Premium Calculation & Portability
How a health insurance premium is built, the tax that applies to it, the limit on premium increases for senior citizens, and how portability lets a policyholder change insurer without losing credits already earned.
What goes into a premium
A health premium is set by the insurer. The usual rating factors are age, the sum insured, the number of people covered, the place of residence and health history. Age generally matters most: insurers price in age bands, and the premium rises when the insured moves into an older band because claims become more likely with age. How steeply it rises differs between insurers.
Many insurers also price by zone, charging more where treatment costs more, usually the large metro cities; the zones and the difference are each insurer's own decision. A loading is an extra charge on the base premium where the insurer assesses the risk as higher than standard, for example because of a pre-existing disease or tobacco use. Whether a loading applies, and how much, depends on the insurer's underwriting.
No-claim bonus
A claim-free year can earn a no-claim bonus. Under IRDAI's Master Circular on Health Insurance Business (29 May 2024) it is given as a cumulative bonus, meaning a higher sum insured, and/or as a discount on the premium, at the policyholder's choice. The rate, and what happens to the bonus after a claim, are set by the product.
Tax on the premium
Since 22 September 2025, premiums on individual health policies, including family floaters and senior-citizen policies, are exempt from GST; earlier the rate was 18%. Group policies are outside the exemption and continue at 18%.
Income tax is a separate matter. Section 126 of the Income-tax Act, 2025 (old section 80D) allows a deduction for health insurance premiums paid by a non-cash mode, but only under the old tax regime; it is not available under the default new regime.
Senior citizens and portability
An IRDAI circular of 30 January 2025 says the premium on an individual indemnity policy of a senior citizen (aged 60 and above) may not be raised by more than 10% a year without prior consultation with IRDAI.
Portability lets the holder of an indemnity policy move to another insurer and keep the credits earned: the sum insured, no-claim bonus, waiting periods served and the moratorium, to the extent of the earlier sum insured. The existing insurer must supply the information sought within 72 hours, and the new insurer must decide within 5 days of receiving it. Moving to another product of the same insurer is called migration and carries credits in the same way.
Rules at a glance
Porting with a higher sum insured
Illustration: Farida, 45, has held an indemnity policy of ₹5 lakh for two years and ports to another insurer for ₹8 lakh. Her two years count towards the waiting periods on the first ₹5 lakh. On the additional ₹3 lakh the waiting periods of the new policy apply afresh.
Loading, GST and the senior-citizen limit
- Assumptions, for arithmetic only: base premium ₹20,000 on an individual policy; the insurer applies a loading of 25%.
- Loading = 25% × ₹20,000 = ₹5,000. Premium = ₹20,000 + ₹5,000 = ₹25,000.
- GST today: nil, so ₹25,000 is payable. Before 22 September 2025 the same premium would have carried GST of 18% × ₹25,000 = ₹4,500, making ₹29,500.
- If this is a senior citizen's individual indemnity policy: 10% × ₹25,000 = ₹2,500, so a renewal premium above ₹25,000 + ₹2,500 = ₹27,500 would need prior consultation with IRDAI.
Result. Payable today ₹25,000; the consultation threshold for next year is ₹27,500. The loading percentage is invented; actual loadings are set by each insurer.
Key points
- Age is usually the strongest rating factor; zones and loadings are decided by each insurer.
- GST is nil on individual health premiums since 22 September 2025; group policies remain at 18%.
- A rise above 10% a year in a senior citizen's individual indemnity premium needs prior consultation with IRDAI.
- On portability the existing insurer has 72 hours to share data and the new insurer 5 days to decide.
Common misunderstandings
- Nil GST does not extend to every health policy: it covers individual policies, while group policies continue at 18%.
- The 10% figure is not an absolute ceiling on senior citizens' premiums: it is the level beyond which the insurer must first consult IRDAI.
- Older material says a portability request must be made at least 45 days before renewal; the current circular has no such window.
Questions people ask
Why can the premium rise without any claim?
Mainly because health cover is priced in age bands, so the premium rises when the insured moves into an older band. An insurer may also revise a product's rates; for a senior citizen's individual indemnity policy, a rise of more than 10% in a year needs consultation with IRDAI.
Is the premium deductible under the new tax regime?
No. The section 126 deduction is available only under the old regime.
How does migration differ from portability?
Portability is a move to another insurer; migration is a move to another product of the same insurer. Credits carry over in both, to the extent of the earlier cover.
What this lesson relies on
- IRDAI Master Circular on Health Insurance Business (29 May 2024)
- IRDAI circular of 30 January 2025 on premium revision for senior citizens' health policies
- GST Council, 56th meeting (3 September 2025) — exemption for individual health and life insurance policies from 22 September 2025
- Income-tax Act, 2025 — section 126 (old section 80D) and section 202
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.