What are the Deductibles in Health Insurance in India?
Deductible in health insurance is the amount that the policyholder is required to pay before that insurance company starts paying up for the treatment expenses in case of a health insurance claim. Simply put, an insurance company is liable to pay for the claim raised by the insured only when it exceeds the deductible.
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Deductible in health insurance is the amount that the insured is required to pay before the insurance company starts offering the coverage benefits in case of a claim. This means that the insurance company is required to pay the claim amount only if it exceeds the deductible amount. But in case the claim amount is lesser than the deductible, then the insurance company is not liable to pay anything. Also, note that the premium for high deductible health insurance plans is low whereas the premium for low deductible policies come at a higher premium.
For example, if the deductible under a health insurance policy is Rs. 30,000, and the insured makes a claim of Rs. 40,000, then the insurance company shall pay Rs. 10,000 only. But if the claim amount is less than the deductible, then the health insurance company is not liable to pay any amount. Note that health insurance with high deductibles comes at higher premiums and vice versa.
Deductibles in health insurance prevent you from making unneccessary treatment and hospitalisation. As the insured has to pay a share of the claim amount with a deductible, hence, they refrain from making claims for minor injuries just because they have a health insurance policy.
Types of Deductibles in Health Insurance
Health insurance deductibles are mainly of two types in India. These are compulsory deductible and voluntary deductible. In the international market, there are other deductibles offered too including comprehensive deductible, non-comprehensive deductible, as well as the cumulative deductible. The two main types of deductibles are explained below:
1. Compulsory Deductible
A compulsory deductible is an amount fixed by the insurance company that the insured is required to pay whenever a claim is raised. For instance, if the compulsory deductible is Rs. 20,000 and the hospitalisation bill is Rs. 60,000, then the insured will be required to pay Rs. 20,000 and the insurance company will pay the rest of the amount that is Rs. 40,000. This can be in the form of the percentage of the sum insured as well, as decided by the insurance company. In the case of compulsory deductible, there is no lowering of the health insurance premium.
2. Voluntary Deductible
A voluntary deductible is an amount chosen by the insured that he/she would like to pay from his own pocket as and when a claim arises. The chosen amount may depend on the financial affordability as well as the medical expenses of the insured. If the insured opts for a higher deductible, then he/she will be required to pay a lesser premium, and vice versa. Voluntary deductible can opt when the insured does not have prolonged illness and may not need financial assistance from the insurance company.
For instance, if the insured has opted for a voluntary deductible of Rs. 50,000 and the claim amount is Rs. 90,000, then he/she will be required to pay Rs. 50,000 and the insurance company will pay the rest of the amount that is Rs. 40,000. This deductible helps when the insured does not raise claims frequently and wants to pay a lesser premium for a health insurance policy.
How Deductibles in Health Insurance Work?
Deductibles in health insurance act as a deterrent from raising small and unnecessary claims just because there is health insurance coverage. For instance, a health insurance policy that has a higher deductible amount will deter the insured from raising small claims as the deductible amount will be paid by him/her. Also, not making any claim will help the insured keep the No Claim Bonus (NCB) safe. Therefore, the insured is prompted to raise a claim only in case of high medical expenses only and not for any minor expenses. As the insured has to pay the deductible amount before the insurance provider pays the rest of the claim amount, it eliminates any unnecessary claims thereby increasing the chances of getting rightful claims.
Advantages of Deductible in Health Insurance
Deductibles in health insurance offer the following benefits to the insured:
- They help in reducing the health insurance premium. Also, if the insured opts for voluntary deductibles, then the insurance company may also offer discounts.
- It discourages the insured from raising claims of small amounts, which helps the insured earn No Claim Bonus (NCB) that can be used to increase the coverage of the primary health insurance policy.
- Despite the applicable deductibles, the insured can get access to health insurance coverage during medical emergencies or unforeseen hospitalisation.
Disadvantages of Deductible in Health Insurance
It is true that deductibles come with decreased health insurance premiums, but there are certain disadvantages too that they bring along:
- The insured will be required to bear the medical expenses, even if they do not have the financial resources to pay for them. This is because the benefits under a health insurance plan with a deductible can only be availed after the deductible is paid by the insured.
- In case of a higher deductible, the insured will be required to pay from their own pocket, which can reduce the savings. Also, the financial burden can be huge if there are multiple medical emergencies.
