Buying insurance for yourself and your family has never been so crucial! The Coronavirus pandemic has put healthcare at the forefront. It is more important than ever to have a good life and health insurance policy and be financially covered for unforeseen events.
When you select an insurance policy, it might seem confusing why insurance premium amounts differ from person to person.
Here are 14 reasons why you may be paying a higher premium than others.
The older you are, the higher your insurance premium is. When you are young, you are less likely to develop any health issues, and even if you do develop health issues, you are likely to recover faster due to a more robust immune system. As compared to younger people, older people are more likely to use healthcare services such as diagnostics, pathology tests, medications, treatment, surgical procedures etc.
Hence, it is always advisable to buy insurance policies when you are young, instead of when you are older. Hence, our date of birth is one of the topmost factors that influence your insurance premium amount.
Various demographic studies have demonstrated that women live longer than men by about 5-7 years. As per studies, men are more likely to go out for work, indulge in physical activities, and become more prone to accidents or illness. They are also more likely to indulge in smoking, alcohol or tobacco consumption as compared to females.
Hence if you are a woman, you are likely to pay less premium than your male counterparts.
Women who do not have children are likely to pay more premium amounts than women who already have children. This is because a woman planning to start a family can claim health insurance for various tests, diagnostics, possible infertility treatments, medications, delivery, consultation etc.
4. Medical history
Almost all insurance companies require you to undergo a complete health checkup before they issue you a policy. They also access and review your health records to understand if you have any pre-existing health conditions. If you have conditions such as hypertension, arthritis, diabetes, asthma, thyroid, obesity, cholesterol, kidney disorders etc, you may be asked to pay a higher premium. This is because people who have health conditions are more likely to claim insurance for various tests, diagnostics, medication and treatments. Your insurer will assess the risk before issuing you an insurance policy.
If you have undergone any surgeries or procedures in the past, you need to disclose it to your insurer. Some insurance companies may even ask you to serve a waiting period before your policy comes into force.
5. Physical Fitness
If you are overweight or have a sedentary lifestyle, you are more prone to lifestyle disorders like hypertension, diabetes, heart attacks etc. According to the 2012 health statistics report by the WHO, one in six adults is obese. People who have a BMI of above 30 are considered to be obese. People who have normal BMI (Body mass index) as per their age and height have a significantly lower premium than overweight or unfit.
6. Family medical history
Family medical history is another factor that plays a vital role in deciding how much premium the insurance company will ask you to pay. Suppose an immediate family member has health issues such as heart diseases, diabetes, cancer, neurological disorders or other hereditary disorders. In that case, it puts you at a higher risk of getting affected with the same. Hence depending on your family medical history, you may be asked to pay a higher premium because the likelihood of claiming insurance costs is more.
7. Family size
If you are buying a health insurance policy for your whole family, the premium amount you need to pay depends on the number of family members covered. A smaller family consisting of two adults, and one child will have to pay less premium than a family consisting of four adults and two children.
You can opt for a family floater plan or individual insurance for each family member. Usually, a family floater plan can be cheaper than an individual policy for each member.
Hobbies that involve a significant amount of risk such as skydiving, bungee-jumping, mountaineering, racing car driving, deep-sea diving etc can lead to higher premium amounts. This is because you are regularly exposed to dangerous activities that can hurt you and in turn, increase the likelihood of claiming insurance.
However, which activities fall in the ‘high-risk’ category may vary across insurance companies. Hence, if you are involved in such activities, you need to take quotes and discuss the same with various insurers, to finalize the best.
9. Smoking and tobacco use
It is no secret that smoking or tobacco consumption puts you at a higher risk of diseases such as heart attacks, strokes, lung disorders, infertility and cancer. Hence the insurance premium amounts for smokers and tobacco users are significantly higher than those who do not smoke or consume tobacco. If you smoke or consume tobacco, you need to disclose this to your insurer without fail!
If you already have an insurance policy with a smoker status, and if it has been a while since you quit smoking, check with your insurance company if the change from ‘smoker’ to ‘nonsmoker’ status will affect your premium amount.
10. Excessive alcohol intake
If you consume alcohol daily, your insurer may charge you a higher premium amount. This is because excessive alcohol consumption puts you at a higher risk of getting liver disorders and other ailments.
If your status in your current insurance policy is that of someone who consumes alcohol, and if you have quite entirely, you can check with your insurer if this change affects your premium.
Some insurers base their policy premium amount on the location of the policy buyer. They believe that factors such as culture, lifestyle, sanitation, hygiene, air quality, pollution, availability of healthy food options etc influence the policy buyer’s health.
If you live in a place where costs of diagnostics tests, consultation charges of doctors, hospital charges etc are high, you may be required to pay a higher premium. For example, if you live in a metro city like Mumbai or Delhi, the policy premium amounts are more likely to be higher than to someone who lives in tier II or tier III city.
In some cases, people living in locations prone to calamities like earthquakes, storms, floods etc have to pay a higher premium than their counterparts. How much the location factor influences the premium amount, depends entirely on the insurance company.
When you apply for a life insurance policy, insurance companies always ask you about your occupation. Occupations such as pilots, stuntmen, firefighters, lifeguards, people who work in the armed forces, construction workers in high rise buildings, toxic gas laboratory workers, technicians working at radiation plants etc are considered to be high-risk jobs. Your premium could be higher if you work at a place that is considered high-risk.
13. Travel history
If you travel to countries that have more instances of HIV or tropical diseases or if you regularly travel to countries that have a high ratio of infectious diseases, your insurance premium might be higher. Travel history is essential in the light of Coronavirus. Travelling to countries that are more prone to a particular type of disease or infection can increase your premium amount significantly.
14. The policy itself
The insurance premium amount is directly proportional to the sum assured and the policy term. Sum assured is the maximum amount you can claim from your insurance company in case of a medical emergency. If you have a more significant sum assured, it gives you a more prominent financial backup when you need it.
A policy with more extensive coverage and a longer time frame will cost more than the insurance plans taken for a small sum and shorter period. Hence the policy type determines how much premium you will be asked to pay. If you select any add-on covers such as maternity or OPD benefit for your policy, it might also increase your premium amount.
In a nutshell
Buying insurance for yourself and your loved ones are of paramount importance because unforeseen medical emergencies can cause a considerable dent in your finances. In the fiscal year 2016, over 64% of the country’s total health expenditure resulted out-of-pocket expenses. This goes on to show how much healthcare expenses affect the economy.
Right insurance gives you peace of mind and keeps you prepared for an emergency. You can focus on getting well or taking care of your loved ones and keep the financial worries aside.
When you purchase a policy, it is essential to look at all the factors determining your insurance premium amount. Make a well-informed decision to buy a policy that suits all your needs and requirements. Take quotes from various insurers and speak to people who already have an insurance policy in place. You must disclose everything to your insurer and not withhold any information. If it is found that you have not disclosed a vital piece of information, it might lead to claim rejection.
For a detailed insight into what affects your insurance premium, contact your insurance company right away!