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Difference Between Short Term and Long Term Health Insurance Plan

Team AckoJul 22, 2021

Then saying that "Health is Wealth" has gained new meaning after the COVID-19 pandemic. People now understand the importance of having a financial back-up for medical treatment. This is crucial because the price of getting hospitalized has skyrocketed in recent times. Many now understand that buying a health insurance policy should be a priority, but some may not know which coverage to choose. This article will try to address this issue by explaining the differences in the Short Term and Long Term Health Insurance Plans.

Difference Between Short Term and Long Term Health Insurance

What is a Short Term Health Insurance Plan?

Short Term Health Insurance Plans are valid for a shorter duration of time as compared to a long term plan. Both plans offer similar coverage, but the validity of a short term plan is less. The policy period for such plans is usually less than 12 months.

What is a Long Term Health Insurance Plan?

A Long Term Health Insurance Plan offers coverage for more time as compared to a short term insurance plan. This type of health insurance is valid for 2 to 3 years. These plans are more feasible for people who do not wish to invest time and money for health insurance on an annual basis.

Short Term vs Long Term Health Insurance:

A short term health insurance plan needs to be renewed more frequently since it is valid for a short duration. On the other hand, a long term health insurance policy can keep you covered with medical insurance for two to three years. Here are the major differences between these two plans:

Parameter Short Term Health Insurance Long Term Health Insurance
Policy Period 3 to 6 months More than one year
Cost Low as compared to a long term plan High as compared to short term insurance
Renewability Upon expiry i.e. within 3 to 6 months Upon expiry i.e. after one year
Coverage for Pre-existing conditions No Yes
Option to buy Add-ons Unavailable Available

What is Included in Short Term Insurance?

A short term health insurance policy offers the coverage of a complete health insurance policy but for a shorter duration. Some Indian insurance companies offer short terms plans that have a validity of 3 months to 6 months.

The sum insured for a short term plan can be as high as 10 Lakh. But most people prefer to opt for a long term policy with such a high amount of sum insured. Usually, policyholders choose a sum insured that ranges from 1.5 to 3 Lakh rupees.

A short term policy comes with added benefits like No Claim Bonus and Free Annual Check-ups. One can get a tax benefit for buying a short terms health insurance plan as well.

Who Needs a Short-Term Health Insurance Plan?

One should always be covered under health insurance. However, opting specifically for a short terms plan can be suitable for a few people. Here are examples of who should buy a should term health insurance plan:

  1. A non-residential Indian visiting for a short duration: He/she can avail medical insurance coverage against injuries, diseases, etc.

  2. A person who is about to switch his/her job: A short term policy will be helpful if this person is completely reliant on the Employer’s Health insurance plan.

  3. A person who wants to switch from one insurance company to another: Short term insurance is a good idea in this case because porting from one insurer to another might take more time than renewing the plan with the same insurer.

Also, read: Group Health Insurance 

Benefits of Short Term Health Insurance:

Apart from providing coverage for hospitalization, cashless facilities, free health check-ups, etc. a short term health insurance plan provides the following benefits to the policyholder:

  1. Low Premiums

    Buying a health insurance policy that is valid for only a few months will cost you less than compared to buying a full-fledged plan. This is because the insurance company is liable to bear the cost of treatment on your behalf for a shorter duration of time.

  2. Seamless Switch Between Insurance Companies

    Sometimes a policyholder may not be happy with the type of service he/she is receiving in terms of receiving the required coverage, turn around time for queries, or claim settlement. With a short term plan, one does not have to go through the hassle of porting the policy, or waiting for it to expire in order to switch to a better insurance company. 

  3. The Benefit of NCB

    Insurance companies offer NCB on short terms insurance plans as well. People who drive safely may not raise claims. They might feel that buying insurance is a waste of money. However, when they are awarded the NCB discount, they have a higher chance of renewing the policy and staying insured. The policyholder can renew the plan and enjoy discounted premiums with the flexibility offered by a Short Term Health plan.

Disadvantages of Short Term Health Insurance Plans:

Buying a short term insurance plan has the following disadvantages:

  1. A short term plan needs frequent renewals.

  2. The overall premium paid is more than the premium for a long term policy for the same duration.

  3. The policyholder does not have the option to customize as much insurance coverage as compared to a long term plan.

What is Covered in Short Term Health Insurance Plans?

The coverages of a short term health insurance policy depend upon the insurance company. Usually, the following things are covered:

  1. Hospitalization: Expenses related to hospitalization such as bed charges, doctor visits, medicines, room rent, cost of surgeries, operation theater charges, etc.

  2. Ambulance charges: The cost of hiring an ambulance for transporting the patient from one place to another would be covered under short term health insurance.

  3. Expenses related to organ donation: Some insurance companies may cover the cost of undergoing surgery for organ donation.

  4. Health check-ups: Regular health check-ups are conducted on the insured persons to keep a tab on their current health status. This is crucial for detecting an ailment in its early stages.

  5. Pre and post hospitalization: A planned surgery may require treatment before or after getting hospitalized. These charges are covered under a short term policy.

