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How Is Health Insurance Premium Calculated?

In today’s world of rapid medical inflation, buying health insurance is one of the most convenient and effective ways to secure quality health care for yourself and your loved ones. When buying a health insurance plan, premium is one of the most important factors to consider as it is the primary cost you have to bear.

Hence, it’s natural to wonder how health insurance or medical insurance premium is calculated. Different health insurance providers charge different premium depending on the coverage and type of risks associated with coverage a particular customer. Before you understand how health insurance premium is calculated, it’s important to start with the basics:

What Is Health Insurance Premium?

Health insurance premium is the pre-decided amount that you are required to pay towards your health insurance policy at regular intervals. Paying the premium regularly makes you eligible to avail the medical coverage for a period, as mentioned in your policy document. The premium paid toward your health insurance policy depends on various factors such as your age, health condition, number of members to be covered, etc.

How Is Health Insurance Premium Calculated?

Your health insurance provider needs to consider several factors in order to determine your health insurance premium. However, the premiums for every insurer are dependent on the company specific terms and conditions. Therefore, there is no set formula for health insurance premium calculation. However, most leading health insurers offer online health insurance premium calculators that can calculate the corresponding premium instantly. All you need to do is, enter a few personal details regarding your age and health, and the health insurance premium calculator will calculate your premium automatically.  However, to help you get an idea of how your health insurance premium is calculated, here’s a list of factors that affect your health insurance premium:-

  1. Marketing Costs – The expenditures incurred from marketing and administration are recovered from the premium paid by the policyholder. Some general operational expenses such as the cost of designing a medical insurance policy and commission to brokers are also included in the premium.
  2. Band Rating – Insurers change the base rate for applicants who possess similar characteristics like age, gender, geographical region, family size, and profession and so on. For instance, working individuals in the age group of 25-35 years will always pay a lesser premium than a set with working individuals aged between 40-50 years.
  3. Costs Incurred From Investments – All health insurance companies invest a part of the income recovered from premiums. These investments are made according to the guidelines issued by the insurance regulatory body of India. And therefore, health insurance premium is determined based on the returns of these capitalizations.
  4. Medical Underwriting – Insurance products are underwritten to analyse risks from various angles with an aim to reduce the overall cost for the insurance company. Also, insurance companies need to design each of their policy offerings carefully and decide the reasons and parameters on which it can accept and reject coverage applications. This helps them reduce the scope of incurring losses significantly.
  5. Rate of Morbidity – Age is one of the primary factors that affect health insurance premiums. This is because the older a person is the higher are the chances of him/her requiring emergency hospitalisation or being diagnosed with a critical illness. Ultimately, the cost incurred by a health insurance company for an older person is much more. Hence, the premium charged for older applicants is higher as they are viewed as high-risk applicants due to an increased rate of morbidity.
  6. Personal Medical History – While some insurers may or may not conduct health check-ups, but they will certainly take into account an applicant’s current state of health, his/her family’s medical history, his/her lifestyle habits like drinking and smoking etc. All this information is taken into consideration before deciding your policy premium. Generally, people with a history of grave illnesses and those who smoke and drink regularly are charged a higher premium.
  7. Modified Community Rating – A broad range of factors like the geographical location, political stability of that region, industrial development, trade activities and lifestyle of a particular area also determines the amount of premium charged by an insurance company.

Significance of Health Insurance Premium Calculator

Aids Decision Making - Thanks to a health insurance premium calculator, choosing a health insurance policy that fits your budget and needs has become easier. A Health insurance premium calculator gives you an estimate of the premium payable based on factors such as your age, policy coverage, medical requirements etc. This makes the decision-making process comparatively hassle-free for you.

Easy Comparison – You can use health insurance premium calculators from various health insurance providers to compare your individual premium rates. That way, you can compare and choose the policy that offers you the maximum coverage at a cost that fits your budget.

Error Free Calculation – Manual calculation is always prone to errors. Digitization of health insurance premium calculation eliminates the possibility of errors from the process. By entering a few details like age, gender, number of individuals to be covered, residential location, etc., you can you can derive error-free premium calculation in a matter of seconds with just a few clicks.

How To Use A Health Insurance Premium Calculator?

The process of using a health insurance premium calculator may vary for different insurers. However, most of them follow a standard pattern. Here’s how you can calculate your premium using health insurance premium calculators: -

  1. Visit the desired health insurance premium calculator page and mention the name of your city, followed by your pin code and yearly income.
  2. Enter the number of members you want to include if you want to opt for a family health insurance plan. For instance, you may want to get your spouse, children or elderly parents covered under a health insurance plan.
  3. If required, you may also need to enter your current medical status or habits such as smoking or drinking along with your contact number.
  4. Once you have entered the relevant details, click on calculate. The health insurance premium calculator will calculate your premium instantly.
  5. If you are satisfied with the premium, you can proceed to buy the health insurance policy immediately.

While the premium is an important factor to consider while buying health insurance, it should not be the only one. The benefits and coverage offered by health insurance plans are equally important. With health insurance, you get the benefit of a wide coverage at a reasonable premium. Moreover, by buying Health Insurance at Finserv Markets, you can enjoy exclusive benefits like cashless treatment at 6000+ hospitals, quick claim settlement, Ayurvedic/Homeopathic coverage and much more. To buy or know more about Health Insurance visit Finserv MARKETS.


Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App”.

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