Categorized | Health Insurance

how a health insurance company determines your premium?

Health insurance or Mediclaim policies are essentially a contract between an individual and an insurance provider that provides financial protection for the individual in case of unforeseen medical emergencies such as accidents, surgeries, critical illnesses and so on. The type and amount of medical expenses that will be covered by the Health Insurance provider is decided when you agree to take a medical insurance policy, and is known as the insurance premium.

The idea of health insurance is finally picking up in India as more and more people are becoming more aware of the need and benefits of insurance. Life in  cities is nowadays too fast and busy, and diseases like hyper-tension, diabetes and cancer are fairly common these days. Health insurance or mediclaim provides you a cushion from the financial implications that you may incur due to hospitalization.

The insurance company or service provider will charge you a sum for providing you insurance coverage, which is called the premium. The insurance Premium is payable annually, monthly and so on. The amount of Coverage you or your family gets depends on the sum Insured provided in the policy. Different companies may charge you different amounts as the insurance premium. So you may be thinking about taking a new insurance Policy and wondering how much it is going to cost you.

You may be curious about how companies will calculate your insurance premium. Here are some of the steps that companies follow in calculating insurance premiums:

•The premium is determined by various mathematical and statistical calculations done by the Underwriting department of the insurance company.
 
•All companies have a Base Premium rate for its insurance policies. The company creates this base premium rate based primarily on factors such as the amount it is paying with respect to health care providers, operating costs, profit margin etc.

•It also depends on your age, health condition, your habits, income and so on. 

Here are some of the most important factors that affect the cost calculation of a health insurance premium:

•Sum Insured
 
Your insurance premium depends on the sum insured that you have chosen. The premium increases as the total sum insured increases.

•Age

As your age increases, your insurance premium increases too. This is because health-related issues increase with age.

•Health History

If your health has been generally good in the past, your insurance premium will be low. If you have Pre-existing problems such as diabetes, hypertension, etc., your insurance premium will increase accordingly. You may even not get coverage for pre-existing health issues.

•Family history

If you have a family history of health problems, such as incidence of cancer, your insurance premium will also go up.

•Type of Policy

Your insurance premium will increase substantially if the mediclaim policy is for your entire family (family floater policies) rather than only for yourself.
 
•Smoking and Drinking Habits

If you have smoking and drinking habits, you will definitely be charged higher premiums, as you are more likely to have or develop health problems.

•Profession

People who work in certain professions such as in the IT industry, nuclear reactors, coal industry etc. are likely to develop certain types of diseases. The insurance premiums will vary accordingly.

•Geographical Locations

Diseases vary according to geographical locations too, and so will the insurance premiums. For example, people in metropolitan cities are more likely to develop hyper-tension or stress related diseases.