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Health Insurance Quote: How it is Calculated

Buying health insurance need not be a cumbersome process. Everyone should be able to make optimal healthcare choices for themselves — one where they benefit from the best possible medical coverage and do not have to break the bank to do so. 

Well, thanks to health insurance calculators, this is very much possible today. Ask 65-year old Mrs Kaushik who purchased her senior citizen health insurance online without any kind of help from anyone!

It’s quite simple actually. Every insurance company has an online premium calculator on its website that provides users an approximate health insurance quote to help them make informed decisions. 

All you have to do is be mindful of a few things to be able to choose the best medical cover that suits your budget: 

  1. What are the various health insurance costs you should be aware of? 
  • Premiums
  • Deductibles 
  • Copayments
  • Coinsurance
  1. What are factors affecting the health insurance premium?
  • Age
  • Policy type
  • Past medical history
  • Family history/risk factors
  • Sum insured
  • Add-ons

Now, let’s discuss the various important aspects of analyzing a health insurance quote.

Premium: the cost of underwriting your risk

In layman’s language, the premium is simply the amount paid to purchase an insurance policy. Insurance company recovers all its cost that is incurred right from the idea of making the policy to the point of selling it to the policy buyer. Sometimes even after paying monthly premiums, you are required to pay out of pocket expenses if you want to receive extra care and special attention. This significantly affects your insurance health quote.

These may include-:

  1. Deductibles 

It is the amount that you have to pay to the insurance company before it starts paying up for you. The liability of the insurance company is an amount exceeding the deductibles. 

Example- deductible is ₹2000, and you have to claim ₹3000, so the Insurance Company is responsible for paying ₹1000. This is done with a view to prevent unnecessary claims or treatment.

  1. Co-payment

There is a co-payment clause in health insurance which states that you might have to pay a fixed amount of medical services like doctor’s fees and the Insurance Company would cover rest. For Example – Co-payment clause is for10%, and your claim amount is ₹20000, then you must have to pay ₹2000, and the company would cover the rest of the amount, i.e. ₹18000.

  1. Co-insurance

It is the percentage of cost that you have to pay for covered care services after you have met your deductibles. Example- same as in case of co-pay but this amount is generally calculated after you have your deductible because this protects the Insurance companies against large claims. It is normally expressed as a percentage of the net claim after co-payment.

The Math behind the cost of Insurance: Premium

Every mathematical or statistical formula has derivation logic to it. Health insurance policy premium is priced depending on some personal information and amount of coverage, and there are some costs hidden in it. The job of designing the policy, determining the cover and calculating the Premium is of an Actuary. But today’s modern world, development in technology has eased the task of computing the premium. There is a tool ‘online premium calculator’ which gives you the estimated premium amount. You have to fill a form with the personal details and a few other specifications and it calculates your premium to give you an idea about your insurance health quote.

You are required to fill details as under.

  • Age
  • Policy term
  • Past medical history
  • Family history
  • Health insurance coverage
  • Sum insured
  • Type of insurance
  • Profession (sometimes depending on the desired plan)

According to your requirement, the online premium calculator shows you the estimated premium amount. This amount may not be precise but it would be very close to reality. The ability to calculate health insurance online also makes it a little easier to choose the best health insurance for yourself.

How Different inputs for premium calculation and its correlation with cost

There are some inputs on which premium depend-:

  1. Age- It plays a vital role in calculating Premium. The Premium varies directly to the age, since an increase in age results in more exposure to diseases, thus, increasing the premium amount. That is why it is always better to take insurance at a young age.
  1. Administration and marketing expenditure- insurance policy and Premium is determined and calculated by an actuary under the given project. So, fee to the actuary is a cost. Also, the health insurance company incurs considerable costs in marketing. Health Insurance Company recovers this expenditure in the premium account. An increase in operational expenses increases the cost of the policy and vice versa.
  1. Past medical record- Past medical records is one of the primary components required to calculate health insurance online. before determining the premium amount, a complete medical checkup is done of yours to ensure that whether you have any disease or any personal habit like smoking, drinking or doing drugs. If you have any medical issue, then your premium will increase because of an increase in health risk. The correlation, therefore, is positive.
  1. Types of plans – Individual health insurance – under this insurance policy, only a single individual, i.e. you are insured, and Premium is paid accordingly. Family floater health insurance – every member of the family is covered in this insurance plan. Though with the increase in the number of members in the family, the premium amount also increases. The percentage increase in the premium amount is lesser than the percentage increase in the number of members of a family. Senior citizens health insurance – old age people are more prone to get affected by a disease, therefore, more probability to claim coverage. Thus, positively correlated to the Premium.
  2. Mortality rate – It is a measure of the number of deaths in a particular region, state or country; normally mortality rates for focused classes of people are used in the calculation. Premium also depends on the mortality rate. The risk of uncertainty increases with a rise in age. The higher the mortality rate of the segment more will be the premium thus positively correlated.
  3. Add-on covers – There are riders and other extra benefits that you aspire to experience in a health insurance policy for better coverage and to safeguard the risks. You can customize your health insurance and opt for superior treatment or protection in case of a medical emergency. Such costs are worth it because of the value attached to it. The Premium amount will increase with an increase in add on covers, thus positively correlated.
An infographic on health insurance premium calculators.

FAQs: How to Calculate Health Insurance

What are the benefits of not claiming any coverage?

If you have a claim-free year, then you get bonus money added to your sum assured or a discount at the time of policy renewal or both. Normally, the no-claims bonus or NCB is offered as an enhancement of the coverage rather than as a premium discount. Also, another benefit of no claim bonus is that it can be transferred to a new insurer or another insurer at the time of renewal. Example – if you are insured for ₹10 lakhs and you claim zero covers, so at the time of renewal, he will get a bonus of 5% this means in the next year your total sum would be ₹10.5 lakhs.

How will health insurance help in safeguarding emergency medical expenses?

You can claim your cover in two ways – Cashless cover or reimbursement. If you opt for a cashless cover, then the insurance company will directly pay your expenses and bills. But in case it is an emergency, and you don’t have time to do medical formalities, so you would pay for your medical expenses and get the sum that you paid reimbursed. But in both cases, the claim cover can’t be more than the sum assured.

Will I be allowed to cover my family under my health insurance?

Yes, but only if you have opted for a family floater plan under your health insurance. In a family floater health insurance, all your family members are beneficiaries and covered by some health plan. Family members can include- you, spouse, children and dependent parents. It may also have parents-in-law, siblings, and other specified members of your family.

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