Factors that Affect Health Insurance Premiums

In a race to excel our career and for providing the best for our family, we tend to neglect our health. With increasing level of stress, physical inactivity and deteriorating environment owing to rapid urbanization, we have become more vulnerable to diseases. People nowadays are highly exposed to lifestyle diseases such as heart disease, stroke and obesity that resulting to hefty medical bills.

The medical treatment has also become quite expensive. As per a recent estimate, the medical cost trend has 6.5% annual grow rate that is signaling of higher medical costs by each going day. In order to make the medical treatment affordable to your pocket, it is quite imperative to choose a Health Insurance Policy that can pay all your medical expenses.

A health insurance plan provides financial protection against any medical treatment expenses for your & your family. With a health plan, you can avail cashless hospitalization or can remunerate your hospitalization expenses. An insurance company charges a premium amount to provide the health cover and the premium amount is determined by properly assessing your risk profile and the information provided in your application form.

Each company uses its own set of standards to calculate that premium. However, there are some key factors that help determine the premium amount for your chosen health insurance policy.

Age: Age, when you buy a health insurance plan plays a pivotal role in determining its premium amount. When you buy a health plan at a younger age, say at 25 years, a lesser premium rate is charged than if buy it at 40+ years of age. At a younger age, you are less likely to face any critical health problem and thus, less risk on insurer’s side and obviously, you will be charged with the lesser premium amount. When you are buying a health plan for your family, age of eldest member is considered while computing the premium amount.

For example, Akash buying an individual health insurance plan with age 30 years, he is charged with an annual premium amount of Rs 6,770. Rakesh who is buying an individual health plan with age 40 years, he is charged with an annual premium amount of Rs 7,661.

Sum Insured: Sum insured is the amount up to which an insurance company pays your hospitalization expenses incurred due to medical treatment of your illness, injury or other medical condition. When you opt for a higher sum insured, you will be charged with a higher premium amount. Moreover, you need to pick an adequate sum insured considering inflation factor, so that your health insurance plan can easily meet your hospitalization expenses.

For example, Akash buying an individual health insurance plan with age 30 years and sum insured of Rs 3 Lacs, he is charged with an annual premium amount of Rs 6,770. Rakesh who is buying an individual health plan with the same age and opts the sum insured of Rs 5 Lacs, he is charged with an annual premium amount of Rs 8,216.

Type of Plan: You have the option to choose an individual or family health insurance plan. Upon choosing an individual plan, a low premium amount is chargeable than a family floater health plan. The member covered under a family health plan is higher than an individual plan and that’s why, its premium rate is also relatively higher. Further, the number of members insured under a family health plan also affects the premium rate. The rate of premium increases with the increasing number of members covered.

For example, Akash buying an individual health insurance plan with age 30 years and sum insured of Rs 5 Lacs, he is charged with an annual premium amount of Rs 8,216. Rakesh who is buying a family floater health plan with 3 members (2 adults) covered opts for the sum insured of Rs 5 Lacs, he is charged with an annual premium amount of Rs 11,503.

Policy Term: The policy term chosen for a health insurance plan also affects the premium amount. The shorter the policy term chosen, higher is the premium amount. The insurance company charges a discounted premium rate on choosing a policy term of 2 or 3 years.

For example, Akash buying an individual health plan for 1 year policy term, the chargeable annual premium amount is Rs 6,770. Rakesh who is buying an individual health plan for 2 years policy term, he is charged with an annual premium amount of Rs 12,524. So, upon choosing 2 year policy term, you can get the savings of Rs 883.

Pre-existing Medical Condition: It refers to any injury, illness, sickness or disease that existed at the time of buying a Health Insurance Policy. In case of any pre-existing condition, you are charged with a higher premium rate. It is advisable to inform your insurer about any such health condition while buying the plan, so you don’t have to face any difficulty in settling the claims. Insurers even don’t prefer to sell health plans to people having any critical pre-existing condition.

For example, Akash a healthy individual aged 30 years buy an individual health plan with Rs 5 Lacs coverage, for 1 year policy term, the chargeable annual premium amount is Rs 6,268. However, Rakesh having diabetes is buying an individual health plan, he is charged with an annual premium amount of Rs 14,737.

Personal Health: Insurance companies consider personal health as a key determining factor for health insurance premium. A healthy individual has lesser chances of getting hospitalized and thus, people with good health are charged with less premium for a same health cover. Also, if you are engaged in unhealthy habits such as chewing tobacco, smoking, consumption of drugs, you will be charged with higher premium.

For example, Akash (non-smoker) aged 30 years buy an individual health plan with Rs 5 Lacs coverage, for 1 year policy term, the chargeable annual premium amount is Rs 6,268. However, Rakesh (smoker) is buying an individual health plan, he is charged with an annual premium amount of Rs 8,677.

Family Medical History: Insurance companies also assess medical history of your family. Your family’s medical history of critical illnesses such as cancer, heart diseases, etc, puts you at a high risk and you will be charged with a high premium.

Location: Some health insurance companies charge zone-based pricing. Under zone 3, the premium amount is 10% cheaper than what you would pay in zone 2 and under zone 1, you will have to pay 10% higher than in zone 2.

For example, for buying Max Bupa’s Health Companion in New Delhi (zone 1), the premium amount is Rs 7,044 and for buying this plan in Bhubaneshwar, the chargeable premium amount is Rs 6,340.

Your Profession: People working with hazardous chemicals or radiation, engaged in jobs with high injury rates has higher insurance premiums. Further, if you are working at a desk-bound jobs, you have a higher risk of cardiovascular disease, so higher premiums would be charged. Working with a risky profession affects your health insurance premium.

Online Buying: Buying health insurance policy online is very time saving and convenient way as you also get the flexibility to read through the policy terms and conditions. By buying the policy online, the insurance company offers you the policy at a discounted rate. Buying a health policy online will save 5% to 20% on your insurance premium. Cigna TTK offers a discount of 10% on buying a health policy online. Star Health offers up to 12.5% discount on some plans. The discount applicable towards premium rate may differ from one insurer to another.

Conclusion

These are the key factors that determine the health insurance premium and you can work on these factors to cut down the insurance cost. You should also review insurance quotes and the plan benefits carefully, and pick a health policy that helps to cater all your healthcare needs. It is also advisable to firstly Compare Health Insurance Policy among Online Health Insurance Plans available that helps you choose a right health insurance policy.