Deductibles in Health Insurance
Before buying a health insurance policy, it's essential to understand all its related aspects. Ignoring such components may cause issues during claim settlement. One such term you may encounter while purchasing a health policy is the medical insurance deductible.
To learn more about deductibles in health plans, read on to understand what they are and how they can help you choose an ideal health plan for you and your family.
What Are Deductibles in Medical Insurance?
A deductible is a pre-decided amount that the policyholder needs to pay before their health policy starts covering costs. Here's how it works: If your medical bills do not cross your policy’s deductible limit, the insurance company will not pay anything. If your total medical expenses exceed the deductible amount, you first pay your deductible, and the insurer covers the remaining billed amount. However, if the claim amount does not meet your deductible, your claim will be rejected.
Example of Deductibles
Let us understand the concept of deductibles better with an example:
Mr. Abhay and Mr. Anand both have the same health insurance policy with a sum insured of INR 10 lakhs and have chosen a deductible of INR 1 lakh. One day, both were hospitalized after a bike accident.
- In Abhay's case: Abhay received a medical bill for INR 1.5 lakh. Since his bill exceeds the INR 1 lakh deductible, he pays INR 1 lakh (the deductible amount), and his insurance provider covers the remaining INR 50,000.
- In Anand's case: Anand received a medical bill for INR 85,000. As this amount is less than his INR 1 lakh deductible, he must pay the entire INR 85,000 himself. The insurance company will not cover anything because the claim amount did not meet the deductible limit.
What Are the Types of Deductibles?
In India, there are two types of deductibles in health insurance: Compulsory and Voluntary. Let's understand them:
Compulsory Deductible
A compulsory deductible is a fixed amount that the policyholder must pay whenever they file a claim. Medical expenses exceeding this limit are then covered by your insurer.
Voluntary Deductible
To lower the premium amount, insurance companies offer policyholders the option to choose a voluntary deductible. The voluntary deductible amount chosen by the policyholder often depends on their financial affordability and anticipated medical expenses.
Why Do Insurance Policies Have Deductibles?
Deductibles discourage people from seeking unnecessary treatments or hospitalizations and prevent them from raising small and trivial claims. With a deductible clause in your health insurance policy, you are less likely to file minor claims. This clause is beneficial for both you and the insurer: you can avail the No Claim Bonus (NCB) benefit by avoiding unnecessary claims, while the insurer only needs to cover legitimate claims.
How Does a Deductible in Health Insurance Work?
A deductible works on the principle of sharing a portion of medical expenses with your insurer. The amount of healthcare treatment costs that the policyholder agrees to bear is paid out of pocket. In such cases, the monthly premiums for your policy are typically lower. So, when an individual buys a health insurance policy, the insurance provider offers them the option to choose either a compulsory or a voluntary deductible, subject to policy terms and conditions. This agreed-upon deductible amount is applied per claim.
However, if your medical expenses do not exceed the deductible limit, you will be responsible for the entire amount yourself. This condition helps insurance companies discourage frequent small claims. If the expenses exceed this limit, the insurer will cover the remaining costs for services such as hospitalization, diagnosis, lab tests, medications, and doctor's consultations.
Factors Influencing Deductible Amount in Health Insurance
| Factors | Explanation |
|---|---|
| Age | Younger policyholders typically have lower deductibles compared to older adults. |
| Policy Type | The deductible amount varies based on the type of health plan chosen. Always review the deductible clause before purchasing. |
| Geographical Location | Policyholders in Tier 1 or Tier 2 cities (metropolitan regions) may face higher deductibles due to generally higher medical treatment costs compared to rural or semi-urban areas. |
| Coverage Scope | The extent of coverage offered by the policy influences the deductible amount. |
| Gender | Some insurers may offer different deductibles based on gender, though this varies by provider. |
| Network Hospitals | A wider network of cashless hospitals might lead to higher deductibles, depending on the insurer. |
| Medical History | Policyholders with pre-existing medical conditions may be subject to higher deductibles. |
| Lifestyle Habits | Individuals with unhealthy lifestyle habits (e.g., frequent alcohol consumption or smoking) are often subject to higher deductibles. |
Deductible vs. Co-payment: Key Differences
The main difference between co-payment and medical insurance deductible is the amount policyholders have to pay. Deductibles are typically higher than co-payments and are usually paid per claim or per policy year, depending on the policy terms, before the insurer starts covering costs. Co-payments, however, are smaller fixed amounts paid each time you avail a medical service. While co-payments are specific to health insurance, deductibles are common in both health and general insurance.
Benefits of Deductibles in Health Insurance
Know the advantages of a health insurance plan with deductibles:
| Benefits | Explanation |
|---|---|
| Lower Premiums | Opting for a higher deductible significantly reduces your health insurance premium costs. |
| Discourages Small Claims | Deductibles encourage policyholders to make mindful claims, preventing frequent small claims and reserving coverage for significant medical events. |
| Higher No Claim Bonus (NCB) Potential | By avoiding small claims, policyholders are more likely to earn a No Claim Bonus (NCB) upon policy renewal. |
| Access to Broader Coverage | Higher deductibles can make comprehensive health plans more affordable, allowing access to extensive medical care without the burden of very high premiums. |
Drawbacks of Deductibles in Health Insurance
Medical insurance deductibles also have some drawbacks that you must know:
| Drawbacks | Explanation |
|---|---|
| Initial Out-of-Pocket Cost | Policyholders must pay the deductible amount themselves before the insurer covers any costs, which can be a significant initial financial burden. |
| Delayed Coverage Activation | The policy's coverage only becomes active for claims once the deductible amount has been fully paid by the policyholder. |
| Risk of Delayed Treatment | In emergencies, arranging the deductible amount can sometimes lead to delays in receiving timely medical attention. |
| No Coverage for Small Claims | For minor medical expenses that fall below the deductible, the policyholder receives no coverage from the insurer. |
Conclusion
The choice of deductible should align with your budget and healthcare needs. Opting for a higher deductible typically results in lower premiums. However, remember that if your medical bill does not exceed the deductible amount, you will be responsible for the entire bill yourself.
A health plan is crucial for covering medical expenses during unforeseen medical emergencies. Therefore, making an informed decision when choosing a suitable plan is essential. If you are financially secure and can comfortably cover initial medical bills, a higher deductible plan might be suitable as it lowers premiums. Conversely, if you prefer your insurer to cover a larger portion of your medical bills and are less financially secure, a lower deductible plan would be more appropriate.
Book a free call with a PolicyX expert
5-min consultation · No spam · No pushy sales
- Step 1 of 3
- Step 2 of 3
- Step 3 of 3
Health Insurance Companies Network Hospitals
Other Health Insurance Companies
Explore other top health insurers in India.