Deductibles in health insurance explained

Do you feel confused by many of the terms after reading the fine print of your health insurance policy? It happens with many. Terms like ‘deductibles’ often sound complex to many. However, understanding them is crucial to managing your health insurance.

Whether you are purchasing your first-ever policy or reviewing your current one, understanding deductibles in your medical insurance can help you make smarter decisions and save more money.

What is deductible in health insurance?

A deductible in health insurance often refers to the fixed amount that you must pay from your pocket for medical expenses before you file a claim. It is often calculated annually. Deductibles help reduce premiums and encourage responsible use of healthcare services.

How do deductibles work in health insurance?

Deductibles can be considered as a threshold you must cross before you ask your insurer to start paying for your medical costs. Understanding how it works in health insurance can give you clarity.

Let’s simplify this:

For instance, you have a ₹10 lakh health cover with a ₹50,000 deductible. If you want to file a claim for ₹4 lakh, you must first pay ₹50,000 out of your pocket. Then, after making the claim, your insurer will compensate the remaining ₹3.5 lakh.

Now, let’s consider another situation. If your hospital bill is ₹40,000 (less than your deductible amount), then your insurer pays nothing.

To put it simply, your insurer only pays when your medical expenses exceed the deductible amount.

Types of deductibles in health insurance

The are two main types of deductibles in health insurance: compulsory and voluntary deductibles. However, there are a few more, and understanding all of them can help you make informed choices.

• Compulsory deductible: This is a fixed amount you must pay before the insurer covers the rest. This is non-negotiable.
• Voluntary deductible: This is an amount that you choose to pay in exchange for a lower premium. The more the deductible, the lower your premium.
• Cumulative deductible (family floater): This is the total deductible amount applicable to the entire family health insurance
• Comprehensive deductible: The deductible is applied once annually during the policy year, regardless of the number of claims made.
• Per-claim deductible: The deductible amount is applied to every claim you make.

Advantages of deductibles in health insurance

Having deductibles in medical insurance can give you endless benefits. Following are a few of them:

• Lower premiums: You often need to pay less in insurance premiums when you choose a higher deductible.
• Cost control: It encourages responsible use of healthcare services and reduces unnecessary claims.
• Customisation: Voluntary deductibles let you tailor your plan based on your budget and medical history.
• Ideal for healthy individuals: Higher deductibles can be helpful for individuals who don’t anticipate frequent hospital visits.
• Better policy terms: Policies with deductibles often come with wider coverage or fewer restrictions.
• Tax benefits: You can enjoy tax benefits under Section 80D, even with deductibles in place.

Factors impacting the deductible amount in a health insurance policy

Learning the factors that influence the deductible amount in a health insurance policy can give you peace of mind.

• Policy type: Comprehensive policies may have lower deductibles, while top-up/super top-up plans usually have higher ones.
• Age of the insured: Senior individuals are often offered policies with lower deductibles due to their higher health risks.
• Pre-existing conditions: If you have a medical history, insurers might offer lower deductibles with higher premiums.
• Claim history: If you have had frequent claims, it may lead to stricter deductible terms in future policies.

Deductible vs co-pay vs co-insurance: key differences

Here are the key differences between deductible, co-pay and co-insurance:

Higher or lower health insurance deductible: what to choose?

The choice between a higher and lower health insurance deductible depends on your financial situation and health needs. While a higher deductible reduces your premium, it increases your out-of-pocket payment during claims. A lower deductible offers more coverage upfront but comes with a higher premium. So, always choose based on your risk tolerance and expected medical expenses.

Conclusion

Understanding deductibles in medical insurance allows you to make smarter and beneficial choices when buying a policy or planning your healthcare budget. Choose the deductible amount according to your expected healthcare needs and financial ability.

While you take steps to safeguard your health and finances, let us help you make informed decisions. Get personalised health insurance advice to choose the right deductible amount for your needs by simply filling out the form on this page.

FAQs

• Is a higher deductible plan better?

A higher deductible can be better if you want to lower premiums and are confident about having fewer medical expenses.

• Does the deductible apply to all medical services?

No, not always, as some services like preventive care may be exempt from deductibles.

• Do I need to pay the deductible for every claim?

No, it depends on your policy. Some have annual deductibles, others per claim.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis or treatment. Please consult a certified medical and/or nutrition professional for any questions. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.