Health Insurance Premium: What Determines the Cost?

Overview

A health insurance premium is the amount you pay to keep your policy active and cover eligible medical expenses. You can pay monthly, quarterly, half-yearly, annually, or upfront for a multi-year policy.

Sample Annual Health Insurance Premiums in India

Indicative annual premiums for ₹15 lakh coverage:

Individual, Aged 25: ₹11,671–₹16,294
Family of Three (2 Adults Aged 35 and 34, and 1 Child Aged 5): ₹24,700–₹29,257
Senior Couple (Aged 62 and 63): ₹73,156–₹86,069

Actual premiums vary by insurer and plan.

Key Factors Affecting Your Premium

Age: Premiums generally increase with age.
Sum Insured: Higher coverage usually costs more, but not proportionally.
City: Metro cities like Delhi may have higher premiums than Tier 2 and Tier 3 cities, depending on the insurer's pricing zones.
Health and Lifestyle: Medical conditions, smoking, and tobacco use may affect underwriting.
Plan Features: Family composition, add-ons, and discounts influence costs.

Why does one person pay ₹12,000 while another pays ₹20,000 for the same ₹15 lakh health insurance coverage?

The difference lies in how insurers calculate your health insurance premium, considering factors such as your age, medical history, location, family composition, and policy features.

Let's explore the factors that determine your premium, why it increases at renewal, and how to keep costs manageable without compromising on coverage.

How Is a Health Insurance Premium Calculated?

Insurers use past claims data, expected healthcare costs, and operating expenses to set a base premium. They then adjust it based on factors such as your age, location, sum insured, policy features, and health status.

Applicable discounts may reduce the final premium, while medical history, Body Mass Index (BMI), and lifestyle habits (smoking and drinking) may attract additional charges called loading.

Factors Affecting Health Insurance Premium in India

1) Age of the Insured

Premiums generally increase with age as the likelihood of needing medical care rises. Buying a policy early and renewing it continuously can help you:

Complete applicable waiting periods and the moratorium period.
Accumulate a higher cumulative bonus.
Maintain uninterrupted coverage.
Reduce the risk of additional loading for health conditions that develop later.

2) Sum Insured

A higher sum insured usually attracts a higher premium, but the increase is not proportional to the increase in coverage.

For example: A 25-year-old purchasing Aditya Birla Activ One Yuva pays:

Sum Insured	Annual Premium
₹10 lakh	₹8,824
₹50 lakh	₹13,528

Although the coverage increases fivefold, the premium increases by only around 53%.

3) City of Residence

Insurers often use zone-based pricing to account for differences in healthcare costs across regions. As a result, the same policy may cost more in high-cost metros such as Mumbai or Delhi than in Tier 2 or Tier 3 cities.

4) Health Status and Lifestyle

Your medical history, BMI, smoking habits, and tobacco use can affect underwriting. Depending on the risk, insurers may apply premium loading or impose special policy terms.

Based on Ditto's experience, loading typically ranges from 10% to 50%, though it can be higher. Check the policy document for applicable limits.

5) Number and Age of Family Members

In a family floater policy, adding more members or covering older family members can increase the overall premium, though floaters are cheaper than buying individual policies for all the members.

6) Policy Features, Add-Ons, and Discounts

Optional benefits such as maternity, Outpatient Department (OPD), critical illness, and consumables cover can increase premiums, while multi-year, wellness, and other insurer-specific discounts can help reduce them.

Sample Premiums by Age and Sum Insured

Let's compare sample annual health insurance premiums for different customer profiles in Delhi across flagship HDFC ERGO, Care, and Aditya Birla Health Insurance plans.

Insured Profile	₹15 Lakh Sum Insured	₹25 Lakh Sum Insured
Individual, Aged 25	₹11,671–₹16,294	₹12,896–₹19,168
Couple, Aged 31 and 30	₹18,743–₹23,153	₹21,045–₹28,544
Family Floater (2 Adults and 1 Child), Aged 35, 34 and 5	₹24,700–₹29,257	₹27,683–₹36,021
Senior Couple, Aged 62 and 63	₹73,156–₹86,069	₹83,495–₹1,04,980

Note: Actual premiums may vary based on the insurer's underwriting assessment and policy terms.

For a detailed breakdown of how premiums vary by age, applicable discounts, family floater options, and add-on costs, refer to our HDFC ERGO Health Insurance Premium Chart, Care Health Insurance Premium Chart, and Aditya Birla Health Insurance Premium Chart.

To know how health insurance premiums are calculated, read our guide on the health insurance premium calculator.

Why Does Health Insurance Premium Increase at Renewal?

