If you are planning to buy health insurance today, it is vital to understand a few terms associated with it. These terms are important elements of health insurance and one must know them very well. One such element is deductible. In health insurance, the deductible is the amount that the insured must pay before the insurance company starts to provide coverage benefits in the case of a claim.

This ensures that the insurance company is only obligated to pay the claim if it exceeds the deductible. However, if the claim value is less than the deductible, the insurance company is not obligated to pay anything. It is also important to keep in mind that the premium for high deductible health insurance plans is cheap, but the cost for low deductible policies is higher.

How it works: If your insurance plan has a deductible of Rs. 70,000, you will be responsible for paying 100% of eligible charges until the bills reach Rs. 70,000. Following that, the expense will be borne by your insurer. 

Health insurance deductibles safeguard you from undergoing unnecessary treatment and hospitalization. Because the insured has to pay a portion of the claim amount as a deductible, they avoid filing claims for small injuries simply because they have a health insurance coverage.

Types of Health Insurance Deductibles

In India, there are primarily two types of health insurance deductibles. Here are two types of deductibles: mandatory and optional. Other deductibles are available in the global market, such as the comprehensive deductible, non-comprehensive deductible, and cumulative deductible. The following are the two primary types of deductibles:

1. Compulsory Deductible 

A compulsory deductible is a fixed sum set by the insurance company that the insured must pay whenever a claim is filed. For example, if the mandatory deductible is Rs. 20,000 and the hospitalization cost is Rs. 60,000, the insured must pay Rs. 20,000 and the insurance company will cover the remaining Rs. 40,000. This can also be in the form of a portion of the sum insured, as determined by the insurance provider. There is no reduction in health insurance premiums when the deductible is compulsory.

2. Voluntary Deductible

A voluntary deductible is an amount specified by the insured that he/she want to pay out of pocket if a claim arises. The amount decided may be determined by the insured’s financial situation as well as his or her medical bills. If the insured chooses a greater deductible, he or she will have to pay a lower premium, and vice versa. When the insured does not have a long-term sickness and does not require financial support from the insurance company, a voluntary deductible can be chosen.

For example, if the insured has chosen a voluntary deductible of Rs. 30,000 and the claim amount is Rs. 80,000, he or she must pay Rs. 30,000 and the insurance company will pay the remaining Rs. 50,000. This deductible is beneficial when the insured does not file frequent claims and wishes to pay a lower premium for a health insurance policy. 

How Does a Health Insurance Deductible Work?

Deductibles in insurance operate as a barrier for claiming small and unnecessary claims just because there is insurance coverage. While your premium may be cheap, your deductible under your health insurance plan may be greater. This may prevent you from filing minor claims and losing the No Claim Bonus. Therefore, you are encouraged to file a claim only for major medical costs and not for small ones. Since you have pay the deductible before the insurance provider would cover the remaining sum insured, any unnecessary claims are eliminated, and only genuine claims are handled by the insurer. 

Benefits of Health Insurance Deductibles

The following are the key advantages of health insurance deductibles:

  • They help to reduce the cost of health insurance. In addition, if you have chosen voluntary deductibles, the insurance company may offer discounts.
  • It prevents you from raising minor claims, which allows you to earn No Claim Bonus (NCB), which can be used to expand the coverage of your primary health plan.
  • Despite applicable deductibles, access to health insurance coverage for medical emergency or unexpected hospitalization.
Disadvantages of Health Insurance Deductible

While it is true that higher deductibles result in lower health insurance premiums, they also have the following drawbacks:

  • The insured must bear the medical bills, even if they do not have the financial resources to do so. This is because the benefits of a health insurance plan with a deductible are only available when the insured has paid the deductible.
  • In case of a higher deductible, the insured will be obliged to pay out of pocket, thereby reducing the savings. Furthermore, if there are several medical situations, the financial burden might be enormous.