Can you lower your health insurance premiums by reducing the base sum insured?

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The base sum insured of a health insurance policy impacts the premium you are charged directly. Greater coverage means greater protection but with a higher premium, and reducing the base sum insured will lower your annual premium. Some of the policyholders, especially those with growing renewal premiums, wonder if it is possible to reduce the base sum insured so that the plan expenses will be decreased without compromising on the protection.

Flexibility offered by insurers

Each health insurer in India allows change of the sum insured, including its decrease, but generally only at renewal of the policy. Mid-term changes are never provided. The insurer may also review your claims history and overall risk profile before approving a decrease. If your policy contains add-ons like top-up or super top-up covers, the decrease would be considered in conjunction with them.

Trade-offs of decreasing sum insured

Though reducing the base sum insured reduces premium outgo, it also reduces your overall financial protection. Lower sum insured may not prove sufficient for metropolitan city hospitalization where the treatment cost is a bit high. In the case of severe ailment or chronic treatment, the lower cover would exhaust very early, and you might end up paying from your own pocket.

Alternatives to reducing the base cover

Instead of decreasing the base sum insured, the policyholders can choose to shift to a higher deductible policy, a top-up coverage, or to the family floater policy where relevant. All these options regulate premiums without compromising much on cover. Some insurers also offer wellness discounts, no-claim bonus, or premium relief for assenting to co-payment terms.

Impact on portability and continuity benefits

If you reduce your sum insured, it can affect future portability to another insurer or limit the extent of continuity benefits such as waiting period credits for pre-existing conditions. A reduced base cover may also reduce eligibility for future top-ups as insurers generally look to have some minimum base cover in position.

Reduction of the base sum insured can be achieved with the majority of health insurers but needs to be performed with caution. Though it results in short-term premium savings, the long-term financial risks of underinsurance might appear greater than the benefits in the long run. The policyholders can explore alternatives like deductibles, top-ups, or plan redesigning prior to opting for a reduced sum insured.

FAQs

Q1. Can I reduce my sum insured during the policy year?

No. Insurers only allow alteration, including a decrease, at the time of policy renewal, not during the mid-term.

Q2. Would decreasing my sum insured affect my no-claim bonus?

Yes. If you decrease the base sum insured, the no-claim bonus accrued may also be decreased proportionately since it is linked to the base cover.

Q3. Is a top-up plan preferable to a decrease in the sum insured?

Yes. A deductible top-up policy is generally the better choice. It keeps your essential cover adequate for everyday claims, with additional protection against high cost of medical care.