What is Premium in Health Insurance?

A health insurance premium is the amount you pay to keep your policy active and continue receiving medical coverage. This payment can usually be made monthly, quarterly, or annually, depending on the insurer and plan chosen. 

The premium amount is determined by factors such as your age, health condition, coverage amount, policy type, city of residence, and any add-ons or riders included in the plan. Let’s understand health insurance premiums in detail.

Contents

• How is Health Insurance Premium Calculated?
• Should You Choose Low Premium Health Insurance? 
• Conclusion
• FAQs

How is Health Insurance Premium Calculated?

Health insurance premium meaning refers to the amount you pay to continue receiving coverage under your policy. Insurance companies determine their health insurance premiums using different criteria that influence the likelihood of claims and the overall cost of coverage. The medical insurance premium can vary depending on age, coverage, and health condition.

Here are the main factors many Indian insurers consider:

1. Age of Insured Individual 

   As people get older, their healthcare needs usually increase. As a result, insurance premiums tend to be more expensive when people become older.

2. Coverage Amount 

   The amount insured is the highest sum that the insurance company would pay. Insurance policies that offer high coverage have high premium rates. For instance, an insurance plan of ₹20 lakh is likely to be more expensive than a ₹5 lakh plan.

   If you're unsure about the right health insurance sum insured, understanding how much health insurance coverage you need can make the decision easier.

3. Pre-Existing Conditions

   If you have conditions such as diabetes, hypertension, or thyroid disorders, the insurer may charge a higher premium due to the increased health risk.

4. Location/City Tier

   In India, there is a difference between healthcare and hospitalisation costs in different cities. Health insurance premiums are often higher in metro cities because treatment costs are higher.

5. Lifestyle

   Smoking, excessive alcohol consumption, and obesity can increase health risks and may lead to higher insurance premiums.

6. Additional Features or Riders

   Optional features like maternity cover, OPD benefits, or critical illness riders can increase the premium amount.

You can also use ACKO’s health insurance premium calculator to estimate your policy cost. 

Should You Choose Low Premium Health Insurance? 

While a low-premium plan might appear to be appealing, opting for a plan based solely on its premiums could be problematic at times due to restricted coverage. To get a plan that combines both cost-effectiveness and adequate coverage, one needs to ensure that the chosen plan includes:

• Sufficient sum assured

• Large network of hospitals

• Shorter waiting periods

• Smooth claim assistance

• Coverage for daycare treatments and pre/post hospitalisation expenses

A good health insurance plan should provide enough financial protection while still being affordable.

Conclusion

The health insurance premium refers to the total amount paid to keep the insurance plan valid. It depends on several aspects, including age, the coverage amount, personal medical history, lifestyle, and additional perks.

Understanding these factors can make it easier to compare plans and choose coverage that suits your needs and budget. Using a health insurance premium calculator can also help you estimate costs and make informed decisions. 

FAQs

Here are some common questions people ask about health insurance premiums in India.

What is premium in health insurance?

A health insurance premium is the amount paid to an insurer to keep your medical coverage active.

How health insurance premium is calculated?

Premiums are calculated based on age, sum insured, medical history, city, lifestyle habits, and selected add-ons.

Do health insurance premiums increase every year?

Yes, premiums can increase due to age progression, medical inflation, and insurer pricing revisions.

Can I claim tax benefits on health insurance premiums?

Yes. Under Section 80D, eligible individuals can claim tax deductions on premiums paid.

Is a monthly premium better than an annual premium?

Monthly premiums offer flexibility, while annual payments may reduce the overall policy cost through discounts.

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