What Happens to the Premium when the Sum Insured is Increased?

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By increasing the sum insured on a health insurance policy, the premium increases. This is because insurers take on a higher degree of risk. However, it’s worth noting that the rise is typically not proportional. For instance, with coverage doubling, only a 20–30% premium increase may result, rather than a 100% hike.


Higher coverage provides a more stable financial protective shield. Read ahead to discover the impact of increasing the sum insured on premiums.


How Does Increasing the Sum Insured Impact Premiums?


Between the sums insured and associated premiums, a direct, linear relationship often exists. So, the higher the sum insured, the higher the premium payment obligation. Explore how the sum insured impacts premiums below:



  1. Resulting in a Higher Cost


If the coverage amount or sum insured increases, the insurer’s risk also goes up. This results in a higher premium payment obligation.



  1. Increase is Non-Proportional


The hike in premium payment requirement is not generally proportional to the increase in sum insured. For instance, raising a ₹5 lakh policy to ₹10 lakh will not automatically mean the premium will double.



  1. Re-evaluation of the Coverage


A hike in the sum insured shall be treated as a new underwriting request. It will take into account various factors, such as the insured’s age, health condition, etc.



  1. Possible Alternatives


There are other options, such as Super Top-Up plans or coverage enhancement channels through riders. These alternatives can be more cost-effective than simply increasing the base sum insured.


What are the different factors affecting the Increase in Premiums?


External factors such as medical inflation, higher claims in specific regions, and increased reinsurance may drive premium hikes. Jobs with higher risk, such as firefighting or construction, lead to higher life insurance premiums. In certain cases, premium amounts differ based on gender-specific health risks/lifestyle factors.


Here are the key aspects affecting the increase in premiums:



  • Your Age:The older you are, the higher the premium requirements. This is especially going to be the condition if the sum insured is increased.



  • Medical History:Pre-existing health conditions or worsening diseases at the time of increasing the sum insured may lead to higher premium payment obligations.



  • Lifestyle:Certain lifestyle habits, like smoking or drinking, can increase the revised rate of premiums.



  • Revision of the Product Level:In certain scenarios, changes in premiums are driven by the policy-level reviews rather than specific claims by individuals.


Final Word


As higher coverage necessitates the insurer paying more upon a claim, they charge higher premiums to offset the potential loss.


The final premium increase depends on factors such as age, health status, and medical history. Increasing the sum insured may also subject the additional amount to new waiting periods. This is a view of pre-existing diseases; the insurer may have to re-evaluate the risk.