What Are Deductibles in Health Insurance in India

Understanding different terms associated with health insurance might seem like a difficult task. However, these terms are essential components of health insurance, and they influence the percentage of the claim the insurance company will pay. In health insurance, you and your insurance provider need to share the medical costs incurred during hospitalisation. Deductibles in health insurance are the amount that you need to pay before the insurance company is liable to pay the claim amount. To understand more about health insurance deductibles, read on to learn about deductibles in health insurance in India and how it is helpful in determining a robust health plan for you and your family.

The word ‘Deductible’ is closely associated with insurance and it is the amount of money that you must pay before the insurer begins to cover the rest of the claim amount. 

If your insurance plan’s deductible is Rs. 50,000, you will pay 100% of the eligible expenses until the bills total Rs. 50,000. Post that, your insurer will bear the cost.

Deductible in health insurance is the amount you have to pay before the health insurance company begins paying up the claim amount. This means the insurer is bound to pay the claim amount after it exceeds the deductible amount. The biggest advantage of a deductible as a policyholder is that the higher the deductible, the lower the premium. To understand the term better, here is an example of how deductibles in health insurance in India work:

Example: If your health insurance claim amount is Rs. 1,50,000 and your policy’s deductible amount is Rs. 50,000, then you pay Rs. 50,000, while the health insurance company pays the balance of Rs. 1,00,000.

Deductibles in insurance act as a deterrent from raising small and unnecessary claims just because there is insurance coverage. While the premium may be low, the deductible in your health insurance plan can be higher. This may deter you from raising small claims and losing out on the No Claim Bonus (NCB). Hence, you are prompted to raise a claim only in case of higher medical expenses and not for minor expenses. Since you need to pay the deductible before the insurance provider covers the remaining sum insured, any unnecessary claims are eliminated and only rightful claims are covered by the insurer.

Top-up in health insurance is an increase in the sum insured to cover the policyholders and their nominees in case of prolonged sickness or unexpected medical emergencies. This is beneficial, especially when you do not want to compromise on the base sum insured in the primary health insurance policy.

However, deductibles in top-up health insurance are slightly different. It is the amount over which the top-up health insurance plan gets triggered. But, any claim amount less than the deductible amount will be paid under the top-up policy. Insurers offer different types of top-up health insurance with specific terms and conditions for deductibles. Ensure you read them carefully before you buy the plan.

Example: Let us say that the sum insured in the primary health insurance policy is Rs. 5 lakh and the top-up policy is another Rs. 3 lakh with Rs. 1 lakh as the deductible amount. If the hospitalization bill amounts to Rs. 6 lakh, the insurer will pay Rs. 5 lakh from the primary policy and the balance Rs. 1 lakh will be paid from the top-up policy. In case of subsequent hospitalisation and the medical bills total Rs. 2 lakh, the policyholder must pay Rs. 1 lakh as deductible amount, and the rest of Rs. 1 lakh will be borne by the insurance company.

Deductibles in health insurance in India are mainly of two types: compulsory and voluntary. Below are different types of deductibles offered in the Indian market as well as those offered in the international markets:

This is a mandatory health insurance deductible governed by the insurance company. Every time the policyholder raises a claim, this compulsory deductible has to be paid. For example, if the compulsory deductible is Rs. 15,000 and the hospitalisation bill is Rs. 50,000, then the insured or the policyholder has to pay Rs. 15,000, and the remaining will be paid by the insurer. This can be in the form of a percentage of the sum insured by the insurance provider.

This health insurance deductible is voluntary and the policyholder needs to opt for this. By opting for a higher deductible, the premium reduces accordingly. This is helpful if the insured has no prolonged illness and may not require financial assistance from the insurer. For example, if you have opted for a voluntary deductible of Rs. 1 lakh. If you raise a claim for medical expenses of Rs. 2 lakh, then you have to pay Rs. 1 lakh and the rest will be paid by the insurer. This is especially helpful when you do not raise claims regularly and want to pay a lower premium towards your health insurance coverage.

A single health insurance deductible which keeps adding until you pay up the total amount towards your health insurance policy. This type of deductible in health plans applies across all kinds of covers. This type of deductible is currently not available in the Indian market.

This type of deductible is applicable only on certain covers and not the complete policy. This may require you to pay an amount of money before the insurer pays up to meet specific medical expenses and treatment.

This type of health insurance deductible applies to a family floater plan. The insurance company will apply deductibles on all members of the family who have to pay the total deductible after which the insurer will pay the balance claim amount.

