Health insurance plans are no longer a luxury; they have become the need of the hour in the emerging world of uncertainties and rising healthcare demands. Given the increasing prices of healthcare in India, a good health insurance plan with a convenient premium will help you financially secure yourself and your family.
Different health insurance companies offer varying premium terms to maintain a policy. Hence, consumers must choose wisely. Understanding how premiums are calculated and the factors that affect them will help you make informed decisions. Tools like a health insurance premium calculator can simplify this process by giving you an estimate before you buy a policy.
Let’s understand it in detail!
What is a Health Insurance Premium?
A health insurance premium is a fixed amount that one has to pay to keep their health insurance policy active. The premium to be paid is decided on an annual or monthly basis. Policyholders can choose the payment frequency, depending on their convenience. Failure to pay the health insurance premium can result in the cancellation of your health insurance policy, which can create unnecessary trouble.
Additionally, a health insurance policy comes with a grace period, which is a time frame for you to pay the premium if you fail to pay it on the due date. If you fail to pay the premium even in the grace period given by the health insurance provider, your health insurance policy will lapse and cannot be claimed when needed.
What is the Method to Calculate Health Insurance Premium?
The healthcare insurance market is flooded with health insurance plans offered by multiple providers. Different plans come with varying health insurance premiums, which makes it difficult for the buyer to choose from. Moreover, the health insurance premium is decided by the health insurance provider based on many factors, which include:
- Pre-existing Conditions
- Medical History
- Lifestyle
- Plan Type
- Selected Sum Insured
- Chosen Add-ons
The major factor influencing the amount of health insurance premiums is the type of plan. For example, if you choose a comprehensive health insurance plan with multiple add-ons, the premium will be higher than a normal mediclaim plan.
Additionally, health insurance plans that provide cashless treatment across a vast network of empanelled hospitals or offer coverage for critical illnesses usually tend to have a higher premium amount. However, they provide higher safety to your health and finances.
What Factors Affect the Calculation of Health Insurance Premiums?
Here are some of the main factors that influence how your health insurance premium is calculated:
- Lifestyle Choices
Your daily habits can directly affect your health insurance costs. If you smoke, drink alcohol frequently, or follow an unhealthy lifestyle, insurers consider you a high-risk applicant. These habits increase the chances of developing severe illnesses such as cancer or liver problems.
Even if you quit, the long-term effects can still impact your health. Hence, insurers usually charge a higher premium to individuals with such habits.
- Age Factor
Age is one of the most significant determinants. As you grow older, the likelihood of medical issues rises, resulting in higher premiums. This is especially true for health insurance for senior citizens, where premiums are higher due to increased risk but provide essential protection during retirement years.
- Family Medical Background
Your family’s health history also plays a part in deciding your premium amount. Insurers review if any hereditary conditions, such as diabetes, thyroid disorders, or hypertension, run in your family. They may also request a pre-policy medical check-up to assess potential risks.
If your family has a record of chronic illnesses, you may be charged a higher premium than someone with a clean medical background.
- Type of Health Plan
The structure of your health insurance policy influences its cost. For instance, an individual health plan typically costs less than a family floater policy since it covers only one person. Similarly, plans offering critical illness cover or comprehensive benefits will naturally come with higher premiums than standard health insurance policies.
- Pre-existing Health Conditions
If you already have medical issues such as diabetes, thyroid problems, or high blood pressure, your premium will likely be on the higher side. Although most insurers cover pre-existing diseases after a waiting period, the risk of future claims remains higher. This perceived risk prompts insurers to charge an additional amount for coverage.
- Coverage Amount (Sum Insured)
The sum insured determines the maximum payout you can receive during a claim. A larger sum insured offers broader protection, along with increasing your premium. It’s best to choose the amount based on your healthcare requirements and affordability rather than opting for unnecessarily high coverage.
- Riders and Add-ons
Riders are optional benefits you can attach to your main health insurance policy for extra protection, for example, maternity cover or accidental benefit riders. However, each add-on comes at an additional cost. The more riders you select, the higher your overall premium becomes.
- Geographic Location
Where you live can also affect how much you pay. Medical expenses are generally higher in metropolitan cities like Delhi, Mumbai, or Bengaluru compared to smaller towns. Hence, people living in big cities tend to pay more for health coverage due to the elevated cost of healthcare and lifestyle-related risks.
- Gender Influence
Gender has an impact on premium calculation. Typically, women are charged slightly less than men, as they tend to live longer and have a lower risk of certain health conditions. However, during their 20s and 30s, women might pay a bit more due to possible maternity-related claims.
Therefore, being aware of the calculation method and factors affecting the premium is crucial in choosing the best health insurance policy. Analyse different health insurance providers and the premiums offered by them to choose a plan that helps you strike an optimum balance between coverage and affordability.
