What Are Health Insurance Deductibles?

It is advisable to read the terms and conditions carefully when you buy a health insurance policy. But reading the fine print will not make sense unless you understand the technical terms related to it. One such term is deductible. An insurance deductible is the initial amount you must pay before your insurance coverage gets activated and the company starts reimbursing you. Generally, a higher deductible may lead to lower premiums. This is because, with a higher deductible, you take on more initial financial responsibility before the insurance coverage begins, influencing the overall expense of your policy.

How Does It Work?

• Once you pay the upfront deductible amount, the insurance company takes over and covers the rest of the claim according to the policy’s limits and conditions.
• Let’s say you have a policy with a sum insured of Rs 3 lakh and a deductible of Rs 30,000, and you undergo a surgery that costs Rs 50,000. In this case, you will need to pay Rs 30,000 on your own, and the insurer will pay the remaining Rs 20,000.
• However, if the bill amount was Rs 20,000, you would have to bear the entire surgery cost as the bill is less than the deductible amount of Rs 30,000.

What Is Its Purpose?

• Deductible allows insurers to address moral concerns where policyholders might engage in risky behaviour without facing financial consequences.
• For example, buying a health cover does not grant policyholders the freedom to lead an unhealthy life when deductibles create a financial stake for the insured.
• Policyholders can use it smartly to reduce the cost. For example, they can buy a super top-up policy with a deductible equal to the base policy’s sum insured.
• Typically, a higher deductible means a lower premium.

Types Of Deductibles

• There are three most common types of deductibles in India.
• Compulsory Deductible: You will need to pay this before raising a claim. For example, with a Rs 10,000 compulsory deductible and a Rs 50,000 bill, you pay Rs 10,000, and the insurer covers the rest.
• Voluntary Deductible: You can opt for this to lower your premium amount. This is suitable for those who do not expect frequent claims.
• Cumulative Deductible: This is exclusive to family health plans and applies cumulatively when any family member makes a claim under the shared policy.