How is Insurance Premium Calculated?
If you have been in the market for private health insurance, you may have noticed that they are all priced differently and require you to pay what is called health insurance premiums. What does it mean though and how does it affect you?
Health Insurance Premium Definition
Before buying insurance of any kind, you need to understand what a premium is and how it works. An insurance premium is an up-front payment you give to the insurance provider to keep the insurance coverage active. Depending on the payment terms set between you and your provider, this can be paid annually, semi-annually, quarterly, etc. When going over your health insurance policy with your Financial Advisor, remember that you will have to pay for the premium whether or not you use the benefits.
In a nutshell, the premium is what you pay for the benefit of being covered by insurance. Keep in mind that health insurance premiums vary between plans and between providers.
What Affects Health Insurance Premium Rates?
When reviewing your health insurance policy and premium, know that there are several factors that affect the cost of your potential policy. When you apply for coverage from a specific insurance provider, your age as well as numerous health factors will be taken into consideration. For instance, you may be asked to take a health screening test to find out certain things such as if you are a smoker, you have ongoing medical conditions, or you have a history of certain medical diseases in your family. Apart from this, your insurance premium will also be based on your deductible amounts, copayment amounts, and other related factors.
Can I Lie to Lower My Premium?
This is the number one no-no when it comes to health insurance applications. Some applicants think that they can withhold certain information, such as if they are a smoker, or certain medical conditions in order to reduce their premium. Not only is this unethical, but you will also likely be found out anyway, so doing so is futile. Hiding things like medical conditions will come out sooner or later in your tests, so your insurance provider will find out you lied to them during the application process which may have serious repercussions.
Is There A Way to Lower My Premium?
Yes, there are certain deductibles that can be taken from your premium like we mentioned earlier. For instance, if you have a pre-existing HMO with your employer, that can be taken into consideration to lower your health insurance premium.
When investing in health insurance, it’s important to understand exactly what insurance premiums and how they come to be. If you have questions about yours specifically, do not hesitate to ask your Financial Adviser. The more informed you are, the better you can use your health insurance benefits.
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