What is Deductible in Health Insurance?

5 min read

It has become vital to have a health insurance policy nowadays, especially after the covid19 pandemic; it is of paramount importance. It provides comprehensive financial security against rising medical expenditures and helps protect your savings for achieving your other goals of life. But, before purchasing an insurance plan for your health, it is a must to know about its coverage. While certain terms used in insurance policy documents could be baffling and ambiguous, it is always best to understand the meaning and purpose before you move to purchase it from the insurer. An insurance deductible is one such word that is commonly misunderstood by many, which we have explained in detail here.

Deductible in Health Insurance?

The portion of the medical/hospitalization expenses that the insurer has to pay before he/she can make an insurance claim is known as deductible in Health Insurance. Insurance companies will either pay the amount of your claim directly to you or to the hospital after the deductible amount has been paid.

In simple words, it can be said that the insurance company shall pay the claim if it exceeds the amount of the deductible, and any claim which is less than the insurance deductible wouldn’t be paid.

Let us understand what is deductible in health insurance with an example: Let’s say you are advised to undergo surgery, which will cost around Rs.1,20,000. You may get hospitalized and eventually file a claim to pay for the cost of the procedure. But, when the insurance policy comes with the deductible of Rs. 20,000, you’ll have to pay Rs. 20,000 from your pocket, and your insurance provider shall pay the balance of Rs.1,00,000.

In case you are required to get admitted to the hospital for a minor surgery that costs Rs. 15,000 only. As the cost is lower than the deductible of Rs. 20,000, the insurer wouldn’t cover the expenses, and you’ll have to pay the entire amount of surgery all by yourself.

Also Read: Advantages of Family Health Insurance

Types of Deductibles in Health Insurance

In the medical insurance sector, deductibles can be categorized into five major types: Voluntary, Compulsory, Comprehensive, Non-comprehensive & Cumulative. What are they, and how are they different from each other?

  1. Compulsory Deductible: This is a deductible that is mandatory and is fixed by the insurance company. When a policyholder files for a claim, this compulsory deductible must be paid for the insurer to pay the remaining. For instance, if the compulsory deductible is Rs. 15,000 and the hospitalization charge is Rs. 50,000, first, the policyholder must pay the amount of Rs. 15,000, following which the insurance company shall pay the balance amount.
  2. Voluntary Deductible: This type of deductible can be chosen by the policyholder before paying the complete claim. By choosing to pay higher deductibles, the claim decreases, which is quite beneficial in case the policyholder is not suffering from any long-term illness or needs financial assistance from the insurance company. For example, let’s say you have chosen to pay Rs.1 lakh as deductible for a treatment costing Rs.2,50,000. Therefore, if you make a claim of Rs.2.5 lakhs, you would need to pay Rs. 1 lakh initially, while the remaining amount would be paid by the insurance company. This type of deductible is particularly beneficial if you don’t have to make claims frequently and wish to pay a lower cost for your health insurance.
  3. Comprehensive Deductible: This is a form of deductible wherein a single deductible amount continues to increase until you have paid the entire amount of the health insurance plan you have purchased. Although this kind of deductible among health insurance policies isn’t available in the Indian market, it is better to know about it since such products might soon be launched here as well.
  4. Non-Comprehensive Deductible: This kind of deductible is only applicable to certain policies and not on all health policies. You may be required to pay a certain amount of money prior to getting admitted for treatment, whereas the insurer will cover the remaining medical costs and treatment.
  5. Cumulative Deductible: This type of deductible is available exclusively for family floater policies, wherein the insurer applies the deductibles to each member of the family based on the chosen policy. All the other terms are similar to other deductibles, wherein the insured has to pay for the entire deductible, and the insurance company will pay the balance of the claim.

Also Read: Domiciliary Hospitalization in Health Insurance

Benefits of Deductibles

It is useful to know the benefits of health insurance deductibles to help decide if they want to use this option or not while raising a claim request with their health insurer or TPA.

  • They help in reducing the premium of your health insurance.
  • By choosing to pay for deductibles, some insurers even offer discounts since they are paying less compared to the original claim amount.
  • Raising small claims are prevented. This can help you achieve No Claim Benefit (NCB) at the end of the policy year, which can be utilized to increase the sum insured and expand the coverage offered by your health insurer.
  • It shall help you apply for health insurance during emergency situations or unexpected hospitalization, even when deductibles are applicable.

Disadvantages of deductibles

While the deductibles can help lower the cost of your health insurance, they do have some disadvantages, such as:

  • You are liable to pay medical costs, particularly at a time when you don’t have the funds to pay for the expenses. Just because your health insurance plan has compulsory deductibles, you may be forced to bear those expenses as well, which may not be possible at all times.
  • If you have a higher deductible attached to your health policy, you’ll have to pay more out of pocket, which may decrease your savings, creating an uncertain situation in case of emergencies.

There are many features that come attached to a health insurance policy which you have to choose before buying them. To help you shortlist the right policy with useful features like health insurance deductibles, PayBima offers you the platform to select and buy the best policy suiting your requirements and life goals.

Also Read: Difference Between Health Insurance Premium For Smokers And Non-Smokers

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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