Unlocking the mystery of deductibles in health insurance: pay less, know more!
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Understanding different terms associated with health insurance might seem like a difficult task. However, these terms are important components of health insurance which influence the percentage of the claim the insurance company will pay. In health insurance, you and your insurance provider need to share the medical cost arising out of hospitalization. Deductibles in health insurance are the amount that you need to pay before the insurance company is liable to pay the claim amount. To understand more about deductibles in health plans, read on to learn about deductibles in health insurance in India and how it is helpful in determining a robust health plan for you and your family.
The word ‘Deductible’ is closely associated with insurance and it is the amount of money that you must pay before the insurer begins to cover the rest of the claim amount.
How it works: If your insurance plan’s deductible is Rs. 50,000, you will pay 100% of the eligible expenses until the bills total Rs. 50,000. Post that, your insurer will bear the cost.
Deductible in health insurance is the amount you have to pay before the health insurance company begins paying up the claim amount. This means the insurer is bound to pay the claim amount after it exceeds the deductible amount. The biggest advantage of a deductible as a policyholder is that the higher the deductible, the lower the premium. To understand the term better, here is an example of how deductibles in health insurance in India work:
Example: If your health insurance claim amount is Rs. 1,50,000 and your policy’s deductible amount is Rs. 50,000, then you pay Rs. 50,000 while the balance amount of Rs. 1,00,000 is paid by the health insurance company.
Deductibles in insurance act as a deterrent from raising small and unnecessary claims just because there is insurance coverage. While the premium may be low, the deductible in your health insurance plan can be higher. This may deter you from raising small claims and losing out on the No Claim Bonus (NCB). Hence, you are prompted to raise a claim only in case of higher medical expenses and not for minor expenses. Since you need to pay the deductible before the insurance provider covers the remaining sum insured, any unnecessary claims are eliminated and only rightful claims are covered by the insurer.
Top-up in health insurance is an increase in the sum insured to cover the policyholders and their nominees in case of prolonged sickness or unexpected medical emergencies. This is beneficial, especially when you do not want to compromise on the base sum insured in the primary health insurance policy.
However, deductibles in top-up health insurance are slightly different. It is the amount over which the top-up health insurance plan gets triggered. But, any claim amount less than the deductible amount will be paid under the top-up policy. Insurers offer different types of top-up health insurance with specific terms and conditions for deductibles. Ensure you read them carefully before you buy the plan.
Example: Let us say that the sum insured in the primary health insurance policy is Rs. 5 lakh and the top-up policy is another Rs. 3 lakh with Rs. 1 lakh as the deductible amount. If the hospitalization bill amounts to Rs. 6 lakh, the insurer will pay Rs. 5 lakh from the primary policy and the balance Rs. 1 lakh will be paid from the top-up policy. In case of subsequent hospitalization and the medical bills total Rs. 2 lakh, the policyholder must pay Rs. 1 lakh as deductible amount and the rest Rs. 1 lakh will be borne by the insurance company.
Deductibles in health insurance in India are mainly of two types: compulsory and voluntary. Below are different types of deductibles offered in the Indian market as well as those offered in the international markets:
This is a mandatory deductible which is governed by the insurance company. Every time the policyholder raises a claim, this compulsory deductible has to be paid. For example, if the compulsory deductible is Rs. 15,000 and the hospitalization bill is Rs. 50,000, then the insured or the policyholder has to pay Rs. 15,000 and the remaining will be paid by the insurer. This can be in the form of a percentage of the sum insured by the insurance provider.
This deductible is voluntary and the policyholder needs to opt for this. By opting for a higher deductible, the premium reduces accordingly. This is helpful if the insured does not have prolonged illness and may not require financial assistance from the insurer. For example, if you have opted for a voluntary deductible of Rs. 1 lakh. If you raise a claim for medical expenses of Rs. 2 lakh, then you have to pay Rs. 1 lakh and the rest will be paid by the insurer. This is especially helpful when you do not raise claims regularly and want to pay a lower premium towards your health insurance coverage.
