What Is Premium in Health Insurance & How Is It Calculated?

Published on May 21, 2025 | 5 min read

Before buying any type of insurance, the first thing you’d look at is the premium. Whether you’re looking for a comprehensive plan or a basic one, usually the premium affordability is the deciding factor on whether or not you buy the plan.

Health insurance is a financial tool designed to shield you against expected and high medical costs in times of medical emergencies. In return for the financial security provided, you have to pay regular premiums. Let’s understand in detail what Premium in Health Insurance is, its calculation, factors impacting it and tips to reduce it.

Key Takeaways

Health insurance offers financial security by compensating for the covered expenses incurred due to medical emergencies. In exchange for this, you have to pay the predetermined premium.
Premiums in health insurance are calculated based on the applicant's age, lifestyle, gender, medical history, types of plan, sum insured and add-ons etc.
You can reduce the premium on health insurance by purchasing a plan at a young age, opting for a high deductible, avoiding unnecessary add-ons, maintaining a healthy lifestyle, using wellness benefits and selecting long-term policies.

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What Is Premium in Health Insurance?

Premium is the money you pay at regular intervals to the insurance company in exchange for coverage of your medical bills. Premiums can be paid in a lump sum or in regular intervals such as monthly, quarterly, bi-annually or annually, depending on the policy terms and your preference.

Regular premium payment is crucial to staying financially protected during medical emergencies. If you fail to pay the premium by the due date and within the grace period, your policy will lapse and you will lose your coverage. In case of lapse policy, you will have to bear all the medical expenses incurred. To revive your policy, you have to contact your insurer, pay outstanding premiums, and submit certain documents based on how long the policy has been lapsed. Once your payment and documentation are processed, the insurer will review your request and reinstate your policy.

How Does Health Insurance Premium Work?

Health insurance is a predetermined sum of money you pay to the insurer in regular intervals to keep your policy active. A premium is basically the price of an insurance policy. Paying your premiums on time is essential to pay for unforeseeable and high medical bills, without dipping into your pockets.

Premiums on health insurance are determined based on your risk profile, age, sum insured, type of plan, add-ons, location, medical history & lifestyle.

How Is Health Insurance Premium Calculated?

Let’s understand the factors involved in calculating your health insurance premium so you can avoid unexpected price increases, manage costs and make informed coverage choices.

Age

Age plays a major role in determining your premiums. Younger and healthier individuals enjoy lower premiums as they face lower health risks. As the age increases, premiums tend to rise.

Medical History

Applicants with pre-existing diseases such as diabetes, alcohol consumption, hypertension, asthma or thyroid may increase your premium payments.

Lifestyle

Harmful habits such as smoking, high alcohol consumption or an inactive lifestyle lead to higher premiums as these increase the health risk.

Type of Plan

Premiums vary based on the type of health insurance plans, Individual plans, family floater plans, senior citizen plans and critical illness, etc.

Sum Insured

A higher sum insured would result in higher premiums. Between a ₹15 lakh and ₹5 lakh plans, the former will charge a higher premium.

Add-ons and Riders

Most insurers offer riders and add-ons to enhance your coverage, opting for them would increase your premiums.

Gender & Location

Though gender is not only a primary factor in determining the premium, it can, however, impact insurance costs as the risk associated with females and males varies at different stages.

For example, women in their late 20s or 30s are charged a higher premium if they opt for maternity cover, while men often pay higher premiums as they age.

Copay & Deductibles

Insurance plans with higher deductibles or Co-payment clauses charge a lower premium, as you bear a certain percentage of the total medical expenses.

Difference Between Premium and Deductible

Many people are often confused between premiums and deductibles in health insurance.

Premium	Deductible
The fixed sum you pay to keep your health policy active.	A deductible is the fixed sum you pay out-of-pocket for medical expenses incurred before your insurance coverage begins.
The higher the premium, the more features and benefits offered.	The higher the deductible, the lower the premium.
Paid monthly, quarterly, bi-annually or annually.	Paid at the time of a claim.
Fixed by the insurer based on your risk profile.	Chosen by you based on your health and financial needs.

Tips to Reduce Your Health Insurance Premium

Health insurance premiums largely depend on your age, medical history, risk profile, sum insured and type of plan. Here are some tips to reduce your health insurance premiums.

Purchase Health Insurance at a Younger Age

Young and healthy individuals in their early 20s are charged a lower premium since they are considered low risk.

Opt for a Family Floater Plan

Instead of buying individual insurance for each member, you can opt for a family floater to cover your entire family on a single premium. In this plan, the total sum insured can be used for one member if a single person requires extensive medical treatments.

Go for a Lower Sum Insured

The sum insured of your plan directly determines your premium. Opt for a lower sum insured to decrease your premium payments.

Maintain a Healthy Lifestyle

Quit smoking and drinking alcohol and focus on maintaining a healthy lifestyle. Physically fit applicants with no destructive habits and an active lifestyle are charged a lower premium.

Avoid Raising Minor Claims

The frequency of your claims could increase your premiums. Avoid filing unnecessary and minor claims to earn a No Claim Bonus (NCB) offered to policyholders

Choose the Right Coverage

Choose the coverage you need and avoid unnecessary add-ons to ensure affordable and reasonable coverage.

Select Plans With Co-Payment or Deductible Option

Plans with co-payment or higher deductible options charge lower premiums.

Invest in Policies With Longer Duration

Most health insurance providers charge a lower premium if you opt for a longer policy duration.

Health insurance premium is determined based on your health, age, medical history, sum insured and other plan-specific features. It’s recommended to start early, opt for the right coverage and avoid unnecessary add-ons.

FAQs

What is a health insurance premium?

It’s the amount you pay to keep your policy active—monthly, yearly, or as per chosen frequency.

Does my premium increase every year?

It can increase based on your age, claim history, or policy upgrades.

Can I lower my premium without losing coverage?

Yes, by buying early, choosing higher deductibles, or removing unnecessary add-ons.

Are online calculators reliable for estimating premiums?

Yes, they give accurate estimates based on insurer data and your profile.

What happens if I miss a premium payment?

You may lose coverage after the grace period and have to undergo medical underwriting again.

About Author

Upstox Desk

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