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Health insurance is a contract between the policyholder and the insurance company where the latter promises to compensate the former in case of hospitalisation as per the terms of the policy. Owing to the rise of healthcare costs in India, a good health insurance policy has become an essential component to safeguard yourself and your loved ones against financial losses in times of need.However, premiums of a health policy can skyrocket if you aren’t careful. Let us examine 8 factors that play a key role in determining your overall health insurance cost.
Factors that Affect Health Insurance Premium
| Type of Plan | What it Covers | Premiums |
| Individual Policy | Covers only single individual as per the terms of the policy. | They are usually cheaper compared to family floater plans but may be more expensive than a group plan. |
| Group Policy | It covers a large group of people, usually corporates and offers standard covers. | They are usually taken by corporations or large organisations and are quite cheap but typically come with low cover and various limitations. |
| Family Floater | Covers the family members listed in the policy such as spouses, kids, and parents. | The premiums will depend on the number and age of the family members listed apart from other factors. |
| Senior Citizens Health Cover | It is a special type of a health insurance plan catering to the needs of individuals who are 65 years and above. | Since the risk of insuring senior citizens is high, the premiums can be quite high. |
| Critical Illness Cover | It promises to pay the policyholder a lump sum on diagnosis of a critical illness such as cancer, heart stroke, etc. | Since they only kick-in in case of certain illnesses, they can be cheaper than a comprehensive policy. |
| Top-up Plans | It promises to cover the policyholder if the hospitalisation bill crosses a certain threshold limit. | They are usually taken as an add-on over an existing health insurance plan and are thus usually cheaper compared to a regular plan. |
- The Type of Health Insurance Policy One of the key factors that have a direct impact on your premiums is the type of plan you choose. Let us look at some basic types of health insurance plans.
- The Sum Insured and the Add-ons The next big factor that could decide your premium directly is the amount of sum insured. Higher the sum insured, higher the premium. Moreover, the add-ons you choose will also impact your premium amount. For every add-on you choose, there is a small extra premium you will have to pay. Some of the add-ons usually considered by policyholders are;
- The Percentage of Co-payment Regular plans usually come with 20% co-payment, which means you pay 20% of the insured expenses and the insurance company bears the rest. You can decrease this co-payment all the way to 0% to make it more hassle-free for you in case of hospitalisation. However, the premiums will increase as you decrease this co-payment percentage.
- Age of the Insured The age of the insured is another key factor that impacts the premium. Younger policyholders are less prone to diseases as compared to senior citizens. Thus, the premiums are likely to increase as you age.
- Pre-existing Illnesses A medical test before the approval and issue of the policy helps insurance companies find out if the policyholder has a pre-existing illness. While many of these illnesses are covered after completing a pre-defined waiting period, it can increase the premiums considerably. Diseases such as diabetes, heart ailments, hypertension are some of the common pre-existing illnesses found among many policyholders.
- Family Medical History Some diseases are hereditary. As a result, if your parents suffer from a particular disease, it could lead you to pay a higher premium as you fall in the higher risk category for the insurance company.
- Lifestyle Your lifestyle determines your health to a huge extent. For instance, smokers or those who consume alcohol or tobacco in any form are considered as high-risk and usually have to pay higher premiums.
- Geographical location The city where the policyholder resides is also considered by insurance companies before fixing the premium for two reasons. Firstly, the location could decide your risk factor for the insurance company. Secondly, healthcare costs in some cities (usually metros) is higher compared to others.
Reduce Your Premiums With These Tips
While some of these factors such as your age are beyond your control, you can reduce the health insurance cost considerably by following some tips such as;
- Opt for top-up plans above your health insurance cover for higher medical bills.
- Choose the add-ons after carefully evaluating them.
- Opt for family floater policy rather than individual plans for each member of your family.
- Get insured when you are young.
- Live a healthy lifestyle.
It is important to not to resort to extreme measures such as hiding information about your lifestyle (smoking habits, etc.) or your medical history in an attempt to lower your premium. Hiding valuable information or lying in your application could make your contract with the insurance company invalid at the time of claim.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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