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What is Health Insurance Premium: Definition, Factors Affecting It and How is It calculated?

Definition and Factors Affecting Your Health Insurance Premium

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If you have a health insurance, you must pay a set premium monthly, annually, or bi-annually. This fee ensures that your insurance keeps providing you with the chosen health protection. However, understanding how health insurance premium work may be overwhelming. Certain factors surround this component, which makes the fee differ from one person to another.

Read through the following sections to know how premiums on health insurance are calculated and the factors that affect health insurance premiums.

What is Health Insurance Premium?

A health insurance premium is the payment that you make towards keeping your health insurance policy active. The amount can be paid either monthly or annually at your convenience. Note that failure to pay your premiums on time can stop the renewal process of your insurance policy.

Typically, insurance providers give a grace period for you to pay the premium if you have failed to make the payment within the due date. If you do not renew your plan within this grace period, your health insurance policy may be cancelled. 

How is Health Insurance Premium Calculated?

When you browse the market for the best health insurance plans, you will find different plans that mention different premiums. Typically, insurers determine the health insurance premium after evaluating your lifestyle, pre-existing conditions, medical history, and other factors.

Further, the type of plan you choose also affects the premiums you have to pay to keep it running. For instance, a health insurance plan with more add-ons would have a higher premium than one with no add-ons. Similarly, if your plan allows you access to a vast network of hospitals across the country, you are likely to pay more premiums.

You can also consider using online health insurance premium calculators to get an estimate of the amount of premium you might have to pay based on any existing illnesses and your lifestyle. 


What Factors Affect Health Insurance Premium?

If you want to know why health insurance premiums vary from one insured to another, you need to know that there are several factors at play. Know the factors affecting health insurance premiums below:

  • Your age

    Age plays a key role in determining the premium on your health insurance plan. In this regard, as you age and the older you get, the more premium you would have to pay. This is mainly because the chances of falling sick are high when you are older. Thus, older people are considered high-risk individuals by insurance providers.

  • Place where you live

    Another crucial factor that might affect your health insurance premium is the part of the country where you reside. Some insurers keep insurance plans that have geography-based pricing. So, if you live in a metropolitan city like Mumbai, Delhi or Bengaluru, you might have to pay higher premiums as compared to someone who lives in a Tier-2 city.

The reason behind the premiums being higher in metros is that the cost of medical treatment is higher in such cities. Moreover, some insurers believe that people living in metropolitan cities have a questionable lifestyle, making them vulnerable to more diseases. This raises the cost of premiums.

  • Sum insured and add-ons

    The sum insured is the limit up to which your insurer agrees to pay your medical expenses. You can choose a health insurance plan with an insured sum of your choice. However, note that a higher sum insured would mean more premiums.

    Add-ons on health insurance are additional covers that you may choose to increase the benefits of your health insurance plan. In this regard, the more add-on covers you choose, the more your health insurance premium will be.

    However, note that if you increase your sum insured some years after purchasing the insurance policy, it would not necessarily increase your premium. This is because the chances of you exhausting your entire sum insured amount are minimal. Thus, the premium may not increase proportionately.

  • Your BMI and lifestyle

    According to insurance companies, individuals with a higher or lower BMI are more vulnerable to various illnesses, such as heart ailments and diabetes. Thus, the premium cost for such individuals is generally on the higher side.

    Further, the insurer may also consider negotiating by reducing certain coverage benefits on your policy while imposing regular premiums.

  • Type of insurance

    The type of insurance policy you choose also affects the premium. For instance, a health insurance plan with extensive coverage will have a higher premium than the one with minimal coverage.

    Moreover, a family floater health insurance plan would be cheaper than an individual policy. This is because the family floater plan covers the entire family under the sum insured. 


Q. Does my family’s medical history also affect my health insurance premium?

A. Yes, in some cases, your family's medical history may be considered to calculate the premium on your health insurance policy.

Q. How can I calculate health insurance premium?

A. An easy method to calculate health insurance premium is by using online calculators. This online tool is accurate and easy to use. 

Q. How can I lower my health insurance premium?

A. You can take some steps to lower your health insurance premium, such as reducing the add-on covers, choosing an alternative plan, or opting for deductibles. 

Q. Which is better, individual or family health insurance?

A. The choice between an individual Health insurance plan and a family floater plan depends upon your requirements. The former provides the sum insured entirely for yourself, whereas the latter covers your family under the same sum insured. 

Q. Can I pay my health insurance premium monthly?

A. Yes, you can choose to pay your premiums monthly after talking with your insurer.

Sources :- 

ARN No: Feb24/Bg/29B

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