Difference Between Deductible, Co-Pay, and Co-Insurance in health Insurance?
Deductible, co-pay, and co-insurance are key features of health insurance plans. In order to make a more informed buying decision, you must understand these terms thoroughly.
1. Deductible: As discussed above, deductible in health insurance is a fixed amount that the insured has to pay in case of a claim before the insurance company offers the remaining coverage. It is a key feature in super top-up and top-up health insurance plans. After the deductible is paid by the insured, the insurance company will start offering coverage if the total claim amount exceeds the deductible. The insurance company will bear all the medical expenses covered under the policy, as per its terms and conditions stated in the policy document. For instance, you have a health insurance policy cover of Rs. 5 Lakh and the deductible is set at Rs. 10,000. In this case, if a person raises a claim of Rs. 50,000, then you will be required to pay the deductible amount before the insurance company can enter the scene to offer coverage benefits. The insurance company will then cover you for the remaining Rs. 40,000, which is calculated after deducting Rs. 10,000.
2. Co-payment: The co-payment clause works a little differently. It can either come as an in-build feature in a health insurance policy or can be purchased as an add-on benefit. Under this feature, the insured agrees to pay a fixed percentage or sum of medical expenses. So, unlike deductible, which has to be paid once, co-payment means that the insured has to pay a portion of medical expenses at the time of claim.
For instance, your health insurance policy comes with a co-payment clause of Rs. 2,000 of treatment expenses and you make a claim of Rs. 10,000. Then the insurance company will only cover you for Rs. 8,000 and you will be required to pay Rs. 2,000 as agreed.
Similarly, in the case of percentage, suppose a health insurance policy comes with a co-payment of 10%, then you will be required to pay Rs. 1,000 while the insurance company will bear the remaining Rs. 9,000.
3. Co-insurance: Co-insurance, similar to the co-payment clause, is the percentage of treatment expenses that the insured is required to pay after paying the deductibles, which is generally offered as a fixed percentage. For instance, a health insurance policy has a co-insurance clause of 20%, then the insurance company will bear the rest 80% and the insured will be required to pay 20% of the expenses incurred. The only difference is that in this case, the amount is generally calculated after the deductibles are paid.
No doubt that the health insurance premium is lower when the insured opts for a higher deductible. But it can be helpful in case of several medical emergencies. The insurance company will bear the most claim amounts. But if someone does not have a prolonged illness, or does not expect any medical expenses, then they can go for a higher deductible and enjoy lower health insurance premiums.
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FAQ About What are the Deductibles in Health Insurance in India?
What is deductible in health insurance with example?
Deductible in health insurance is the amount that the policyholder is required to pay by self for the medical treatment before the insurance company starts covering the expenses. For instance, if the deductible amount under your health insurance policy is Rs. 10,000, and you have made a claim of Rs. 35, 000, then your insurance company will cover you for Rs. 25,000 (Rs. 35,000-Rs. 10,000). You will be required to pay Rs. 10,000 from your own pocket as this is the deductible amount under your health insurance policy.
What are the types of health insurance deductible?
In health insurance, there are two types of deductibles. These are explained below:
- Compulsory deductible: It is a fixed amount that the insured individual is required to pay in case a claim arises. A compulsory deductible is decided by the insurance company.
- Voluntary deductible: Voluntary deductible is an amount that the insured individual chooses to pay from his/her own pocket in case a claim arises. The amount chosen may depend on the financial affordability as well as medical expenses incurred by the policyholder.
Do health insurance premiums count towards deductible?
In the case of compulsory deductible, there is no lowering of the premium. Whereas, in case of voluntary deductible, the higher the amount is, the lower your health insurance premium will be. This is because of voluntary deductibles, the reliability of the insurance company decreases.
Should you choose a higher or lower deductible?
When choosing a health insurance deductible, you should only think about lowering your premium, but also focus on the health issues you face as well as the frequency of claims you are expected to make in a financial year. If you are expecting low medical expenses, then you can go for a higher deductible plan. But if you are someone who would not want to pay an extra amount at the time of claim, then you should avoid going for voluntary deductibles or opt for a very less amount.
What happens if I do not pay the required deductible amount?
If you are unable to pay the deductible amount, then there is a chance that you would not be able to avail the required treatment right away. In case the insurance company requires the deductible amount to be paid before it provides you with the cover, then you will be required to find a way to pay the required deductible.
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