Ramesh and his colleagues were discussing medical insurance during their lunch break. All his colleagues had similar medical insurance. But each of them was paying different amounts.
Ramesh then wondered why there is such a difference in the amount? And how is medical insurance premium calculated?
Read on if you want to find out.
A medical insurance premium is an amount you pay periodically for your medical insurance policy.
How is Medical Insurance Premium for an Individual Calculated?
Several factors are considered while calculating the premium.
Let’s understand each of them in detail.
- Medical History
The medical history of the insured person is scrutinised. For example, do you have a family history of diabetes, blood pressure or cardiac conditions? Were you subject to such situations in the past?
Here, lifestyle is also considered. You need to ask yourself how often you exercise and how is your diet?
- Entry Age
Age is an essential factor. People of higher age can be more prone to kidney diseases or cardiovascular diseases. These are called critical illnesses. That’s the reason your premiums increase as you grow older.
- Gender
Males are said to be more prone to stroke and similar critical illnesses than females. That’s why the premium for male candidates is usually more than that of female candidates.
- Term or Duration of the Policy
The premium for a higher duration policy is more than that of a lower duration policy. But insurers also provide a discount for longer-term policies.
- Chosen Plan
Even though the broad policy is the same, the variation for each customer may be different. The room grade may differ. The riders like accident insurance, critical illness cover may be different. Your premium will vary based on these selections.
- No Claims Bonus
No claims bonus is a discount that you get for not making claims in the past years. It is a significant amount that may differ from person to person based on their claims history.
- Habits
Habits like smoking and drinking are also examined. And these attract higher premiums. So the insurer might also choose to deny you a policy on these grounds.
These were the factors related to the insured. Apart from this, there are certain factors related to the insurer. These, too, will affect the premium.
Marketing Expenses
The expenses are borne by the insurer for marketing the policy also come out of the pool of premiums.
Servicing Expenses
Servicing expenses refer to operations and customer support expenses. These also have a say on the premium you are offered.
Savings and Investments
Insurers pool the premiums collected from the insured. They invest them in Insurance Regulatory and Development Authority (IRDAI) approved securities. The returns from these investments also affect the premium offered to you.
Policy Underwriting
Insurers issue various kinds of policies like the individual, family floater and group policies. These policies are pooled and underwritten to keep risk in check. Unfortunately, this underwriting can also affect the premium offered to you.
How to Reduce Medical Insurance Premium?
Now that you know what factors are assessed while calculating your medical insurance premium. Let’s see some ways to reduce your premium.
- Higher deductibles vs Higher Premiums
A deductible is the fixed amount which the insured person has to bear. Therefore, the higher your deductible, the lower will be your premium.
- Family Floater Plans
Family floater plans have lesser premiums per head per year than individual plans.
- Multi-Year Medical Insurance Policy
A longer duration policy will have a lower premium per year than that of a single year policy.
- Staying loyal to one insurer
Buying a policy from an insurer with whom you have another policy might attract a loyalty discount from the insurer. The insurer might also offer a discount for renewing an existing policy. And not to forget the no claims discount from an earlier policy.
- Geographical discount
You can also get a geographical discount for staying in a city with low hospitalisation expenses.
- Compare Premiums
Compare quoted premiums on similar policies offered by various insurers. Pick the one that matches all your insurance needs and is affordable at the same time.
- Combination of Basic and Top-up Plans
You can divide your desired sum insured into two parts. First, get a basic policy with the sum assured as the first part.
You can get a top-up policy with a deductible equal to the sum insured of the basic policy. The premium for top-up plans is much lesser than the premium for a basic plan. So you end up enhancing your cover for a low extra premium.
If the medical expenses are equal to the sum insured of the basic, it will take care of them. However, if the medical expenses are more than the sum insured of the basic, the top-up will kick in.
Isn’t this a win-win scenario for both the insurer and the insured?
Ramesh used this knowledge to get the most benefits from his medical insurance policy at a lesser premium.
And now even you know the factors affecting your medical insurance policy premiums. You also know how to reduce your medical insurance premium.
Use this knowledge to get the most benefits from your medical insurance policy. All this while keeping the premium as low as possible.
Read Benefits of Buying Health Insurance