Deductible in health insurance

What is Deductible in Top-up Health Insurance?

A deductible in top-up health insurance works no differently than one in regular health insurance. As a policyholder, you must pay out-of-pocket before the insurance coverage guaranteed under the top-up plan comes into effect. The only difference here is that your basic plan will also cover a part of your expenses, and the top-up plan will only get activated when you cross the threshold limit. Suppose you have a base plan of Rs 5 lakh, and top-up plan of Rs 5 lakh and a deductible set at Rs 3 lakh. Your medical bill during hospitalisation is Rs 8 lakh. You won’t have to pay anything as the first Rs 5 lakh will be covered by the base plan and the rest by the top-up plan.

Factors that Impact the Deductible Amount in Health Insurance Policy?

Domiciliary hospitalization cover has many benefits. When you are buying health insurance, ensure it is part of the base policy or add it to your healthcare plan:

• Plan type: The type of health insurance plan you choose will affect your deductible amount. For example, a high-deductible healthcare plan typically has a higher deductible than a traditional policy.
• Coverage level: The level of coverage you choose can impact your deductible in health insurance. If you are going for a higher sum assured, you are already paying a high health insurance premium to keep the deductible low.
• Age: Your age can also impact your deductible amount. Older individuals tend to have higher health insurance premiums and deductibles.
• Location:Healthcare costs vary by location, and your deductible may be higher or lower depending on where you live.
• Family size: The size of your family will impact your deductible amount. Larger families often have higher deductibles.
• Lifestyle choices: If you smoke or drink, your health insurance premium and deductible may be higher.
• Pre-existing conditions: Your deductible amount may be higher if you have a pre-existing medical condition.

How many types of health deductibles are there?

There are two types of deductibles in health insurance in India – Compulsory Deductible and Voluntary Deductible. However in international markets, there are a few more which are also included below

• Compulsory Deductible: In compulsory deductible, the insurance provider decides the amount,and the policyholder has no say in it. Whenever there is a claim, the insured has to pay only the amount set by the insurer. Since the amount is fixed, there’s no impact on the premium of your policy. For instance, if your hospital bills come to Rs 50,000 and your compulsory deductible is Rs 20,000, you have to pay Rs 20,000, and the insurer will pay the remaining amount.
• Voluntary Deductible: This deductible in health insurance is voluntary and chosen by the insured. You can select the amount you have to pay from your pocket based on your financial capacity and medical expenses. The higher the deductible amount, the lower will be your premium. This is helpful for those who don’t raise claims frequently.
• Comprehensive Deductible: In this type of deductible, a single deductible keeps adding up until you pay up the total amount towards your health insurance policy. It is applied across health insurance policies and is yet to be made available in the Indian market.
• Non-Comprehensive Deductible: This is not applied to all health insurance plans. It may require the deductible amount to be paid before the insurer pays up to meet specific health expenses and treatment.
• Cumulative Deductible: It 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 remaining claim amount.

Why Should You opt for an Insurance Deductible?

An insurance deductible can help you in many ways. If you opt for a high deductible, it will help you lower the premium of your policy, which can benefit you over the years. A deductible will minimise the number of claims you file, and if you don’t file small /unnecessary claims, your insurer will reward you with a No Claim Bonus (NCB). The NCB is the discount you will get on your premium at the time of renewal. The accumulated NCB will also increase the sum insured, which can reduce your out-of-pocket expenses during emergencies. However, there’s a disadvantage to an insurance deductible. If your hospitalisation expenses, repair costs of your vehicle, or home renovation expenses do not exceed the deductible, you will not get any insurance coverage. You will end up spending from your pocket. So, when opting for a deductible, understand what are deductibles in health insurance, how it works and whether it will benefit you.

Pros & Cons

It's important to carefully consider both the pros and cons of a deductible in health insurance and to choose a plan that is right for your individual healthcare needs and financial situation.

