What is a Deductible In Health Insurance In India?

Health Insurance

Deductible refers to the amount an insured person pays out of pocket. The remaining extra amount is borne by the insurance company. This amount is given as a percentage or proportion of the medical or hospitalisation expenses incurred and is pre-fixed by the insurance provider. Deductible in health insurance reduces the insurance risk.

This post discusses what is deductible in health insurance with an example, types, benefits, disadvantages and how to choose a deductible while buying a health insurance plan. Read on!

How Does Health Insurance Deductible Work (With Example)

Let’s understand what is deductible in health insurance with an example. 

Suppose a policyholder undergoes medical treatment, leading him to incur a bill of Rs. 50,000. He decides to raise a claim for his expenses. However, he agrees to pay a deductible of Rs. 10,000. In such a scenario, the remaining amount (Rs. 50,000 – Rs. 10,000 = Rs. 40,000) will be paid by the insurance company. 

Note that if the expenses are less than the healthcare deductible amount, one cannot raise a claim for his/her treatment. For instance, Rohit receives minor treatment from a hospital which costs him Rs. 10,000. As per his insurance policy, the deductible amount is Rs. 15,000. In such a case, he will not be able to raise a claim and pay the entire amount from his pocket. 

To avoid bearing a substantial amount as deductible, policyholders should file a claim only in case of higher medical expenses. This will help an applicant benefit from the plan by obtaining the No Claim Bonus. In this way, insurance companies ensure rightful and genuine claims only. 

Types of Deductibles in Health Insurance

There are various types of healthcare deductibles in health insurance offered in both Indian and international markets. They are as follows:

• Compulsory Deductible

This is a mandatory amount policyholders need to pay every time they raise a claim. For instance, if Rohit’s insurance policy levies a health insurance deductible of Rs. 12,000, and he undergoes a treatment worth Rs. 40,000, he will need to pay this deductible upfront during claim processes. 

• Voluntary Deductible

Members who do not regularly raise claims and look for ways to bring down the insurance premiums can opt for this. In this type, policyholders need to bear a higher deductible, as per their wish, which reduces their premium effectively. Ideally, individuals who are not suffering from a prolonged illness or do not require financial assistance from an insurer can opt for this. 

• Comprehensive Deductible

Currently not available in Indian markets, this type of deductible keeps on adding until a member pays the entire deductible amount agreed upon towards a health insurance plan. 

• Non-comprehensive Deductible

This type of deductible is applicable to selective coverages or medical expenses and not the entire policy. In this case, a member might need to pay for his/her medical expenses before the insurer pays up. 

• Cumulative Deductible

Essentially crafted for a family floater plan, this deductible applies to all family members. After payment of the deductible amount, insurers will settle the claim. 

It is crucial to check for the deductible option available under a health insurance policy before opting for it.

Factors Affecting Calculation of a Health Insurance Deductible

• Pre-Existing Conditions

Before buying a particular insurance plan, one must factor in their pre-existing medical conditions such as diabetes and asthma. Existing conditions can affect the amount of premium in health insurance. 

• Current Health Status

Some members might require frequent treatments, and some might not, based on their current health conditions. The deductible amount in insurance largely depends on an applicant’s current health condition. For instance, individuals rarely going for treatments can opt for a higher deductible plan. However, they should not opt for a voluntary deductible if they want to avoid paying a high deductible. 

• Age

This is also a determining factor in how much healthcare deductible amount one needs to pay during an insurance claim. Since health complications may arise with age, it is vital for a member to consider this factor before choosing a plan. 

• Past Medical Concerns

Individuals with a history of any ailment should factor in their present medical condition and consider its future occurrence before choosing a healthcare plan. 

• Lifestyle and Habits

Policyholders with smoking and drinking habits should make an informed decision regarding their healthcare plan by considering their lifestyle. 

Applicants need not be confused about deductible meaning in medical billing if they consider the above factors beforehand. 

Benefits of Deductibles in Health Insurance

Here are some primary benefits of deductibles in health insurance plans:

• Opting for a higher deductible amount allows policyholders to avail of a higher sum insured under their health insurance policy by paying a low premium amount. For example, if an individual has an insurance policy with his/her employer with a sum insured of Rs. 2 lakh, and wants to increase the coverage amount, he/she can opt for a higher deductible amount. If the policyholder increases the deductible to Rs.2 lakh, he/she can seek a sum insured of Rs. 20 lakh, against a very low premium payment.
• Deductibles and health insurance premiums have an inverse relationship. Since a policyholder pays the deductible amount out of his/her own pocket, he/she can enjoy the benefit of paying a lower premium. When the deductible amount increases, the premium decreases and vice versa.  
• Although one needs to pay deductibles out of the pockets, they can still access health insurance coverage during unforeseen events. 

With ample knowledge about the benefits of a health insurance deductible, you can now download the Navi app on Android or iOS and purchase the policy within minutes. 

Disadvantages of an Annual Aggregate Deductible

Although deductibles in medical insurance reduce the premium amount, it could come with certain disadvantages too, some of which are mentioned as follows:

• In the case of compulsory aggregate deductibles, one needs to pay upfront to receive the claim amount. Therefore, individuals not possessing enough funds will not be able to benefit from their insurance plans. 
• During multiple medical emergencies, payment of high deductibles can reduce an applicant’s savings. 

However, with proper planning and consideration, one can curtail their deductible amount and avail of medical services without hesitation. 

How to Choose a Deductible?

One needs to follow the given points before choosing a deductible:

• Although a higher deductible brings down the premium amount, it may not be safe in the case of health insurance. As this insurance covers medical emergencies, one must consider the right coverage along with deductibles in line with their requirements
• If an individual is comfortable in self-funding a higher deductible during claims, he/she could settle for a high deductible plan. 
• Individuals wanting their insurance plan to cover maximum medical expenses must choose one that comes with a higher premium and lower deductible amount. 

Final Word

Now that you know the health insurance deductible meaning, making a sound decision regarding insurance will be easier. Furthermore, understanding the working of deductibles and their types can be a good start for first-time insurance buyers. 

Additionally, members should consider the aforementioned factors before choosing a health insurance deductible to obtain maximum benefits. Also, knowing the criteria affecting deductible calculation can help them reduce financial pressure that might occur due to a high deductible plan. 

FAQs on Health Insurance Deductible

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.