What is Deductible and Why You Should Know About It?

Health insurance can provide financial protection when it comes to medical expenses, but understanding your policy's various terms and conditions can be confusing. One such term is 'deductible' an essential factor when selecting a health insurance plan.

In this blog post, we will explain what a deductible in health insurance is, how it works, and why it's essential to know about it. Whether you're a first-time health insurance buyer or looking for a top-up plan, this guide will help you understand the importance of deductibles and how they can impact your healthcare costs.

What is a Deductible in Health Insurance?

A deductible in health insurance refers to the amount of money an insured individual needs to pay out of their pocket before their insurance policy starts covering the eligible medical expenses. The deductible amount varies depending on the terms and conditions of the policy and can range from a few thousand to several lakh rupees.

Insurance companies add deductibles to health insurance policies for several reasons, including:

• To reduce the number of small claims
• To encourage responsible healthcare use
• To share the risk with the policyholder

Overall, adding deductibles to health insurance policies can help to balance the risk and cost of healthcare between the insurance company and the policyholder. It can also help to keep insurance premiums more affordable while encouraging responsible healthcare use.

Let's say you have a health insurance policy with a deductible of Rs. 10,000. You fall sick and visit a hospital for treatment, and the total bill is Rs. 50,000. In this case, you will be responsible for paying the first Rs. 10,000 of the bill out of your pocket, and your insurance policy will cover the remaining Rs. 40,000, subject to the terms and conditions of the policy.

However, suppose your total medical expenses for the year do not exceed the deductible amount of Rs. 10,000. In that case, you will have to pay the total amount out of your pocket, and the insurance company will not cover any expenses.

Factors Influencing the Deductible Amount in Your Health Insurance Policy

The deductible amount in a health insurance policy can be influenced by several factors, including:

Age

Generally, older individuals may be subject to higher deductibles as they are more likely to need medical care.

Health status

Individuals with pre-existing conditions or a history of medical problems may be subject to higher deductibles as they are considered at a higher risk of needing medical care.

Coverage level

Policies with higher levels of coverage may have lower deductibles than those with lower coverage levels.

Premium Cost

Policies with lower premiums may have higher deductibles and vice versa.

Type of Policy

The policy type can also impact the deductible amount. For example, a high-deductible health plan (HDHP) may have a higher deductible than a traditional health insurance policy.

Network Provider

Some insurance plans have a network of healthcare providers. The deductible amount may vary depending on whether the policyholder receives care from an in-network or out-of-network provider.

What are the Different Types of Deductibles Available in India?

Primarily, there are three types of deductibles available in health insurance policies. The details are as follows:

Voluntary Deductible

A voluntary deductible is an optional amount that a policyholder can add to their health insurance policy in India. The voluntary deductible is an amount the policyholder agrees to pay out of their pocket before the insurance covers the eligible medical expenses. The voluntary deductible is in addition to the mandatory deductible already specified in the policy.

For example, suppose a health insurance policy has a mandatory deductible of Rs. 5,000 and a voluntary deductible of Rs. 10,000. In that case, the policyholder can voluntarily pay the additional Rs 10,000, which would increase their out-of-pocket expenses and reduce the policy's premium cost.

The voluntary deductible can be a good option for individuals who want to lower the premium cost of their health insurance policy but are willing to pay a higher amount out of their pocket for medical care.

Compulsory Deductible

A compulsory deductible is a fixed amount specified in a health insurance policy in India. The policyholder must pay out of their pocket before the insurance starts covering the eligible medical expenses. The insurance company usually sets the compulsory deductible amount, which may vary depending on the type of policy, the coverage level, and other factors.

The compulsory deductible is designed to help reduce the number of small claims and to encourage policyholders to use their insurance coverage only for major medical expenses.

Cumulative Deductible

A cumulative deductible is a type of deductible that is used in family health insurance policies. It is a deductible calculated on a cumulative basis, which means that it is the total amount that the policyholder needs to pay out of their pocket before the insurance policy starts covering the eligible medical expenses over a specific period, usually one year.

For example, a health insurance policy has a cumulative deductible of Rs. 20,000 for a policy year. Suppose the policyholder incurs medical expenses of Rs. 5,000 in the first month. In that case, they will have to pay the total amount out of their pocket, and the cumulative deductible amount will reduce to Rs. 15,000.

In another case, imagine that the policyholder incurs medical expenses of Rs. 10,000 in the second month. Here, they will again have to pay the total out of their pocket, and the cumulative deductible amount will further reduce to Rs. 5,000. Once the policyholder reaches the cumulative deductible limit of Rs. 20,000, the insurance policy will start covering the eligible medical expenses subject to the terms and conditions of the policy.

Cumulative deductibles are designed to encourage policyholders to use their insurance coverage judiciously and reduce small claims.

Should You Opt for a Deductible?

Opting for an insurance deductible can be a good choice for several reasons:

Lower Premiums

When you opt for a deductible, your insurance company may offer you lower premiums for your health insurance policy since you share the financial risk with them. This can make the policy more affordable, especially if you want to save money on your insurance premiums.

Control Over Out-of-Pocket Expenses

Choosing a deductible amount can also give you greater control over your out-of-pocket expenses. You can budget your costs more effectively by agreeing to pay a certain amount out of your own pocket before your insurance coverage kicks in.

Encourages Responsible Use of Insurance

A deductible can enable you to be more responsible with your health insurance. Knowing that you'll be responsible for a portion of the costs can encourage you to seek more cost-effective healthcare options, saving you money in the long run.

Summing up

In conclusion, understanding a deductible and how it works in health insurance policies can help you make informed decisions about your healthcare coverage. By choosing a deductible amount that fits your budget and healthcare needs, you can control your out-of-pocket expenses, enjoy lower premiums, and encourage responsible use of your insurance coverage.

With the right deductible, you can have peace of mind knowing that you're financially protected in a medical emergency. You can request a quote either by visiting our health insurance webpage or contact us directly.