Introduction
Vikas is an avid online shopper. From books, household utilities, and kitchen utensils, to fashionable apparel - online shopping is his favourite go-to. His payments are cleared via his credit card, which has currently become his financial BFF. The credit card is a financial life saviour postponing the requirement of any immediate payments. Vikas will need to pay off his bills by the 20th of the next month. But what happens if he misses a payment?
First, he is given a buffer of a few days to clear out the payment. Missing that, he is then charged late fees on a per-day basis. And once Vikas experiences this, he starts looking back at how much extra he had had to pay over late fee-laced credit card bills.
Parallels can easily be drawn between this analogy of a credit card & its bill and a health insurance policy & its premium.
However, in the case of a health insurance plan, any delay in premium payment can have a diverse impact on the financial cushioning that protects a policyholder’s savings during times of medical emergencies and can even create a situation where one no longer has access to quality healthcare services that can be covered with cashless modes of payment.
Now, timely payment of premiums bears more significance, and this is just the tip of the iceberg. To get a better idea of why timely payments of health insurance plan premiums are crucial, let’s take a look at the read below -
Health Insurance Premiums: All You Need to Know
Health insurance policies from the best insurers have been in heavy demand across the globe owing to the health scare due to our latest lifestyle practices, sudden vulnerability during COVID-19, and the substantial spike in medical costs across the industry.
To facilitate the better suitability of health insurance policies, plans have been tailored to cater to the medical requirements of potential policyholders. While each health insurance plan carries with it a set of common perks and another set of customised benefits, there is one commonality that is inescapable - substantial premiums.
Now, honestly, one cannot blame the health insurance providers for the spiked premiums because it is their way of financially shielding themselves against high-end hospital invoices. However, premiums are not just about how expensive they are, it is also about how they are calculated, the factors that contribute to the sum total, and how and when the policy gets renewed.
Heads Up: It takes an average person up to 5 hours to read & analyze a policy, and 10 hours or more to compare different plans and make a decision.
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A. How are health insurance premiums calculated?
In recent times, there are multiple free tools to calculate health insurance premiums online. These computations depend on a variety of factors -
- Age of the policyholder - The higher the age of the policyholder, the higher the risks of contracting ailments leading to a spiked risk of payout over multiple hospitalisations or long-term treatment procedures. Thus, health insurance providers demand a higher premium.
- Sum Insured - The higher the sum insured opted for, the more an insurer is promising to cover in terms of your health insurance plan and thus, require a higher premium to be paid by the policyholder.
- Health insurance add-ons opted for - Health insurance add-ons are an excellent way to customise policies to benefit a policyholder and help him/her better meet his/her medical requirements. However, such riders also fetch a nominal charge that has an impact on the health insurance premium.
- Pre-existing ailments - Pre-existing medical conditions of policyholders at times make it difficult to avail of a health insurance plan.
Even when they can avail of plans, they come with an extensive waiting period and often demand a loading charge that spikes the overall premium of the health insurance plan.
- Location of the health insurance policy proposer - Based on the Tier city that the proposer of the health insurance plan is situated in, the premiums vary. In Tier 1 cities, individuals are looking at higher hospital bills over costly procedures and hospitalisations, and hence, a higher premium as compared to that posed on individuals located in Tier 2 and Tier 3 cities.
- Deductibles and copayments availed of - Some health insurance policies offer options of copayment and deductibles on the plan. This determines the share of the payment made by the policyholder towards the medical bills. Since the policyholder agrees to share a financial responsibility towards the policy, the health insurance provider is extremely willing to offer a mitigated premium on the plan.
- The number of network hospitals listed in the policy - The number of network hospitals in a policy determines if the plan is one of the best health insurance policies in the market or not. However, more number of partner hospitals in a plan suggests higher convenience provided to the policyholder and as a result, higher premiums should be expected.
B. Premiums during health insurance policy renewal
When it’s time for a health insurance policy renewal, policyholders are required to pay up their premiums for a 1, 2, or 3-year period. For a single-year health insurance renewal, the sum to be paid comprises of -
- Base premium
- Health insurance add-on charges
- Loading charges, etc.
