What is Deductible in Health Insurance?
Your health is your most valuable asset. You owe it to yourself to do everything you can to keep it in good condition. However, taking preventive measures does not guarantee the avoidance of ailments, accidents, and other health scares. General Insurance companies realise this and offer various health insurance plans to suit your requirements. They typically explain the terms defining your coverage in the policy document. One such important term is health insurance deductible. Read on to understand what it means to make an informed decision while buying the policy.
Health Insurance Deductible Meaning
Deductible in a health insurance plan is the amount you pay from your pockets before the insurance company or insurer pays for your medical expenses. As a policyholder, depending on your policy’s terms, you must cover the costs of a specific portion of the medical expenses out of your pocket. The insurer pays the remaining claim amount after you have paid the deductible amount. Also, the claim amount typically should exceed the deductible. If not, the insurance provider is not liable to clear your claim.
A high healthcare deductible plan typically attracts a lower premium, whereas policies with lower medical deductibles generally cost higher premiums.
Decoding What is Health Insurance Deductible with Example
To better understand the health insurance deductible meaning, consider this scenario.
Let’s assume you are struggling with a health complication that demands ₹2 lakh for surgery. After hospitalisation, you can raise a claim to pay the amount. However, based on your mediclaim plan, if you have a deductible of ₹50,000, you are required to pay it out of your pocket. Your insurer will bear the remaining ₹1.5 lakh.
In another instance, if you have to undergo a minor procedure that leads to a medical expense of ₹45,000, you must bear the entire cost. This is because the surgery amount is lower than the deductible, which is ₹50,000. Hence, you cannot raise a claim for it, as your insurer is only liable to cover claims exceeding ₹50,000.
Types of Medical Insurance Deductibles
Having explained what does deductible mean in health insurance, let’s uncover its types to help you make the best choice while buying your health insurance policy.
- Voluntary deductible
A voluntary medical insurance deductible is one wherein the insured party can determine the deductible contribution amount. You can choose the deductible based on your financial capability. It helps to opt for a higher deductible when you are young, fit, healthy, and not expecting to raise health insurance claims. A high voluntary deductible results in lower premium costs. However, if you are older, you can benefit from choosing a policy with a lower voluntary deductible and a slightly higher premium.
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Involuntary deductible
An involuntary or compulsory medical insurance deductible is one wherein the insurer fixes the deductible amount. You must pay the amount as a rule during an insurance claim. You typically have to pay the involuntary deductible amount as a percentage of the sum insured under the health care plan. In both cases, the insurer pays the sum insured only when the claim goes beyond the deductible. If it is lower, you bear the entire responsibility to pay. Since the insurer fixes the compulsory deductible, it does not impact the premium amount payable.
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Cumulative deductible
A cumulative health insurance deductible plan mainly applies to family floater plans. The insurer considers paying the balance claim amount after the total deductible on such plans gets cleared. Typically, cumulative deductible plans only come into effect when the claim exceeds the deductible amount. Otherwise, the insured parties under family floater plans must bear the medical costs with the cumulative deductible.
Benefits of the Medical Deductible clause in Health Insurance
Listed below are the many benefits of health insurance deductible and why you need it in your mediclaim plans.
● Reduction in premium amount as high deductible plans reduce the insurance company’s risk and indicate your sense of responsibility.
● Reservation of No Claim Bonus (NCB), which is a reward for not raising claims throughout
the policy period.
● Restores your sum insured so you can use it for compensating hefty losses when a financially draining medical emergency strikes.
Choosing a Medical Deductible Amount
At its core, a health insurance deductible is beneficial as it saves you from making minor claims that affect your sum insured. However, it can also prove counterproductivity when you are financially incapable of contributing to the medical expense. Striking the right balance is vital to get a lower premium while keeping the deductible realistic. You get to make this choice when you opt for a voluntary deductible. You should evaluate your financial situation and the necessary deductible-specific clauses in the insurance policy before determining a suitable deductible amount.
Difference between Health Insurance Deductible and Co-Payment
Most people tend to use the terms deductible and co-payment interchangeably when they mean different things. As explained earlier, the deductible is the amount you must bear before the insurer covers the claim amount. After you exhaust the deductible, the insurer pays for the remaining medical expenses up to the sum insured.
However, in co-payment, you can select it as an add-on rider or get it as a built-in feature in your health insurance plan. Under co-payment, you agree to pay a fixed sum for medical expenses. Unlike deductible, which you pay once until you exhaust the applicable amount, you must co-pay every time you raise a claim. Essentially, a co-payment is an agreement to contribute a specific percentage of money for every filed claim.
Why is a Health Plan better than Health Insurance?
Traditional Health Insurance generally covers Hospitalization expenses when admitted for over 24 hours. LivLong Health Plan on the contrary covers not just hospitalization expenses (powered by IRDAI approved Insurer) but also expenses around Doctor consultations, lab tests, pharmacy, and more, providing much higher value for money.
Final note
Once you figure out what is deductible in medical insurance, buying a plan that suits your needs is a straightforward process. Thanks to digitalisation, you can compare and purchase health insurance plans online. The procedure gets completed in a matter of minutes. The same convenience extends to settling claims and renewing the policy. Thus, you need not go through a hassle during a medical emergency.
