Choosing Between Short-Term & Long-Term Insurance Plans

• 20th Oct 2021
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There are a number of choices that one has to make while buying Health Insurance. One such choice to make is whether to invest in a short-term policy or in long-term insurance plans. Such a decision is important as it helps determine the allocation of your finances and expenses in a given period of time. Above all, it is of utmost importance to make an informed call regarding financial tools.

Your choice should be made depending on the kind of requirements you and your family have and the time period for which you want to avail these benefits. Having an idea about these things will help you settle on an ideal premium amount as well. As for the kind of term period that will be suitable for you, let us read on.

When Short Term Plans Are Ideal?

Short-term insurance plans are the way to go if you are

• In the middle of changing jobs
• If you are a non-residential Indian (NRI)
• If you are a student who is flying somewhere for short term education goals
• Planning to shift to a new insurer or a new plan with the same insurer

Some essential features of this plan are as follows.

• These plans usually last from 3 months to 1 year - not more.
• After every year or a few months, you will have to renew the plan
• The premium for a short-term policy is usually low, thereby making it highly affordable
• You can avail benefits under Section 80D of the Income Tax Act of 1961
• They are the perfect option if you are planning on porting out your plan
• You are covered for any kind of mishap that may befall you during the period

It is interesting to note that many people got short term insurance plans during the Covid-19 pandemic and continue to do so even now to keep themselves covered against the virus. Back in 2020, the Covid specific plans were not renewable, but now, they are. Basically, short term insurance policies are a great way to get yourself covered if you have specific short term requirements.

When Long Term Plans Are Ideal?

Some critical features of long-term insurance plans are as follows -

• They are an investment for your health and your future in the long-run
• These plans are usually 2-45 years long, or for lifelong
• The premium on such plans may be slightly higher than the short-term plans
• The benefits offered and the add-ons are much more in long term plans. For example, a long-term plan covers critical illnesses, pre-existing illnesses and also provides maternity cover.
• With a longer duration, you need not be concerned about having to renew the policy regularly

Apart from these, there are also smart term plans today which are customized to fit your needs! You can pick and choose from a variety of benefits and add the ones offered by your insurer. This will enable you to tailor a plan based on you and your loved ones’ needs and requirements. Frankly, buying insurance has become a lot easier today owing to the various facilities that banking and insurance companies offer to us. Now, whether you need a short term plan or a long term one, that is up to you. The main takeaway here is that insurance is important for everybody. So, if you don’t have one yet, invest today!

- A Consumer Education Initiative series by Kotak Life