Health Insurance Premium: How it is calculated?


3 min read

Updated on Jan 24, 2023

Different health insurance plans have a different rate of premium. Most of you, therefore, wonder what the reason for the differentiating premium is. Well, the answer is simple. Premium rates of health insurance plans are calculated keeping in mind various factors. If the factors affecting the premium change, the premium rate also changes. Do you know what these factors are? You might not.

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Here are the factors which affect health insurance premiums and how is premium calculated:

  • Age of the insured

Your age plays the most important role in calculation of your health insurance premium. At a higher age the chances of medical contingencies increase. As such, a higher premium is charged for older ages as compared to younger ages.

  • The coverage offered

One of the primary reason why health insurance premiums vary across different plans is the coverage features offered. If the health plan offers a wide range of coverage features, the premium is higher compared to plans which offer limited coverage features. So, the premium is also calculated taking into consideration the coverage features of the plan.

  • The members covered

If you cover more than one member under your health plan, the premium increases. This is because the insurance company takes on a higher risk of covering your family members too. That is why family floater plans are dearer than individual plans.

  • Sum insured chosen

As the sum insured directly quantifies the risk which the insurance company is undertaking, it directly affects premium calculations. Premiums are calculated taking into consideration the sum insured you choose. The higher the sum insured the higher would be the premium charged and vice versa.

  • The coverage term

Though health insurance plans are offered as annually renewable plans, you can choose a continuous term of two or three years by paying the aggregate premium at once. These long term coverage plans offer you attractive premium discounts. You can avail a discount of 5% to 15% by choosing a 2 or 3 year policy term. Thus, the term of the plan also helps in premium calculation.

  • Accumulated NCB discount

NCB stands for No Claim Bonus. This bonus is offered if you do not make a claim in any policy year. Some plans offer a premium discount as NCB. So, if your policy allows a premium discount in case of not making a claim, you get a discount in your renewal premium. At the time of premium calculation, this NCB discount is used to lower the premium rate.

  • Other available discounts

Besides the NCB discount, your health insurance plan might also allow other discounts. For instance, if you cover more than 2 or 3 family members you can get a premium discount, if you buy the policy online you can get a premium discount and so on. These discounts are also considered at the time of health insurance premium calculation to reduce the premium outgo and calculate the final premium rate.

  • Your medical quote

The last factor which affects your health insurance quote is your medical history. If you have a history of medical ailments and illnesses, the premium would be increased for the higher health risk you present.

These factors affect the premium of your health insurance plan. Every health insurance premium calculator uses these factors to calculate the exact premium amount. So, know the factors and understand how your health insurance premium is calculated.

Choose wisely!

Also read: What are Health Insurance Riders and Their Relevance | Do Health Insurance Policies Cover Depression?

Found this post informational? Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance and Investment section. You can visit PayBima to Buy Insurance Online.

Mar 18, 2021
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PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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