1) Age-Based Premium Revisions

Based on Ditto's experience, age-related premium hikes generally follow two pricing models:

Annual Age-Based: Premiums increase every year as the policyholder ages. For example, HDFC ERGO Optima Secure Family follows annual age-based revisions, with premiums typically increasing by 2–5% for individuals below 60 and up to 10% for those above 60.
Age-Band-Based: Premiums remain constant within a fixed age bracket (typically 5–15 years) and increase when the policyholder moves into the next bracket. For example, Care Health follows age-band-based revisions, with premiums potentially increasing by 15–30% when moving into the next age band.

2) Medical Inflation and Rising Claim Costs

Rising healthcare costs, including hospital charges, medicines, and diagnostic tests, increase insurers' claim expenses. Insurers may revise premiums across an entire plan based on medical inflation and claims experience. These are product-level revisions, not individual claim-based increases.

Insurers' public disclosures show how revisions vary across products and locations.

For Example:

Niva Bupa reported year-on-year model premium increases for products such as ReAssure 2.0 and Aspire in FY 2026–27 (up to August 2026).
HDFC ERGO reports three-year premium changes across products and cities.

Note:

Under IRDAI guidelines, insurers cannot refuse renewal or conduct fresh underwriting solely because of past claims, except when the policyholder requests an increase in sum insured. However, a claim may affect product-specific discounts. For example, HDFC ERGO Optima Secure's Favourable Claims Experience Discount may reduce or disappear after a claim, increasing the renewal premium. This is not the same as individual claim-based loading.
Under IRDAI's January 2025 directive, insurers must consult the regulator before implementing annual premium increases exceeding 10% for senior citizens covered under individual health insurance policies.

Premium Payment Options

You can generally pay your health insurance premium monthly, quarterly, half-yearly, or annually.

At Ditto, we recommend the annual payment option because it offers convenience, protects you from pending installments or missed deductions, and helps you save through upfront payment discounts.

If you prefer installments, keep these points in mind:

Grace Period

IRDAI allows a 15-day grace period for monthly installments and 30 days for other payment modes. Coverage continues during this period for installment-based payments, subject to policy terms.

Additional Costs

Insurers may apply an installment loading of around 2%–5% or withhold certain annual and multi-year discounts. For example, HDFC ERGO Optima Secure offers no-cost installments but reserves certain long-term discounts for upfront payments.

Pending Premiums During a Claim

If you make a claim before paying all installments due for the policy year, the remaining amount may become immediately payable and be adjusted against the admissible claim. For example, if six monthly installments of ₹2,500 are pending, ₹15,000 may be deducted from a ₹1 lakh admissible claim, leaving ₹85,000 payable.

Choosing a Multi-Year Policy

Some insurers offer policy tenures of one to five years with upfront payment options. These policies may offer additional discounts and protect you from premium revisions during the selected tenure.

How Much Can You Save With Multi-Year Payments?

Multi-year discounts vary by product:

HDFC ERGO Optima Secure+: 6% for two years and 8% for three years or more on total premiums.
Care Supreme: 7.5% on the second-year premium for two years, 7.5% on the second-year and 10% on the third-year premium for three years.
Aditya Birla Activ One MAX: 7.5% for two years and 10% for three years on overall premiums.

What About Credit Card EMIs?

With credit card EMIs, the card provider pays the insurer upfront, while you repay in monthly installments. However, interest (often over 10% annually) and processing fees may apply.

How to Reduce Your Health Insurance Premium?

Compare Plans Before Buying: Compare premiums, coverage, exclusions, and benefits across insurers to find a suitable plan.
Choose an Appropriate Sum Insured: Select coverage based on your healthcare needs, family size, and location without compromising on adequate protection.
Avoid Unnecessary Add-Ons: Choose only optional benefits that meet your healthcare needs.
Look for Available Discounts: Check for wellness, multi-year, and other product-specific discounts. For example, Aditya Birla Activ One MAX offers Health Returns discounts of up to 100% for meeting fitness benchmarks, depending on your activity levels.
Avoid Cost-Sharing Features: Optional co-payments, deductibles, and room-category restrictions may lower premiums but increase your out-of-pocket expenses during claims.

Save on Taxes

Under the old tax regime, eligible health insurance premiums qualify for deductions under Section 126 of the Income-tax Act, 2025 (formerly Section 80D).

You can claim up to ₹25,000 each for yourself (and your family) and your parents. These limits increase to ₹50,000 for each category if the relevant insured person is a senior citizen. The combined deduction can therefore reach ₹1 lakh.

For multi-year policies paid upfront, the deduction is apportioned across the relevant tax years.

Why Choose Ditto for Health Insurance?