While acknowledging these components in a health insurance bill is crucial so that you can be well-prepared for the payment, it is also important that you set an alarm for the renewal date. The timely payment of the health insurance premium can be very significant. Here’s why -
What is the Importance of Timely Premium Payments for Your Health Insurance?
Each policyholder is given the option to opt for a 1, 2, or 3-year (multi-year) health insurance policy. It is a matter of whether you are ready to pay off the premium for 1, 2, or 3 years at a go. A health insurance provider offers you a grace period of approximately 30 days (varies from one insurer to another) from the date of health insurance renewal.
If the premium is paid within the stipulated deadline, you have a smooth-running health insurance policy. However, if you exceed the renewal date and/or the grace period too, the consequences can be financially monumental.
Here’s a look at the consequences that make it crucial for policyholders to pay off their premiums in a timely fashion-
CASE I: DELAYED PREMIUM PAYMENT WITHIN THE GRACE PERIOD
(i) You do not have coverage during the grace period
While the grace period is a considerate offering by the health insurance provider to make sure that the policyholder doesn’t lose out on a health insurance plan completely, they do not extend the coverage privileges during this span. Thus, in case of any medical emergencies during the grace period, policyholders are left financially vulnerable to pay off the healthcare charges from their pockets.
At times, to avoid such eating away at one’s savings, individuals might try and compromise on the quality of healthcare services that one seeks. That is not good news for an individual.
The best way out would be to pay off the health insurance premium before the grace period kicks off so that none of such vulnerabilities get activated.
(ii) Late fees might be a reality with delayed premium payments
A delayed health insurance premium payment during the grace period attracts a late fee. This is a financial consequence of the trust that the health insurance provider extends to its policyholder.
The late fees get added to the premium amount that you will be paying and that means you are looking at a spiked premium that takes a redundant toll on your savings.
CASE II: DELAYED PREMIUM PAYMENT AFTER THE GRACE PERIOD
(i) You might have a case of health insurance policy lapse
After the grace period has passed and the policyholder is yet to pay off his/her premium on her health insurance plan, things get radically complicated. One may be looking at a cancellation of his/her policy. And if this happens, individuals are looking at 2 situations -
- The vulnerability of being exposed to any financial consequences resulting out of a medical emergency.
- The purchase of a new health insurance plan that starts with the use of a free health insurance plan comparison tool and availing of advice from expert health insurance advisors.
(ii) Delayed premium payments = Restart of the waiting period
When you have an active healthy insurance plan, as a policyholder you are processing multiple waiting periods - commencement, pre-existing ailments, specific illness, and critical disease.
If you want to port your health insurance plan, the waiting period consumed is considered. However, if you make a delayed premium payment after the pre-decided grace period and a subsequent cancellation of a health insurance policy, all that consumed waiting period has gone to waste. Even with a new plan, you will have to start from scratch.
(iii) No access to quality preventive care services
A delayed health insurance premium payment post the grace period leading to a cancelled plan means you no longer have coverage for preventive care services.
Since these services come expensive and are responsible for the diagnostic tests that lead to the early detection of multiple ailments, any compromise with these services means a prologue to compromised healthcare services in the future and unforeseen medical complications.
(iv) Lost credibility with health insurance providers
If a policyholder makes a timely payment, he poses as an ideal policyholder making him a suitable candidate for discounts and smooth claim settlements.
If a policyholder has delayed payment of premiums but within the grace period, since he/she sticks with the same plan and the insurer, one still stays in the good books of the health insurance provider.
However, if a policyholder misses out on his/her grace period too and loses the health insurance plan altogether, applying for another policy with the same or different insurer will prove to have difficult consequences. Availing of a health insurance policy in such cases will have some hurdles considering the policyholder’s credibility, and even if the plan is offered, perks might just be compromised or mitigated.
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Conclusion
Having active health insurance policies is a much-required financial shield during times of spiked medical inflation. However, to continue to reap the benefits of the plans, policyholders have to be financially responsible to make timely payments of health insurance premiums.
