Health Insurance Premium: How it is calculated?

Factors Which Affect Health Insurance Pemiums and How is Premium Calculated:

1. 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.

2. 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.

3. 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.

4. 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.
 

5. 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.

6. 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.

7. 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.

8. 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.