Deductible In Health Insurance

A deductible in health insurance is an amount that you are required to pay before your health insurance policy kicks in. So, the insurance provider shall cover the claim after you have paid the deductible amount. For instance, if you make a claim of ₹50,000 and your policy has a deductible of ₹10,000, then the insurer is liable to pay ₹40,000 while you have to pay the remaining ₹10,000.

However, the insurer shall only cover the insurance claim if the amount exceeds the deductible in health insurance. If you make a claim that is less than the deductible amount, the insurance company is not liable to pay anything. So in the previous case, if you were to make a claim of ₹5,000 while your policy has a deductible of ₹10,000, the insurance company will not cover anything as the claim is less than the deductible. In this article, let us understand how deductibles in health insurance work and their pros and cons.

Deductibles in health insurance help insurance companies achieve two important objectives:

• Providing Checks and Balances - Insurance companies view deductibles in health insurance as essential checks and balances to protect against too many frivolous claims. As the policyholder has a health plan to fall back onto, the insured person might not take the necessary precautionary measures. However, the insurance company ensures that the policyholder also has financial accountability to some extent by ensuring they contribute towards the expenses as well.

• Prioritising Responsibilities - Deductibles also secure insurers against a large number of small claims that might overwhelm them and hinder their ability to provide cover to the insured against a single large catastrophic claim. So, in a way, the deductible in health insurance allows the insurance company to prioritise its responsibilities – a large number of small claims or a small number of large claims. Given the nature of medical emergencies, it is natural that insurance companies prefer the latter.

A health insurance deductible requires the insured to pay a certain fraction of the total medical cost before the insurance coverage kicks in. Without a deductible in health insurance, policyholders would tend to make more claims, regardless of the cost. But the deductible clause shares the burden of the claim with the insured and thus, deters them from making smaller health claims. Thus, the policyholder needs to first clear the health insurance deductible before the insurer covers the remaining medical expenses.

Here are five types of deductibles that you may find in health insurance plans:

• Compulsory Deductible - A compulsory deductible is the one which is decided by the insurer, and the policyholder has to pay this amount before the policy coverage kicks in.

• Voluntary Deductible - A voluntary deductible is where the insured has the freedom to decide the amount of deductible applicable to their policy. By opting for a higher deductible, the insured can avail of a lower premium amount and vice versa.

• Cumulative Deductible - A cumulative deductible is applicable to family floater plans wherein each policyholder makes payments to meet the specified deductible in health insurance.

• Comprehensive Deductible - A single deductible amount applicable to all the covers that a policyholder may add to his/her insurance plan is termed as a comprehensive deductible.

• Non-Comprehensive Deductible - A sum that the insured is liable to pay for certain medical benefits or covers and isn’t applicable to all covers in the policy is known as a non-comprehensive deductible.

Advantages & Disadvantages of Health Insurance Deductibles

Now that you have learnt what is a deductible amount in health insurance with examples, let’s move to the benefits and drawbacks of deductibles -

Choosing deductible insurance has various benefits to offer:

• Reduces Policy Premium: If you choose a high-value deductible amount, the policy premium amount will be reduced. This helps you save a good amount in the long run.

• Saves Insured Sum Amount: Deductibles minimise the number of claims you make. The fewer the number of claims, the more the insured sum amount will be. This is beneficial for the policyholders, during emergencies when there is a need for lump-sum amounts.

• Discounts:  Insurance companies offer No-Claim bonus points to the policyholder that can be redeemed in the form of discounts on premium payments.

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