How Do Health Insurance Deductibles Work?

The importance of health insurance for all is indisputable. It can help you get comprehensive financial coverage against medical expenses during an emergency and keep your savings intact for other life goals. However, when you buy a health insurance policy, you must understand the intricacies of its terms and conditions.

Specific jargon may be confusing and misleading. You must understand the real meaning and pick the right policy accordingly. One such term you may come across is deductible. Let us know more about it.

What is a deductible in health insurance?

A deductible in health insurance is the proportion of the medical expenses you pay from your pocket when you file a claim. The insurance company will pay the balance amount directly to the hospital only after you have paid the deductible amount.

In other words, the insurance company will pay the bills only if the claim amount exceeds the deductible amount. If the overall bill is less than the deductible, the insurer will reject your claim request. Generally, all insurance companies add a deductible amount clause in a health insurance plan to prevent fraud or scams.

Let us understand how deductible in health insurance works with an example.

Imagine a scenario where you get admitted to the hospital for a surgery that costs ₹1,20,000 and your policy has a 10% deductible clause. After the treatment is over, you will file a claim to cover the expenses with the insurer. However, before you file a claim, you will have to pay ₹12,000 (10% of ₹1,20,000) and submit the proof of the same so that the insurer pays the balance amount.

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Now that you understand how deductible in health insurance works, let us know about the types of deductibles. Broadly, there are three types of deductibles in health insurance:

  • Voluntary deductible

As the name suggests, a voluntary deductible is when you choose the deductible amount yourself. So, if you opt for this type of deductible, you can select the deductible amount you can afford. This could either be a fixed amount or a percentage of the total bill amount.

If you choose a higher deductible, the insurer may reward you with a lower premium for the policy. But, when you file a claim, you would have to shell out a larger sum from your pocket.

  • Fixed deductible

The insurance company fixes fixed or compulsory deductible amounts, and you do not have any say in this clause. Since the mandatory deductible is usually a fixed amount, it has no impact on your premium.

Cumulative deductible

A cumulative deductible is applicable only on family health insurance. Family healthcare plans cover all the family members, including spouse, children and parents, under a single policy. In such a policy, all the insured members share the sum assured, and the cumulative deductible is applied when an insured person makes a claim.

Should you opt for a deductible – It is worth it?

You may opt for a voluntary deductible as it will help you lower your policy’s premium, which can help you save a significant amount in the long run.

Opting for a deductible is a great way to reduce the number of claims you make in a policy year. They not only help the insurer but also benefit you. When you raise fewer claims, your overall sum assured remains intact, and you can utilise the same during an emergency.

Additionally, many insurance companies offer NCB or no-claim bonuses to people who do not file a single claim during a policy year in the form of a discount on the premium upon renewal.

Final Word

Many people perceive deductibles in health insurance as an unwanted clause, but it could be a blessing in disguise for you. So, don’t be afraid of it and choose a deductible carefully to suit your needs and affordability.

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