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Deductibles in Health Insurance in India

24 May 2022

Insurance, health insurance, in particular, comes with a lot of jargon and one of them is the term ‘Deductible’. While not many may know what it means, Deductible is very easy to understand.

In insurance, be it health or motor, it is because of the clauses like Deductible that you as a policyholder may end up paying money from your pocket. This is despite having health or motor insurance covering your expenses.

Now, let’s understand what Deductible means and how it works.

How does Deductible work in health insurance?

A Deductible is a portion of a claim beyond which the insurer will cover. Any amount below this limit must be borne by the policyholder.

Let’s understand how Deductible works with an example.

Assume Banu has a health insurance cover for Rs 10 lakh. She plans to undergo minor eye surgery, say Cataract, and she knows her health insurance policy covers it. But unfortunately, she didn’t read the policy document. Her health insurance policy document explained that her insurance policy covers cataract surgery up to Rs 10,000 per year.

Banu undergoes the surgery, and the total medical expenses work out to Rs 12,000. Her health insurance policy covers her only for Rs 2,000. This is because the Deductible for the policy is Rs 10,000. So, while her policy covers Rs 12,000, there is a deductible limit of Rs 10,000 which must be borne by her.

If only Banu went through the policy wordings, she would have been better prepared financially. Or alternatively, she would have opted for a health policy without any deductibles.

Deductibles in motor insurance too work the same way.

Also, Read – Everything About Health Insurance in India

Types of deductibles

There are two types of Deductibles – compulsory and voluntary.

Compulsory Deductible is the limit fixed by the insurance company and must be paid by the policyholder up to the limit. The insurer will cover those expenses (under the category) over and above the Deductible limit.

On the other hand, voluntary Deductible, the Deductible limit is chosen by the policyholder.

While the voluntary and compulsory deductible are more prevalent in motor insurance, health insurance policies too come with a deductible under certain circumstances. These usually include ambulance cover, dental coverage, air ambulance services, out-patient department (OPD expenses), cataract surgery, and robotic surgery.

Advantages of Deductible

  • The reason why insurers have Deductible in a policy is to avoid unnecessary or frequent claims from policyholders. This in turn helps policyholders to keep up their No Claim Bonus (NCB), which is used to increase the base cover of the policy.
  • Opting for a voluntary deductible helps in lowering premium payment in a policy.

Disadvantage of Deductible

  • If you had opted for a deductible, in case of any emergency medical or motor, you may have to shell out a higher amount at the time of claim before the insurer starts to cover.
  • On the other hand, if you don’t want any deductible clauses in your policy, you can pay an additional premium (if insurers provide the option) and avoid the same. It reduces your financial burden in case of any claims.

Deductible vs Co-payment

More often, there is a confusion between Deductible and Co-payment. This is more common in a health insurance policy.

Deductible is the amount up to which you as a policyholder must bear in case of a claim. The insurer will cover medical expenses beyond this (deductible) limit.

On the other hand, co-payment is usually a percentage of policy cover up to which the insurer will cover. So, for instance, Banu has a health cover of Rs 10 lakh. If she meets with an accident and in need of a dental surgery, her health policy has a co-pay of 10%. This means that, up to Rs 1 lakh she will be covered. Any expenses beyond Rs 1 lakh have to be borne by Banu.

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