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100% Free Consultation
No Spam. No Sales Pressure.
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Dedicated Claim Support Team
Compare Plans and Premiums with a Trusted Insurance Advisor

Confused about the right insurance? Speak to Ditto’s certified advisors for free, unbiased guidance. Book your call or chat with us on WhatsApp now!

Conclusion

Your health insurance premium depends on factors such as age, sum insured, location, and policy features. Compare plans, check available discounts, and understand potential renewal increases before choosing a policy.

Before buying or renewing, compare like-for-like quotes and review the policy's coverage, exclusions, and renewal terms. Focus on getting adequate coverage at a premium you can comfortably afford, rather than simply choosing the cheapest option.

Frequently Asked Questions

Is GST charged on health insurance premiums after September 2025?

No. Under the revised GST on health insurance premium rules, eligible individual health insurance policies are exempt from GST from September 22, 2025. This includes individual, family floater, senior citizen, and retail top-up plans. However, group health insurance policies, including employer-sponsored coverage, continue to attract 18% GST. The exemption applies to premiums paid on or after September 22, 2025, including renewal premiums and eligible installments. This means individuals can save 18% on the GST component of their health insurance premiums.

Does health insurance premium increase every year or only when I move to a new age band?

This depends on the insurer's pricing structure. Some insurers revise premiums annually based on the insured person's age, while others increase them only when the person moves into a higher age band. For example, HDFC ERGO Optima Secure+ follows annual age-related revisions, whereas Care Supreme follows defined age bands. Your premium may also change due to insurer-wide pricing revisions, medical inflation, or changes in the policy's pricing structure.

Does my city of residence affect my health insurance premium?

Yes. Insurers may classify cities into different geographical zones based on healthcare costs and hospital treatment rates. For instance, a policyholder living in Mumbai may pay a different premium from someone living in Coimbatore for the same coverage. However, geographical pricing varies between insurers, so a city being classified as a metro does not automatically mean its premiums will be higher.

Can a multi-year health insurance policy help you save on premiums?

Yes. Many insurers offer discounts when you purchase a policy for two or three years and pay the entire premium upfront. This can reduce your overall premium cost and help you avoid premium revisions due to inflation during the selected policy tenure. However, you're committing to the policy for that duration, which may limit your flexibility to port or migrate to another insurer or plan. Discount percentages and terms vary across insurers and plans.

What is the difference between health insurance premium and sum insured?

The health insurance premium is the amount you pay to keep your policy active. In contrast, the sum insured is the coverage amount available for eligible medical expenses during the policy year. For example, if you purchase a policy with a ₹10 lakh sum insured and pay an annual premium of ₹12,000, ₹12,000 is your premium and ₹10 lakh is your coverage amount. The actual claim payout remains subject to policy terms, limits, and exclusions.

Can I switch health insurance companies if my renewal premium increases significantly?

Yes. You can consider porting your existing health insurance policy to another insurer at renewal if you find a more suitable option. Under portability, you can carry forward eligible continuity benefits, such as credits for completed waiting periods and the moratorium period, subject to applicable regulations and the extent of coverage transferred. Ideally, initiate the portability request 30–60 days before your renewal date. Compare the new policy's coverage, exclusions, underwriting terms, and premium before switching.

Does a higher sum insured always mean a higher health insurance premium?

Generally, yes. A higher sum insured means greater potential claim liability for the insurer, which usually results in a higher premium. However, the increase isn't always proportional to the coverage. For example, a 25-year-old purchasing Aditya Birla Activ One Yuva pays ₹8,824 for ₹10 lakh coverage and ₹13,528 for ₹50 lakh coverage. Although the coverage increases fivefold (400%), the annual premium increases by only around 53%. The final premium also depends on the insurer's pricing structure, policy features, and applicable discounts.

Can I remove add-ons to reduce my health insurance premium at renewal?

Yes. If your policy allows it, you can choose to remove optional add-ons at renewal to reduce your premium. For example, you may reconsider benefits such as annual health check-up, OPD, or other optional riders if they no longer suit your requirements. However, review the benefits and exclusions carefully before removing any add-on, as you may have to pay for those expenses yourself if you need them later.

Does the incurred claims ratio (ICR) affect health insurance premiums?

Yes, indirectly. The incurred claims ratio (ICR) shows how much an insurer spends on claims relative to the premiums it earns. A consistently high ICR may strain an insurer's finances and contribute to future premium revisions. However, a high ICR does not automatically mean your premium will increase. You can also check your insurer's NL-47 public disclosures for plan-wise ICR figures. These can help you understand the insurer's claims experience, although ICR alone cannot explain or justify a premium revision.

Last updated on: 14 Nov, 2026

Health Insurance Premium: How It Is Calculated?