Deductibles in Insurance

Deductibles in health insurance refer to the out-of-pocket expenses that you (the insured) have to bear while making an insurance claim. If your health insurance plan includes a deductible component, you can make a claim for hospitalisation expenses exceeding the deductible amount.

For instance, you purchase a mediclaim policy with a deductible clause of ₹10,000. If you undergo a medical procedure that costs ₹40,000, you will have to pay the ₹10,000 deductible first. After that, the insurer will settle your claim for the remaining ₹30,000 bill, subject to the policy terms.

Let’s understand the working of a deductible in insurance with an example:

You have a health plan with a deductible of ₹ 15,000, and you incur a medical treatment expense of ₹60,000. In this case, you will have to pay ₹15,000 out of pocket, and your insurer will pay the remaining ₹45,000 to settle the bill.

If the expenses incurred for your healthcare treatment do not exceed the deductible, you cannot raise a claim. For instance, if you need to pay a hospital bill of ₹10,000, you cannot claim health insurance coverage, as your deductible is ₹15,000.

Knowing different types of deductibles in health insurance is crucial before buying a plan. It helps you understand the type of out-of-pocket expenses that you may have to bear during a claim and make an informed decision.

The following are the different types of deductibles:

Selecting deductibles in health insurance is a sensible option if you do not need to undergo frequent medical procedures. When you choose a voluntary deductible, you get the benefit of lower premiums, which allows you to opt for a higher sum insured.

Moreover, deductibles help accumulate a No Claim Bonus (NCB), as they prevent you from making unnecessary or frequent claims. This allows you to utilise the NCB to increase the sum insured without any increase in premium at the time of renewal.

However, if you need frequent medical assistance, choosing a higher deductible in insurance will increase your financial burden. This is because you will need to pay the deductible each time you raise a health insurance claim.

Whether you want to buy a new health insurance policy or renew your existing plan, terms like "deductibles," "copayment," and "coinsurance" come into play. Therefore, it is necessary to understand their meanings and differences.

Here is a detailed overview:

Note :Coinsurance and Copay in health insurance do not usually apply to the same health insurance plan. However, you should check it with your insurer before finalising the policy.

When choosing deductibles in health insurance, consider the following factors to ensure you select the right amount that aligns with your affordability and needs:

You should be aware of the advantages and disadvantages of deductibles in health insurance before purchasing a plan and choosing the deductible. This ensures that you are making the right decision while buying a health insurance policy.

Here are the pros of health insurance deductibles:

• Choosing health insurance with higher deductibles helps you secure lower monthly or yearly premium rates.
• Deductibles have an inverse relationship with premiums. If you choose higher deductibles, your premium reduces. In you choose lower deductibles, your premium increases.
• It helps manage your medical expenses, as you need to remain mindful of paying the deductible before making an insurance claim. This promotes the right use of medical coverage and reduces the frequency of unnecessary claims.

Alternatively, here are the cons of deductibles in health insurance:,

• During medical emergencies, you need to incur medical expenses out of your own pocket to avail coverage under your health insurance plan.
• If you need medical assistance frequently, choosing higher deductibles can lead to higher upfront expenses, as you need to pay the deductible each time you make a claim (if medical bills are higher than the deductible amount).

There is an inverse relationship between health insurance premiums and deductibles. If you select a higher deductible, your premium will reduce, and vice versa. A higher deductible reduces the risk for your insurer having to pay, as you are paying upfront, so the premium is lower.

Let’s understand through an example!

Ramesh buys a health insurance policy with a deductible of ₹15,000, while Rahul buys a health insurance plan with a deductible of ₹10,000. Thus, Ramesh’s monthly health insurance premium is lower than that of Rahul. However, during an insurance claim, Ramesh will have to pay a higher deductible than Rahul.

Choosing an appropriate deductible in health insurance is necessary to avail the maximum benefits. Here are some tips you can follow in this regard:

• A higher deductible means a lower premium, but it may be risky during medical emergencies. This is because you cannot raise a health claim without paying the upfront charges set as a deductible. So, opt for the right sum insured and deductibles to ensure your emergency medical needs are adequately covered.
• If you are comfortable with paying slightly higher out-of-pocket expenses while making claims, you can opt for a health insurance plan with a high deductible.
• If you need to make frequent claims, then you should opt for a plan that includes a lower deductible.

Now that you have understood the meaning of deductibles in health insurance, it should be easier to select the right sum insured as per your healthcare needs. You should also check the deductibles section when comparing and buying health insurance plans.

This can help you choose a plan with a deductible that aligns with your preferences and avoid unpleasant surprises when filing claims.