comes with higher premiums. Having said that, accidents are unpredictable. While you can have control over your health issues, you cannot control unexpected medical expenses. Hence, whether you should consider ROP depends on your individual needs and preferences.
Factors Affecting Health Insurance Premium
The premium is the amount of money you have to pay monthly, quarterly, or annually to keep the policy active. There are several factors which affect health insurance premiums, such as:
- Age of the insured: Age is a critical factor affecting health insurance premiums. For younger individuals, the premium will be lower because they typically have fewer health issues and are considered a lower risk. As you age, premiums increase due to the higher risk of health issues and a higher probability of filing claims.
- Medical history: If you have any significant health issues or have a family history of cancer, cardiac issues, or high blood pressure, you are likely to pay more for insurance. The reason is, you are more likely to need medical assistance.
- Lifestyle: Lifestyle choices like poor eating habits, no physical activity, smoking and alcohol consumption can put you at increased risk of health problems, and consequently lead to higher premiums.
- Regulatory policies: Thecost of insurance also depends on government regulations and policies.
- Location: In metro cities, the premiums are likely to be higher due to high healthcare costs.
- Policy type and coverage: Basic plans offer a lower premium compared to comprehensive plans with higher coverage or a higher sum insured.
- Add-on covers: Add-ons or riders come with additional cost.
Conclusion
While purchasing health insurance or a mediclaim policy, most people focus primarily on the cost. They look for a low-cost policy as they believe the premium amount will go to waste if they don’t raise any claims during the policy year. The good news is that health insurance now has an added feature: the return of premium, which rewards policyholders with financial benefits for staying healthy and not making any claims.
Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.