Health insurance forms a safety net for you and your loved ones. During illness or emergencies, a health insurance plan can step in and provide crucial support.
While a good health insurance plan can do wonders for your physical and financial health, there’s a hefty price that needs to be paid for this protection. It comes in the form of health insurance premiums, according to a statement.
Health insurance quotes are based on several factors. They can determine if you pay a low or higher premium. Here are some factors that influence how your health insurance company comes up with a quote for your plan.
Rising cost of healthcare
Healthcare continues to be expensive. Costs for healthcare-related services such as hospitalisations, surgeries, diagnostic tests, and even medicines are rising with every passing year, with no reversal in sight. This has a direct impact on health insurance premiums. Health insurance companies factor medical inflation into their premium. When medical inflation rises, premiums also rise to match it, as it makes business sense for the insurance companies.
Higher sum insured
Opting for a higher sum insured is the way to go if you can afford it. It gives you more peace of mind and can do the heavy lifting when you need it. But the higher your sum insured, the higher your health insurance premium will be. Insurers take a huge risk with a high sum insured plan; hence, a higher premium will be charged in such cases. Customising your health insurance plan can also lead to high premiums. Customisation can come in the form of add-ons and riders, which give you flexibility with your plan but at a price.
Age
Age also plays an important role when it comes to health insurance premiums. The older you are, the higher the premium you will pay. Health tends to decline with age, leading to a higher likelihood of claims. Hence, insurers tend to charge senior citizens a higher health insurance premium compared to their younger policyholders.
Chronic illnesses
Another class of policyholders who get charged more premiums would be those with chronic and critical illnesses. Pre-existing conditions require prolonged care and can often lead to health complications. This makes them more expensive to treat and a risk for the insurer. Critical illnesses such as cancer, heart disease, and stroke also require constant attention and prolonged hospitalisation in many cases. While the elderly are more vulnerable to such conditions thanks to age, younger people are also becoming increasingly susceptible to these diseases.
Lifestyle choices
Living an unhealthy lifestyle comes at a hefty price, not only for your health but also for your health insurance plan. Certain unhealthy lifestyle choices, like alcohol consumption and smoking, can lead to health troubles down the line. Insurers often charge higher premiums to policyholders with these habits. Those who are overweight can also be asked to pay a higher premium, as obesity causes many health issues that could require expensive treatments and medication.
Claims history
Another factor that influences your premium rates is your history of claims. If you have made several high-sum claims or have a history of filing claims regularly, your health insurance premium may be hiked at the time of policy renewal. More claims indicate that you are a risky customer to the insurer, and hence a higher premium will be charged to offset this risk.
Risk pooling
Health insurance operates on the principle of risk pooling. Insurers prefer a large pool of people with fewer health issues to take up their policy. This allows them to distribute risk in an efficient way across the pool while serving the needs of the sick within the pool. This keeps premiums stable across the board. Premiums can rise if the pool has more sick members than healthy ones. This leads to an increase in premiums to offset the risk arising from a higher number of claims.
There are many factors at play when it comes to your health insurance premium rates. Understanding them can help you figure out what rates might be coming your way and how to lower them if possible. While some factors may not be under your control, if you make healthy choices, research and look at your options, and restructure your existing plan, you may be able to save on your premium. But do keep in mind that health insurance is an investment for a safer future, and the premium you are paying today will pay dividends when the time comes.
