Health insurance is an essential part of financial planning, protecting against unexpected medical expenses. Whether you're insuring yourself or looking for coverage for your entire family, understanding how health insurance premiums are calculated can help you make better choices and avoid overpaying. Let us look at the key factors that affect your premium and tips to manage your costs effectively.

What is a health insurance premium?

A health insurance premium is the amount you have to pay monthly to keep your insurance policy active. This is separate from other out-of-pocket costs like deductibles, co-pays or coinsurance. Essentially, your premium ensures that you remain covered by your chosen policy, even if you don't use medical services in a given month.

What factors determine health insurance premium?

Many factors influence the cost of your health insurance premium, including:

• Age: It is a vital factor affecting health insurance premiums. Premiums increase with age. This is because the body is more susceptible to diseases and ailments as and when you age. The insurer thus covers a greater risk and hence charges you more.
• Lifestyle: The lifestyle you lead has a direct bearing on health insurance premiums. If you are addicted to smoking or drinking, it will push up the premium amount. On the other hand, if you don’t, the insurer charges you less for the same policy offering the same coverage.
• Coverage Amount: Health insurance premiums are directly proportional to the coverage amount. It means higher the amount, higher the premium. To put it numerically, you need to pay more for ₹ 10 lakh coverage than ₹ 5 lakh.
• Age of the Eldest Member in Case of a Family Floater Plan: In case you are willing to buy a family floater plan which provides coverage to all family members, the premium amount depends on the age of the eldest member. More the age, higher the premium.
• Pre-existing Ailments: If you have any pre-existing ailments or diseases, premium increases. For example, if you are suffering from diabetes or hypertension, you need to pay more towards your health insurance plan.

How is health insurance premium determined?

Insurers use actuarial data and risk assessment tools to determine your premium. They consider your personal details and health history, the sum insured (i.e., the maximum amount the insurer will pay) and the policy type (individual or family).

For instance, with a health insurance policy for family, the insurer considers the age of the oldest member, the number of members covered and the overall health profile of the family. These policies are usually more cost-effective than buying separate individual plans for each family member.

What is a health insurance premium calculator?

A health insurance premium calculator is an online tool provided by insurance companies or third-party platforms. It helps you estimate the premium for your desired health insurance plan based on inputs like age, number of insured members and coverage amount.

How to use a health insurance premium calculator?

Using the calculator is straightforward:

1. Enter personal details: Age, gender, smoking status, etc.
2. Select type of policy: Individual or family floater.
3. Choose sum insured: The total coverage amount you need.
4. Pick add-ons: You can include maternity benefits, critical illness cover, etc.
5. View results: The tool will generate an estimated premium for your selected inputs.

For example, if you're planning to buy a health insurance policy for family, the calculator will ask for each member's age and generate a combined premium based on a family floater plan.

Benefits of health insurance premium calculator

Below are some of the advantages of health insurance premium calculator:

• Quick and easy: It offers an instant estimate of premiums.
• Comparison-friendly: You can compare premiums across insurers.
• Customisation: Allows you to adjust inputs and see how changes affect costs.
• Transparency: Helps you understand what you’re paying for.

How to calculate health insurance premium?

While calculators do the heavy lifting, it’s useful to understand the basic formula:

Premium = Rate(base) + Factors + type of plan adjustments.

Here’s a breakdown:

• Base Rate: Depends on age group, health status.
• Factors: Exact age, geographic location, plan type, lifestyle history, family size, income and subsidies.
• Type of plan: Individual, family floater, etc.
  
  

For family policies, the premium is often calculated based on the eldest member's age. A younger family with no major health concerns might enjoy a lower premium.

How to reduce health insurance premium?

Here are some helpful tips to lower your premium:

• Buy early: Younger individuals get lower premiums.
• Choose a higher deductible: You pay more out-of-pocket, but premiums are lower.
• Opt for family floater plans: These are more affordable than multiple individual policies.
• Maintain a healthy lifestyle: Non-smokers and those with a healthy BMI may receive lower rates.
• Avoid unnecessary add-ons: Only include extras you truly need.

FAQs

1. Is a family health insurance policy more affordable than individual plans?

Yes, family floater plans generally offer more economical coverage for families under a single premium.

1. Can I customise the sum insured in a family plan?

You can certainly choose a sum insured based on your family’s healthcare needs and budget.

• Are online calculators accurate?

They provide close estimates but the final premium may vary slightly after underwriting.

• Can I reduce my premium without compromising on coverage?

Yes, by buying early, opting for essential coverage and maintaining good health.

• Can I include my parents in a family health insurance plan?

Yes, many insurers do allow you to include parents in a family floater plan, though it may increase the premium. Alternatively, buying a separate senior citizen health policy for parents may offer better benefits suited to their age and health needs.

Conclusion

Knowing how health insurance premiums are calculated can really help you to make quite better financial and healthcare decisions. If you’re buying a plan for yourself or securing coverage for your entire family using tools like health insurance premium calculators can offer valuable insights and help you select the most cost-effective option.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis, or treatment. Please consult your general physician or another certified medical professional for any questions regarding a medical condition. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.