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How Health Insurance Premium Is Determined?

Published On Nov 03, 2020

Health insurance premium is the amount of money a policyholder has to pay to a health insurance company in order to gain coverage for medical expenses. Premium payment can be done by means of cash, credit/debit card, cheque, etc. Earlier, premium could be paid only on an yearly basis, however, with IRDAI’s new rule in September 2019, health insurance companies are allowed to provide installment options such as monthly, quarterly, or half-yearly for premium payment purposes. 

Health insurance premium is one of the prime factors that plays a deciding role in the purchase of a health insurance policy. Please note that there are also certain factors that decide what a premium would be for a certain health insurance policy. Let’s take a quick look at the key aspects that determine health insurance premium. 

You may also like to read: Top 5 Health Insurance Plans Available At Low Premiums

6 Major Factors That Determine Health Insurance Premium

Check this list of top 6 key factors that your health insurance premium amount revolves around.

1. Coverage Type

When looking for a health insurance policy, you may find yourself surrounded by various types, which will ultimately decide the premium. For instance, if willing to buy an individual plan for each family member, you will have to pay more premium. Family floater, being a single plan for all members, will cost you less in terms of premium. Those looking for critical illness coverage will have to pay a high premium as medical expenses for critical illnesses like Cancer, Heart Attack, and others will be covered. All in all, the type of plan you choose will determine your premium. 

2. Sum Insured Amount 

When you choose a health insurance policy, you also decide the sum insured or the amount of coverage you want to be paid for your medical expenses in case of an emergency. All the medical benefits under the sum insured chosen by you will be covered when the need arises. If you want a vast number of features to be covered, you may have to choose a high sum insured amount, and thus, pay a high premium. Same goes with a low sum insured amount. This is how the sum insured amount decides how much premium you pay for your health coverage.

Also read here: How Age Affects Your Health Insurance Premium Cost

3. Policyholder’s Age

Age is one of the key deciding factors of health insurance premium amount. Since it is generally perceived that medical issues increase with age, the premium also falls on the higher side according to the same. The elderly have to pay a higher premium than young people as the former have higher chances of filing a claim due to a health issue. If you are 40 years and above, you may be charged a high premium as chances of you filing a claim owing to a lifestyle disease or critical illness will be high.

4. Family Medical History 

The reason family medical history is given the desired emphasis in determining health insurance premium is because a health insurance company has to check the aspect of vulnerability. For instance, the insured with a family medical history of certain diseases will be vulnerable to such health risks and charged more premium. An insured with clean medical history will have to pay a low premium amount for the same. 

5. Pre-existing Diseases 

While buying a policy, the policyholder has to declare pre-existing disease, if any. Not informing the policyholder about any pre-existing disease may end up in claim rejection. Policyholders with any pre-existing disease are charged a higher premium as they have higher chances of filing a claim. 

6. Geographical Location

It may come across as unexpected, but your location has also a lot to do with your health insurance premium. There are health insurance companies that charge premium based on whether the policyholder belongs to an urban area or a rural area. The good thing is that not all health insurance companies follow geographical location or zone-based pricing, thereby keeping the premium rates the same for all places.

Read here: Know Factors to Compare Health Insurance


If you are ready to buy a health insurance policy, make it a point to share all your information correctly. Hiding or giving wrong information about yourself can land you a higher premium or even claim rejection. While there may be multiple factors based on which you have to pay premium, you too have a number of aspects while choosing a policy. Make sure you take a wise decision!

Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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