Health Insurance Premiums
Factors affecting premium of Health Insurance
The premium for a Health Insurance Policy depends on various factors. It is very important to realize that the health insurance premium that we are paying is not to be treated as an expense, but that it is an investment for the rainy day when we fall ill. It can be literally a life saver in these days of astronomical healthcare costs. Some of the factors which determine health insurance premiums are
1. Age: Age is a major factor for determining the premium. The higher the age , the higher will be the premium. Thus it is best to get into a health insurance plan early. Premium increases with age because the probability of falling ill is higher at an older age than at a young age.
2. Previous medical history is one more factor that has an effect on the premium. If there is no medical history of any previous illness, then the premium is lower. But if there are instances of the person having suffered from diseases previously, then the premium will be more.
3. If one wants to cover domiciliary treatment or wants to include maternity etc in the policy benefits, then the premium charged will be significantly higher.
4. Term of the policy helps in determining the premium, the longer the term the cheaper is the premium and vice versa. But this is not very relevant for medical insurance as most policies are of one year duration. However some companies are introducing two year policies.
5. No claim bonus: If there has been no claim in a particular year, then it can help in reducing the premium in the next policy year . Certain companies do not reduce the premium but increase the sum insured automatically, which effectively works out to the same thing.
Coinsurance in a health insurance plan means that the insured has to pay a percentage of the claim. In effect, you split the insurance cost with the insurance company. For instance, if it is a 80-20 copay plan, your insurance plan pays for 80% of the expenses and you have to pay the balance 20%
Copay is available on many individual health insurance plans. Insurance companies use copayments to ensure that the insured has a skin in the game, and does not make frivolous claims.