Pros

• Lower Monthly Premiums: The monthly cost with a deductible is typically lower than other types of health insurance plans as it reduces the risk factor for the insurer.
• Encourages Cost Consciousness: By requiring individuals to pay for a portion of their medical expenses out-of-pocket, a deductible can encourage people to be more cost-conscious and make informed decisions about their healthcare.

Cons

• Higher Out-of-Pocket Costs: A high deductible requires you to pay for a portion of your medical expenses before insurance comes into play, which can result in higher out-of-pocket costs.
• Risk of Financial Hardship: If you have a major medical expense that exceeds your deductible, you may face significant financial hardship, especially if you have little or no savings.
• May Deter Use of Preventive Care: The requirement to pay out-of-pocket before insurance coverage begins may discourage individuals from seeking preventive care, which can lead to more severe health problems down the road.

Difference Between Deductible, Co-Pay, and Co-Insurance in health Insurance

While selecting a health insurance policy, it is important to know about certain terms like deductibles, co-pay and co-insurance. How are these terms different from each other? Let’s take a look:

• Deductible: A deductible in health insurance is a part of the claim amount that you have to bear before the insurance provider starts paying. The insurance provider will cover the medical expenses only after you have paid the deductible. So, the insurer will pay only if the expenses exceed the deductible. For instance, your health insurance policy has a deductible of Rs 5000, and your hospital bill comes to Rs 3,000; you have to bear all the costs incurred in such a case.
• Co-pay: Co-payment or co-pay is the fixed amount or percentage that the policyholder has to pay towards the treatment costs while the remaining expense will be taken care of by the insurer. For example, if your insurance policy has a co-pay clause of Rs 2,000 and your treatment cost is Rs 10,000, you will pay Rs 2,000, and the insurer will cover Rs 8,000. Again, if your co-pay clause is 10% of the claim amount, you will need to pay Rs 1000, while the insurance provider will cover 90% of the cost, i.e., Rs 9,000.
• Co-insurance: Co-insurance is the fixed percentage of the medical expenses that a policyholder needs to pay after paying the deductibles. The insurer will pay the rest of the expenses. The co-insurance is calculated after the deductibles are paid. For example, if your claim for medical expenses is Rs 10,000 and you pay the deductible of Rs 5,000, the insurance provider will pay the balance of Rs 5,000. Of this Rs 5,000 (the insurer has to pay), if your co-insurance is 10%, you have to pay an additional Rs 500 (10% of Rs 5,000). Your insurance provider will cover the remaining Rs 4500.

How to Choose a Deductible?

Choosing the right deductible in a health insurance plan can be tricky. Tips that may enable you to make an informed choice: 

• Consider your overall healthcare expenses: Review your past medical bills and estimate your future healthcare expenses to determine how much you can afford to pay out of pocket before insurance comes into effect.
• Balance cost and coverage: A higher deductible plan typically means lower monthly premiums, but it also means you will pay more out of pocket before insurance gets activated. Consider your financial situation and determine how much you can afford to pay upfront.
• Consider your potential for large medical expenses: If you have a pre-existing medical condition or are facing a major health event, such as surgery, you may opt for a lower deductible to reduce your out-of-pocket expenses.
• Evaluate your lifestyle: Consider your lifestyle and any potential risks. If you are an active person with a higher risk of injury, you may want to opt for a lower deductible.

Ultimately, choosing the right deductible in health insurance is a personal decision that should take into account your individual needs and financial situation. Researching and comparing healthcare plansand understanding the difference between deductible and co-pay can help you make the right call.

Conclusion

Before opting for a deductible in health insurance, you should understand what is deductible, what is deductible in insurance, how it works, why insurance policies have deductibles, what is the difference between deductible and copay etc. Don’t blindly choose the deductible in health insurance to lower your premium because it may or may not benefit you in the long run. It is imperative to understand what are deductibles in health insurance and what other related terms associated with a deductible imply. Before signing the proposal form, read the details of the policy carefully.