What is Included in Long Term Insurance?

A Long Term health insurance policy offers wider coverage as compared to a short term plan. A long term policy is valid for 2 to 3 years and has many renewal benefits as well. A long term policy can be of different types. For example, an Individual Health policy, Family-Floater plan, Critical Illness cover, Senior citizen plan, etc. 

Long Term plans offer medical insurance for a specific type of policyholder depending upon their requirement. Since a long term policy is valid for more time, the coverage is also comprehensive in nature. Additionally, such policies can be fortified with add-ons like Room Rent Waiver, Daily Hospital Cash, Maternity Benefit, etc.

Benefits of Long Term Health Insurance:

Long Term Health Insurance plans are beneficial for people who do not wish to invest time in frequent renewals and at the same time want to be covered with an adequate health insurance plan. Here are the detailed benefits of buying a long term health insurance plan:

  1. Higher Policy Period: Since a Long term health insurance policy is valid for more time, the policyholder can enjoy the benefits of being insured for a longer duration as the policy period is more.

  2. Less Chances of Claim Rejection: In many cases, the policyholder forgets to renew his/her health insurance plan and makes a claim for expenses related to a medical emergency. Here the insurance company cannot help the policyholder because the policy was not renewed in time. With a Long Term Health insurance policy, the insurance company will be able to honour claims and would not reject them on the basis of an inactive policy.

  3. No Need of Frequent Renewals: It is a hassle to keep a track of the policy expiry date and complete the renewal process, especially if health insurance is purchased from a traditional insurance company. With a long term plan, the policyholder has to renew the insurance plan after 2 to 3 years depending upon the term. 

Disadvantages of Long Term Health Insurance Plans:

A long term health insurance plan is suitable for people who require holistic coverage in terms of a medical emergency. Such plans can prove to be a hassle for people who keep themselves updated with the latest trends in the insurance space. Here are a few of the disadvantages of buying a long term health insurance policy:

  1. One cannot switch to a new insurance company for a long time. 

  2. Porting an insurance policy might take longer.

  3. There might be better health insurance products available in the market. But because a long term policy is active for multiple years, the policyholder may not be able to switch to a better plan in time.

What is Covered in a Long Term Health Insurance Plan?

A Long term health insurance policy offers a wide range of coverages that include the following:

  1. Hospitalization: Cost of treatment related to illness, diseases, accidental injuries, surgeries, etc. will be covered under a long term policy.

  2. Pre and Post Hospitalization: Cost of treatment before and after undergoing surgery is covered.

  3. Day Care Procedures: Minor surgeries like tonsillitis, cataract, etc. will be covered. Such treatments do not require prolonged hospitalization.

  4. AYUSH Treatment: Ayurveda, Yoga, Unani, Siddha and Homeopathy treatments are covered under a long term plan if included by the insurance company.

  5. Add-ons: The policyholder is given an option to buy add-ons like maternity cover, room rent waiver, etc. with their base plan. Such add-ons are helpful for getting more coverage in the time of a medical emergency.

  6. Wellness programs: The insurance company would arrange for wellness programs that help in improving the health of the insured people.

  7. Critical Illness Cover: A Critical Illness plan covers the cost of treating a potentially life-threatening illness. For example, cancer, brain stroke, etc.

Why Do You Need Long Term Health Insurance?

A Long Term Health insurance policy assures continuous medical coverage for a longer duration. The policyholder does not have to worry about the expenses related to medical treatment for a long time.

If the insured person is receiving treatment in a network hospital, then the policyholder can avail cashless claims. This is where the major part of the hospital bill is directly paid by the insurance company to the hospital. If the insured is treated in a non-network hospital, then the policyholder needs to first settle the entire bill amount and then avail reimbursement for the paid hospital bill. 

If add-ons are purchased while buying a Long Term Health plan, the policyholder can get additional benefits. For example, when the Room Rent Waiver is purchased with the base plan, the policyholder has the option to change the sub-limit on the insurance policy. This will allow the insurance company to bear the full cost of a hospital room.

You can consider buying a Long Term Health insurance policy due to the benefits and coverages that this policy offers.

Frequently Asked Questions:

1) How to compare short term health insurance policies?

The easiest way to compare short term health insurance policies is to go online and use a comparison tool. This tool is available at any of the insurance company's or broker's websites. Select health insurance plans that interest you and click on compare. You will see a direct comparison between coverages, added benefits, and premium of health plans.

2) Is long term health insurance tax-deductible?

Yes, one can get a tax benefit for buying a Long Term Health insurance plan under Section 80D of the Income Tax Act.

3) How much does short term health insurance cost?

Since the policy period of a short term plan is less than that of a conventional health insurance policy, the cost is also less.

4) How much does long term health insurance cost?

The cost of a long term health insurance policy depends upon the exact duration of the policy period, type of policy, number of inclusions, add-ons, number of people insured, and the sum insured.

5) Is long term health insurance coverage more than short term plan?

Yes, some insurance companies may offer more coverage and benefits for a long term policy as compared to a short term health plan. You can check the coverage of the policy in a document called the Policy Wordings.

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