How Is The Health Insurance Premium Calculated?

Whenever people think about buying a health insurance policy, its premium is perhaps the first thing they look at. However, it is also true that not many people are aware of the method using which the premium is calculated. The mathematical calculations involved in this process are not quite difficult to understand. But, it is also important to know about the various factors that play a major role in determining the premium amount. These factors affect the final figure of the calculation. 

So, how do insurance companies figure out the premium? If you already have a health insurance policy or planning to buy one, then you should definitely go through this article. It will help you understand the process behind it. Nowadays, there are online premium calculators available, and it has made the job a lot easier for the customers as well as for the insurance agents. The factors mentioned below are taken into consideration at the time of calculating the health insurance premium.

Age does matters

Without any doubt, your age plays a huge role in evaluating your Health Insurance Premium. A person at his mid-30s will have to pay a lower premium amount in comparison to someone who is in his mid-40s. Like we know, people become more vulnerable to serious or life-threatening diseases as they grow old. Hence, insurance companies charge more premiums from such customers. 

Your current health status

In addition to your age, your current health status is also taken into consideration to figure out the health insurance premium. Insurance companies charge higher premium amounts from people who smoke or drink a lot. Likewise, obese people are also charged with higher premiums. Such people are more susceptible to serious medical conditions.  

Company’s marketing and admin expenses

An insurance company is run by dozens of employees, and most of them belong to the administration and marketing department. So, the expenses incurred for running the company are also recovered from the health insurance premium shelled out by the customers. The expenditure also encompasses the cost incurred in getting the medical insurance policy designed by the actuators; plus the cost of marketing as well. So, this particular factor is something that totally decided by the insurance companies.  

Pre-existing diseases

If someone has been diagnosed with an illness before purchasing a health insurance policy, most of the insurance companies will not cover the same. Even if they do, the policyholder will have to pay a higher premium. For this reason, at the time of calculating the insurance premium, do not forget to take into account this particular factor.

  • Your location matters

At the time of using a health premium calculator, you will find that the premium amount calculated for a person living in the urban region will always be higher than compared to someone living in the rural area (considering all other factors/inputs remain the same in both the cases). The reason behind is related to the unhealthy and hectic lifestyle of people living in urban regions. As a result, they are more prone to serious diseases. In addition, the cost of healthcare in the big cities is also higher in comparison to the small towns in India. 

  • How much is your sum assured?

Like we know, the sum assured is the amount of money the insurance company is ready to pay to the policyholder. In other words, it is the coverage amount. So, it is quite obvious that the premium amount of your health insurance policy is directly proportional to its sum assured. If you want to increase the amount of coverage, you also have to pay a higher premium. 

  • Your personal history

Not all insurance companies in India carry out a health check-up of the would-be customer. Nevertheless, most of the insurance companies do consider the medical history of the would-be customer, and also his family’s. Personal habits such as smoking and drinking can also increase the amount of premium. These aspects are considered at the time of the premium calculation. 

In addition to them, there are a few more factors that matter. However, they are not as significant as the ones mentioned above. When you calculate your health insurance premium online, you must pay attention to each and every attribute/field before typing in the details. If you end up entering something incorrectly, it might affect the premium amount. As a wise customer, your aim should be to keep the premium amount as low as possible, without compromising with the overall effectiveness of the health insurance policy. 

Plus, it is also better to take good care of your health. Giving up bad habits can definitely prove beneficial for you in a number of ways, apart from helping you save on your health insurance premiums. So, keep the above-mentioned aspects in mind and go ahead with the calculations.