Health insurance is used throughout the world, and is a major expense for people of all ages. Because of this, it is important that people realise just how health insurance policies function, and how individual risk factors are calculated in regard to specific health contracts. Like all forms of insurance, health insurance works through a process of risk management, where a policy owner transfers risk to an insurance company in exchange for the price of ongoing insurance premiums. Just like life insurance contracts however, health insurance premiums can vary widely, and this is how many people become confused when shopping around for a health policy.
General risk factors and lifestyle related risk factors play an important part in any health insurance contract, and are one of the main reasons why the price of individual health insurance premiums differs so much from policy to policy. Many health insurance companies require that their new customers attend a health check before they initiate a contract, as well as signing a detailed and legally binding statement regarding their health history and associated lifestyle. Some of the key factors influencing premium rates include the age of the policy owner, their location, their sex, and their medical history. Some of the lifestyle factors influencing premium rates include the levels of smoking, drinking alcohol, using illegal drugs, exercising, and unhealthy eating levels with respect to each individual policy owner.
There are many lifestyle factors that can influence the utilisation of health services, and therefore influence insurance policy credit limit and premium rates. It is only fair that insurance companies raise premiums when they can prove that a link exists between lifestyle and risk, in order to provide an adequate level of cover for all of their customers. Even if an insurance firm does not require that their policy holders attend medical examinations, any information left out in the initial contract is likely to make the policy null and void when it comes time to pay-out for any reason.