A single deductible which keeps adding until you pay up the total amount towards your health insurance policy. This type of deductible in health plans applies across all types of covers. This type of deductible is currently not available in the Indian market.
This type of deductible is applicable only on certain covers and not the complete policy. This may require you to pay an amount of money before the insurer pays up to meet specific medical expenses and treatment.
This type of deductible is applicable to a family floater plan. The insurance company will apply deductibles on all members of the family who have to pay the total deductible after which the insurer will pay the balance claim amount.
The following are some of the main factors that influence the deductible amount in health insurance.
Plan type: Different types of health insurance plans may have different deductible amounts. For example, high-deductible health plans (HDHPs) typically have higher deductibles than traditional or HMO plans.
Age: Age is a key factor in determining deductible amounts as older individuals typically have higher deductibles than younger individuals.
Gender: While not always the case, some insurance policies may offer different deductible amounts based on gender.
Medical history: An individual's medical history can impact their deductible amount as those with pre-existing conditions or a history of medical issues may have a higher deductible.
Coverage level: Higher levels of coverage often come with higher deductible amounts.
Network provider: Some health insurance policies may offer different deductible amounts depending on whether the provider is in or out of network.
Geographical location: The cost of healthcare can vary depending on where an individual lives, so some health insurance policies may take location into account when determining deductible amounts.
Benefit structure: The benefit structure of a policy may also affect the deductible amount, as some policies may have a separate deductible for certain services such as prescription drugs or mental health services.
The primary benefits of the deductibles in health insurance are listed below:
They aid in reducing the health insurance premium. Also, if you have opted for voluntary deductibles, the insurance company may offer discounts.
It discourages you from raising small claims, which in turn helps you earn No Claim Bonus (NCB), which is used to increase the coverage of your primary health plan.
Access to health insurance coverage during medical emergencies or unforeseen hospitalisation despite applicable deductibles.
While deductibles help decrease the premium towards health insurance, it does come with certain disadvantages:
You will have to bear medical expenses, especially if you do not have the financial resources to pay the bill since the health insurance policy with a compulsory deductible will pay only after you pay the deductible amount.
In case of a higher deductible, you will have to pay from your pocket, which can reduce your savings, especially due to multiple medical emergencies.
In health insurance, the cost of medical care has to be shared by the insured and the insurer. Your share is the deductibles and the copay components. Both copay and deductibles are different, although both components are paid by the insured.
Copayment in health insurance is a predetermined amount that you need to pay every time you avail medical care services and raise a claim for the same with the insurance company. It is that percentage of the claim amount that the insured/policyholder agrees to pay. The remainder of the claim amount will be paid by the insurer. When you compare deductible vs. copay, the former is the amount that you need to pay before the insurer begins paying the claim amount; however, copay means, every time you raise a claim, a certain percentage has to be paid by you.
For example, if the claim amount is Rs. 1 lakh and the co-payment percentage is 10%, then you will have to pay Rs. 10,000 and the balance Rs. 90,000 will be paid by the insurer.
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While you may agree that you pay a lower premium by choosing a higher deductible, it may not be safe, especially when you are buying health insurance. Health insurance acts as financial coverage in case of medical emergencies. Hence, you need to make an informed choice before you choose the right coverage. If you are able to pay a higher amount from your pocket while raising the claim, you can opt for the higher deductible. However, if you want insurance to cover most of your medical expenses, then opt for a lower deductible, although you have to pay a higher premium.
Below are some of the common queries about deductibles in a health insurance policy:
While the premium is lower when you opt for a higher deductible, it may be helpful in case of frequent medical emergencies. The insurer will bear most of the cost of the insurance except for the copayment. However, if you do not have a prolonged illness or do not foresee any medical expenses, you can opt for a higher deductible which offers a lower premium benefit.
Until you meet the deductible amount, as agreed on the health insurance policy, the insurance company will not pay the claim amount. Once the deductible is paid by you, and if the medical bill is more than the deductible, the insurer will pay the remaining expenses.
A health insurance policy with low deductibles may be suitable for consumers who foresee frequent medical treatment due to prolonged illness or who feel that they may not be able to bear the entire medical expense.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.