Do you smoke or drink? Are you planning to buy health policy after 65? If yes, then the premiums for your personal health insurance can spike. Find out why.
The premium you pay for getting health insurance policy ensures coverage against the cost of medical treatment during the set period. Calculation of this premium involves underwriting guidelines and thus is a little complicated. However, three important factors which are considered while calculating the premium of your personal health insurance policy are:
- The first is the period of cover
- The second is the coverage you opt for
- The third is the risk i.e. the likelihood of you making a claim in the defined period
Given below is a detail explanation of each of the factors:
1. Period of cover
The policy term impacts the premium amount, more the number of years; greater will be your premium. Most health insurance policies give you the option to choose the period of coverage. You can buy the plan for one, two or three years and renew it after that period.
The good thing about policies which offer coverage for a longer period is that it has a percentage discount on the premium which makes buying the policy for longer term a considerable.
The coverage is defined by largely by three factors namely the type of coverage, benefits offered and the coverage amount or sum insured. This impacts the premium calculation as follows:
Whether you opt for an individual plan or a family floater or even an individual plan for your entire family has an effect on your premium. The family floater plans calculate the premium based on the age of the eldest member, the number of members covered and the number of adults and children covered by a plan.
The individual plan also considers the age of the insured member. When you buy an individual plan for the entire family, you may get a discount on the premium after covering more than one family member with the same policy. The money that you pay, in this case, will be calculated based on the age of individual members involved in the plan.
Number of Benefits
The number of benefits offered in your policy has a direct impact on your premium. You are likely to pay higher if there are more benefits in your plan. So, you need to be selective and choose only essentials. Compare different health insurance plans to pick and choose the right list of benefits. Avoid paying for additional benefits when you don’t need it. For example, if you don’t plan to have kids in the future, don’t buy a plan with maternity cover.
Sum insured or coverage amount
The amount of insurance cover or sum insured you choose has a direct impact on your premium. More is this amount; more will be the premium.
To get covered for higher sum insured while paying a lower premium, buy super top-up plans along with a basic plan. The super top-up plans would help you get larger coverage at a relatively lower premium.
The risk is the term used to define the likelihood of the claim. A person with higher risk is more likely to claim while that with a lower risk is less likely to claim. The factors considered as risk are:
Age at the time of buying the policy or at the date of renewal impacts premium. More is your age; more is the premium you are likely to pay. If you have observed, the premium for a healthy person purchasing a policy at the age of 25 years is lower than the one at age 40. It is because of the association of higher age with an increased risk of ailments. An older individual is considered as more likely to have a health issue compared to a younger person.
Pre-existing medical conditions
The pre-existing medical condition is any medical condition that you have at the time of buying the policy or before that. These conditions have a large effect on the premium of your policy. Diabetes, hypertension, and high blood pressure are some very common pre-existing conditions. Insurance companies consider the person who is suffering from a pre-existing condition as a risk. Typically, insurance companies load or increase the value of premium for individuals with pre-existing conditions. However, in cases where the pre-existing condition is very severe, the insurance company may deny you a policy.
One of the factors used to determine the risk is the lifestyle you lead. Unhealthy lifestyle, determined by the habits mentioned below is considered higher risk:
Smoking and drinking
Individuals who smoke and drink on a regular basis are high-risk groups for insurance companies as they have proven to be prone to chronic and critical illnesses like cancer, liver cirrhosis, blood pressure, etc. An insurance company can increase your premium based on your tobacco consumption, smoking and drinking history.
Body Mass Index (BMI)
Obesity puts you in the high-risk zone too, as obese people have proven to be at a higher risk of cardiovascular diseases and other health complications. Personal health insurance premiums shoot up for individuals whose body mass index is greater than 18. Not only that a company may deny you a policy if your BMI is 25 or above.
A personal health insurance plan has been specially devised to ensure optimal financial protection. If you are careful while making a choice, there is little to worry about the premium.
Some things to remember are:
Avoid extra cover-
Pay only for the benefits which you really think are necessary and not for everything that appears good to have. For example, when buying a super top-up consider that maybe the younger members of your family do not need it. Planning for the right cover will save your premium while comparisons will help you get the best policy.
Buy a family floater–
Family floater plans reduce the premium if you have children in your family. However, please be careful here as this plan could work out to be more expensive if you add senior members. Because then you are covering members with most likely any health condition which will, in turn, increase your premium.
We ensure you that if you make a wise choice, then you can easily save some money. Do read our list of recommended posts and let us know if there is anything with which we can help you.
Thank you for reading.