Your Credit Score Can Impact Your Health Insurance Premium. Here’s How

When most people think about health insurance, they usually consider factors like age, medical history, type of plan, and coverage benefits. Rarely do they imagine that their credit score—a number usually associated with loans and credit cards—can affect how much they pay for health insurance.

Surprising? Yes. But true.

A good credit score can actually help you save money on health insurance premiums, while a poor score may increase your costs. In recent years, insurers have started using credit scores as a way to assess customer behaviour, financial discipline, and risk profile. Let’s dive deep into what this means for you, why it matters, and how you can manage your credit score to reduce your health insurance burden.

Your Credit Score Can Impact Your Health Insurance Premium. Here’s How

What Exactly Is a Credit Score?

A credit score is a three-digit number, usually between 300 and 900, that reflects your creditworthiness. It is calculated based on your financial behaviour and credit history. In India, credit scores are provided by credit bureaus such as CIBIL, Experian, Equifax, and CRIF High Mark.

Here’s what goes into calculating your score:

Repayment history (35%) – Whether you pay your EMIs and credit card bills on time.
Credit utilisation (30%) – How much of your available credit limit you use.
Length of credit history (15%) – How long you’ve had credit accounts.
Credit mix (10%) – A balance of secured loans (like home loans) and unsecured loans (like personal loans).
New credit inquiries (10%) – The number of times you apply for new loans or credit cards.

The higher your score, the more financially responsible you appear to banks, lenders, and now—insurance companies.

Why Do Health Insurers Care About Credit Scores?

You may wonder: Why should my credit history matter for health insurance?

Insurance companies operate on risk assessment. Their business depends on predicting how likely it is that a policyholder will file a claim or default on premium payments. Traditionally, they used factors like age, smoking habits, pre-existing conditions, and lifestyle. Now, many insurers also consider financial behaviour.

Here’s why:

Indicator of Responsibility
A high credit score shows that you are disciplined with money—paying bills on time and managing debt wisely. Insurers assume that responsible people are less likely to commit fraud or delay premium payments.
Lower Risk for Insurer
Insurers view customers with poor credit scores as risky. They may worry about late payments, lapses in policy renewals, or disputes. This perceived risk often translates into higher premiums.
Fraud Prevention
Insurance fraud is a real problem. A healthy credit score suggests lower chances of fraudulent behaviour, giving insurers more confidence in offering discounts.

How Credit Scores Affect Your Premium

The impact of credit scores on health insurance premiums can go both ways:

Discounts for High Credit Scores
If your score is excellent (say above 750), you may get a discount on your premium. Some insurers in India now advertise this as a benefit—rewarding financially responsible customers.

Example: If your base premium is ₹20,000 per year, and you qualify for a 10% discount, you save ₹2,000 annually just because of your credit score.
Loading for Low Credit Scores
On the other hand, if your score is poor (say below 600), the insurer may charge extra, known as “loading.” This means your premium could increase by 5–20%, depending on the insurer’s policy.

Example: If your premium is ₹20,000, you might end up paying ₹23,000 or more due to additional loading.
Neutral Zone
For average scores (between 650–720), insurers may neither give discounts nor impose penalties. You simply pay the standard rate.

How Does the Process Work?

When you apply for a health insurance policy:

The insurer may ask if you want to opt in for a credit-score-based evaluation.
If you agree, they check your credit score through your PAN-linked credit bureau record.
Depending on your score, they may either:
- Apply a discount to your premium, OR
- Add a loading charge if your score is low.
The final premium is calculated after applying this adjustment, along with any taxes or fees.

Pros and Cons of Credit-Linked Premiums

Like any system, linking credit scores with insurance premiums has benefits and drawbacks.

Pros

Reward for financial discipline – You get lower premiums if you manage your money well.
Encourages responsibility – People may be motivated to improve their credit scores.
Fairer assessment – Insurers rely on actual financial behaviour, not just health factors.

Cons

Unfair to some customers – Someone who had financial difficulties (job loss, medical bills, etc.) may end up paying more.
Limited awareness – Many people don’t even know this practice exists.
Not fully transparent – Insurers may not clearly disclose how much discount or loading applies.

GST Exemption on Health Insurance Premiums

Another important update for policyholders in India:
Starting 22 September 2025, individual health insurance premiums are no longer subject to Goods and Services Tax (GST).

Earlier, policyholders had to pay an additional 18% GST on top of their premium. This made health insurance quite expensive, especially for senior citizens and families.

With the new rule:

If your premium was ₹20,000 + 18% GST = ₹23,600 earlier, you will now pay only ₹20,000.
This change, combined with credit-score-based discounts, can lead to substantial savings.

How to Improve Your Credit Score for Better Premiums

If you want to take advantage of lower premiums, here are some practical tips to boost your credit score:

Pay all bills and EMIs on time – Even a single late payment can reduce your score.
Keep credit utilisation low – Try to use less than 30% of your credit card limit.
Avoid too many loan applications – Multiple inquiries in a short time reduce your score.
Maintain old accounts – A longer credit history improves stability.
Check your credit report regularly – Correct errors or discrepancies.

Improving your score is not an overnight task, but with consistent discipline, you can see results within 6–12 months.

Things to Remember Before Buying a Policy

While your credit score is important, don’t make it the only factor when choosing a health insurance plan. Always evaluate:

Coverage benefits – Hospitalisation, day-care procedures, maternity cover, etc.
Room rent limits – Higher limits prevent out-of-pocket expenses.
Waiting periods – Shorter waiting periods for pre-existing diseases are better.
Claim settlement ratio – Choose insurers with a good track record of settling claims.
Network hospitals – Ensure the insurer has tie-ups with hospitals near you.

A slightly higher premium with comprehensive coverage is better than a cheap plan with many restrictions.

The Bigger Picture: Financial Health = Physical Health

Your financial health and physical health are more connected than you may realise. A poor credit score doesn’t just impact your ability to get loans—it can now also affect your access to affordable healthcare.

By maintaining good financial habits, you not only strengthen your future borrowing capacity but also reduce the burden of health insurance costs.

Final Thoughts

Health insurance is essential in today’s world of rising medical expenses. With premiums linked to credit scores, your financial discipline now plays a bigger role than ever.

A good score can give you discounts.
A poor score may cost you extra.
With the removal of GST, the overall burden on policyholders is already reduced.

So, managing your credit wisely isn’t just about securing loans—it could also mean better protection for your health at a lower cost.

In the end, maintaining a good credit score is like maintaining good health: it requires regular care, discipline, and responsibility. And just like healthy habits lead to a stronger body, smart financial habits lead to lower premiums and greater peace of mind.

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