Age plays a pivotal role in health insurance pricing. Premiums are generally lower for younger policyholders and rise significantly with age. How can buying early reduce your premium and extend coverage? Read to find out.
At what age should one get health insurance? The question weighs differently for each individual with some people opting to wait until they see visible signs of health concerns or until it feels more financially necessary. However the healthcare industry is rapidly changing, and with the dual concern of rising medical costs and unpredictable health crises, younger individuals too must rethink the idea of postponing coverage.
Opting for health insurance in your 20s or early 30s might seem premature to some, but industry experts argue otherwise. Early investment in health insurance is one of the factors included in the financial planning strategies that secure your finances if any unforeseen medical calamity arrives. Let’s look into why buying health insurance young doesn’t just lower premiums in the short-term, but also builds financial resilience and future-proofs your health coverage for the long haul.
Age plays a pivotal role in health insurance pricing. Premiums are generally lower for younger policyholders and rise significantly with age. Insurers assess the risk of potential health issues increasing over time and provide low premium rates when bought early. According to Aayush Dubey, co-founder and research head at Beshak.org, an insurtech platform, this early-age entry into health insurance allows you to ‘lock in favorable terms’ - thereby securing a lower base premium that will see only gradual increases as you age. For instance, someone in their 20s might pay significantly less over the years than someone who waits until 50 and faces 25-30 per cent higher premiums due to the heightened risks that come with age.
Saya Ajay Shah, Head – Distribution, Care Health Insurance, “Premiums are calibrated based on age bands - typically 20-25, 36-45, and so on. As people age and shift into higher bands, premium hikes are inevitable.”
Asserts Dubey, “One key benefit of securing health insurance early is guaranteed coverage.”
He explains: “As we age, the risk of developing health conditions increases. If you wait until 40, and get a serious medical condition, it could make it difficult to get comprehensive coverage. Moreover, purchasing insurance at a young age, like 25, allows you to lock in favorable terms based on your current health status.”
Waiting to buy health insurance until later in life can result in higher premiums due to age and potential health issues. “Insurance companies might even add "loading fees" to your premium, reflecting the increased risk associated with being older. In some cases, you might have fewer plan options or face limitations on coverage due to your age and health status,” he states.
Beyond premium savings, early policyholders benefit from cumulative no-claim bonuses and better coverage over time. Younger policyholders who are statistically less likely to make frequent claims, benefit from an enhanced sum insured without additional premiums. Says Priya Deshmukh - Head - Health Product, Operations & Services, ICICI Lombard, “Young policy buyers can clock in additional benefits such as entitlement to cumulative bonus for every claim-free year and preventive health check-ups that may help detect and treat illnesses early.”
This would provide a young policyholder enhanced coverage for health emergencies in later years. This means that by the time they reach middle age, they are well-covered for health emergencies and can manage medical expenses that might otherwise drain their savings. “However, older customers may not be able to meet the claim-free criteria most of the time, due to pre-existing health conditions which may delay cumulative bonus-related coverage enhancement,” she adds.
Individuals who purchase insurance later in life often struggle to meet claim-free criteria due to some pre-existing conditions resulting in fewer bonus-related enhancements and more out-of-pocket expenses.
Coverage For Pre-Existing Diseases (PEDs): Beating The Waiting Periods
Waiting periods for pre-existing conditions are a common aspect of health insurance policies. Most plans have a stipulated period (usually 3-4 years) during which treatment for any PED/conditions is not covered. When younger individuals get insured, they have the advantage of getting past this waiting period before any major health concerns likely emerge.
Parthanil Ghosh, director, and chief business officer, HDFC ERGO General Insurance explains that young policyholders can complete these waiting periods at a time when their health is stable ensuring that once the waiting period is over, their policy covers them comprehensively, no matter what health issues might arise in the future.
Moreover, those who wait until their 40s or 50s often find that waiting periods become a bigger obstacle as age-related health conditions like hypertension, diabetes, or joint issues might already be present by the time they buy insurance. In some cases, these conditions can either result in restricted coverage or higher premiums, creating challenges just when the need for coverage is most acute.
Staying with a single insurer over the long term can be advantageous, notes R Balasundaram, Secretary General, Insurance Brokers Association of India (IBAI). “Sticking with one insurer can provide continuity in coverage and streamline the claims process. Continuity can be particularly beneficial as it often means pre-existing conditions are continuously covered without waiting periods or exclusions,” he adds.
However, insurers have noted that younger policyholders may tend to treat health insurance as a discretionary purchase, with a low renewal rate due to a lack of immediate need.
“At HDFC ERGO, we have observed that the renewal rates for the younger population in the age bracket of 25-36 years are more than 70 per cent as compared to 80 per cent for the population of 36+ years. This is a surprising trend as ideally the young population should continue with their health insurance policies as longevity of policies attracts higher no claim bonuses and thereby higher Sum Insured and reduces any complication at the time of claims incidence,” says Ghosh.
Deshmukh points out that insurers increasingly encourage young policyholders to stay with one insurer by offering loyalty rewards and fitness-linked incentives to build long-term relationships with the policyholders which benefits both parties.
While health insurance at any stage acts as a significant financial safety net against medical expenses, starting young offers many accumulated benefits that come in handy during the later years. Buying early also ensures lower premiums and continuous coverage. As medical inflation rises, the purchase of health insurance at a young age would provide peace of mind for future uncertainties.