What are Deductibles in Health Insurance?

Posted on: Feb 14, 2019 | 3 mins | Written by: HDFC ERGO Team

What are Deductibles in Health Insurance?

When the risk of both accidents and ailments looms large, buying the best health insurance in India is a wise call to safeguard your finances during medical emergencies. But a health plan that offers comprehensive coverage comes at a premium that can leave policyholders high and dry, especially if they have a history of hospitalisation or have pre-existing diseases. One can raise the deductible amount to reduce the premium and bring it under the budget. But the concept of a deductible is not very clear to many. For instance, most people wonder why insurers pitch the idea of deductibles. Well, let's clarify your doubts by understanding what is a deductible in health insurance and the various types of deductibles in health insurance.

What are deductibles?

A health insurance deductible is the amount a policyholder must pay before filing a health insurance claim. This means the insurance company will pay the claim amount only after you have cleared the deductibles. In other words, your insurer will pay only when the claim amount exceeds the deductible. If the amount is less than the deductible, the insurer will pay nothing, and your claim will get denied.

Example:

Let us understand what exactly is a deductible with the help of an example.

You have a health insurance policy with a sum insured of Rs 3 lakh and a deductible of Rs 30,000. You have to undergo surgery which will cost Rs 50,000. So, before raising a claim, you need to pay Rs 30,000 out of your pocket, and the insurer will pay the remaining Rs 20,000. Now, imagine you have to be hospitalised for an illness, and the bill comes to Rs 20,000. Now, since this amount is less than the deductible amount of Rs 30,000, you have to bear the entire surgery cost, that is, Rs 20,000. You cannot raise any claim because it is less than the deductible.

What is Deductible in Top-up Health Insurance?

Top-up health insurance is an additional cover to your existing health plan. The top-up plan kicks in only after the sum insured by your base plan gets exhausted. Deductibles in top-up plan health insurance imply your basic policy will also cover a part of your expenses; the top-up plan will get activated only when the threshold limit is reached. Suppose the sum insured of your base plan is Rs 5 lakh, the top-up plan is also 5 lakh, and the deductible is set at Rs 3 lakh. During hospitalisation, if your medical expense is Rs 8 lakh, you won't have to pay anything as the first 5 lakhs will be covered by the base plan and the rest by the top-up plan.

Types of Deductibles in Health Insurance

Let's look at the categories of deductibles in health insurance available both in India and the international market.

1. Compulsory Deductible:

The compulsory deductible is fixed by the insurance company, and you have to compulsorily pay this amount whenever you file a claim. For instance, if your health insurance has a compulsory deductible of Rs 10,000 and the hospitalisation expense is Rs 50,000, you have to pay Rs 10,000, and your insurer will pay the remaining. Since the deductible amount is fixed, there's no impact on the premium of your policy.

2. Voluntary Deductible:

As the name suggests, this deductible is voluntary, and you can opt for it to reduce the premium. You can choose the deductible amount based on your affordability and medical expenses, as this amount has to be paid from your pocket each time you raise a claim. For instance, if you opt for a voluntary deductible of Rs 1 lakh and the hospital bill is Rs 1.5 lakh, you have to pay Rs 1 lakh, and the insurance provider will pay the remaining. This is usually recommended for those who do not raise claims regularly and want to pay a lower premium. The higher the deductible amount, the lower the policy's premium.

3. Cumulative Deductible:

This is only applicable to family floaters or family health insurance plans. As the family floater covers all members of the household under one plan, the cumulative deductible is applied when any insured family member raises a claim.

4. Comprehensive Deductible:

This is a single deductible that keeps adding up until you have paid the total amount.

5. Non-comprehensive Deductible:

This type of deductible applies only to specific covers and not the entire policy. You may have to pay for the specific medical costs before raising claims.

Deductible vs. Copay Clause in Health Insurance

The major differences between deductibles and copay in health insurance are:

Parameters	Deductible	Copay
Meaning	The deductible is the fixed amount you must pay before raising a health insurance claim. Only when the claim amount exceeds the deductible your insurance provider will pay the remaining.	A copay is the amount you must pay while the insurance provider pays the rest.
Form	A deductible is a fixed sum.	A copay can be a fixed amount or percentage of the sum insured.
Frequency	A deductible is usually applicable for an entire policy year.	Copay has to be paid whenever you raise a health insurance claim, whether cashless or reimbursement.
Scope	A deductible is a part of most health insurance policies.	Copay is included only in specific health plans such as critical illness and senior citizen health insurance, where the likelihood of filing claims is more.

Significance

• The deductible amount is fixed at the time of purchasing or renewing a health insurance policy.

• The higher the deductible, the lesser your health insurance premium will be and vice-versa.

• Policyholders refrain from making small and unreasonable claims because they know a part of the claim amount will be paid by them. A claim-free policy year helps them earn a No Claim Bonus, which will reduce the premium amount at the time of policy renewal.

• Since the policyholder must pay the deductible before raising a claim, there are fewer chances of fraudulent claims.

• The flip side is if your claim amount is less than the deductible and you have to bear all the expenses, having an insurance cover doesn't serve any purpose. Your investment will become a waste. Hence, check the policy terms properly before buying it.

Conclusion

Opting for a high deductible will reduce your premium, but there will be more out-of-pocket expenses. Health insurance policies with high deductibles are recommended if you don't have any chronic illness or do not require much medical attention. Those with chronic illnesses should opt for a low deductible so that insurance takes care of most of the expenses. While choosing a deductible, consider your health condition, age, frequency of filing claims, etc. Premiums should not be the sole deciding factor.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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