Explained: How health insurance premium 'lock-in until claim' feature works

'Locking' in premiums until claims is a useful feature, but look at other features, claim track record and the larger picture before buying such policies

Newly-minted standalone health insurer Galaxy Health recently launched its maiden health insurance plans, including the one that promises to lock in premiums.

The ‘Premium promise’ feature is one of the key offerings under the products - it is built into its Signature variant, but will have to be purchased separately as an add-on under its 'Elite' plan.

This is how it works: if you were to buy a policy at the age of 35, your premiums will not increase solely due to your age until you file a claim or turn 55, whichever is earlier. “This is mainly to bring younger people into the insurance coverage ambit. This will create awareness, early entry and encourage them to continue for a longer period of time,” says G Srinivasan, MD and CEO, Galaxy Health Insurance. In 2022, Niva Bupa had rolled out a similar feature – termed ‘Lock the clock’ - under its Reaassure 2.0 plan.

Typically, health insurance renewal premiums go up depending on insurance companies’ claim experience, healthcare inflation and policyholders’ age band. However, since these companies promise to freeze the age-bracket-linked premium hikes, the age at which the policyholder enters the policy gets locked until she makes her first claim.

“The premium is locked at entry when a policy is purchased. The same premium will be charged for subsequent renewals until a claim is paid or completion of age 55 years whichever is earlier,” says Srinivasan. The company will offer this benefit to insurance seekers up to the entry age of 50 years. “No additional premium will be charged in the middle of the tenure in case of claims. At the time of renewal (or in case of a claim), the premium will be charged as per the current age of the insured at renewal,” he adds.

Also read: Health insurance premiums can rise 10%-15% due to high medical inflation, says Star Health MD and CEO

Does this mean that if, as a 30-year-old, you were paying an annual premium of Rs 15,000, you will continue to pay the same premium until you make a claim? Not necessarily. “In exceptional circumstances when the product pricing is revised, the premium will be charged based on the original age slab of the revised product,” says Srinivasan.

If the product pricing is hiked by 10 percent after ten years, you will be charged the premium applicable to a 30-year-old under the revised rate structure.

For example, suppose you purchased the policy at the age of 32 years when the premium for the 31-35-year age band was Rs 10,000 and Rs 15,000 for the 41-45-year bracket. Now, ten years later, say the insurer revised the premium for your age band then (41-45 years) by 10 percent due to medical inflation – Rs 11,000 for 31-35 years and Rs 16,500 for 41-45 years. “The insured will need to pay a premium of Rs 11,000, instead of Rs 16,500 (which would be the case without the premium promise or lock-in feature),” says Srinivasan.

Also read: How not disclosing pre-existing ailments can affect your claim, policy renewal

The prospect of paying premiums charged to younger age groups as they will be lower is bound to result in savings in premium outgo for individuals. While you can take this feature into account while buying a policy, it should not be the sole parameter influencing your purchase decision. “In general, instead of ‘innovative features’, policyholders would be better off focusing on the core features in a health policy such as room rent sub-limits, financial limits, and more importantly, the insurer’s track record when it comes to product or feature withdrawal and claim settlement. In case of a new insurer it’s always better to wait it out for a few years to check their general track record,” says Mahavir Chopra, founder of insurance platform Beshak.org.