The following are some of the main factors that influence the deductible amount in health insurance.

Plan type: Different types of health insurance plans may have different deductible amounts. For example, high-deductible health plans (HDHPs) typically have higher deductibles than traditional or HMO plans.

Age: Age is a key factor in determining deductible amounts as older individuals typically have higher deductibles than younger individuals.

Gender: While not always the case, some insurance policies may offer different deductible amounts based on gender.

Medical history: An individual's medical history can impact their deductible amount as those with pre-existing conditions or a history of medical issues may have a higher deductible.

Coverage level: Higher levels of coverage often come with higher deductible amounts.

Network provider: Some health insurance policies may offer different deductible amounts depending on whether the provider is in or out of network.

Geographical location: The cost of healthcare can vary depending on where an individual lives, so some health insurance policies may consider location when determining deductible amounts.

Benefit structure: A policy's benefit structure may also affect the deductible amount, as some policies may have a separate deductible for certain services, such as prescription drugs or mental health services.

The primary benefits of the deductibles in health insurance are listed below:

While deductibles help decrease the premium towards health insurance, it does come with certain disadvantages:

In health insurance, the cost of medical care has to be shared by the insured and the insurer. Your share is the deductibles and the copay components. Both copay and deductibles are different, although both components are paid by the insured.

Copayment in health insurance is a predetermined amount that you need to pay every time you avail medical care services and raise a claim for the same with the insurance company. It is that percentage of the claim amount that the insured/policyholder agrees to pay. The remainder of the claim amount will be paid by the insurer. When you compare deductible vs. copay, the former is the amount that you need to pay before the insurer begins paying the claim amount; however, copay means, every time you raise a claim, a certain percentage has to be paid by you.

For example, if the claim amount is Rs. 1 lakh and the co-payment percentage is 10%, then you will have to pay Rs. 10,000, and the insurer will pay the balance of Rs. 90,000.

Also, read: Health Insurance for COVID-19

While you may agree that you pay a lower premium by choosing a higher deductible, it may not be safe, especially when you are buying health insurance. Health insurance acts as financial coverage in case of medical emergencies. Hence, you need to make an informed choice before you choose the right coverage. If you are able to pay a higher amount from your pocket while raising the claim, you can opt for the higher deductible. However, if you want insurance to cover most of your medical expenses, then opt for a lower deductible, although you have to pay a higher premium.

Regarding health insurance, you should give great thought to the trade-off between your deductible and premium. While the premium is the consistent payment made to maintain your coverage, the deductible is the amount you pay out-of-pocket before your insurance starts to help with medical bills. The two naturally interact since changing one usually affects the other.

The deductible and the premium costs generally have a direct relationship. Your monthly premium is less if you choose a greater deductible and vice versa. This is so because a higher deductible indicates that the insurer bears less financial risk, thereby reducing the premiums; the deductible is basically the amount you promise to pay ahead before the insurance provider contributes.
If you choose a plan with a ₹ 1,00,000 deductible, for instance, the insurance company will have to pay less annual expenses, thus lowering the monthly price. On the other hand, a smaller deductible increases the risk the insurer bears, which results in a higher premium to pay for their possible bigger payouts.

If you want to keep your premiums low, choosing a larger deductible is logical. If you are typically healthy, don't expect to need a lot of medical attention, and you are financially ready to manage more out-of-pocket costs should an unanticipated medical incident develop.

Those who can meet their medical expenses up to the deductible level without major financial difficulty frequently prefer this arrangement. This strategy results in lower premiums but increases your financial load once medical bills start to show. This is why one should carefully consider your financial situation and healthcare requirements.

Conversely, choosing a smaller deductible will translate into a higher premium. If you have continuous health issues, expect regular medical attention, or just want the peace of mind knowing your insurance will begin paying expenses more immediately. This is a wonderful choice. Although your monthly premium will be costlier, you will achieve the deductible sooner, and your insurer will start paying more quick medical bills.

Although it will need more constant premium expenditure, this kind of plan can provide stronger defense against unforeseen high medical expenses, including surgeries or extended hospital stays. Families, those with chronic conditions, or those who need consistent care may find the increased cost valuable for the extra stability and coverage.

In the end, the choice between a cheaper premium and a larger deductible is about juggling your long-term financial plan with your present medical requirements. Choosing a larger deductible with a lower premium could make sense if you are in good health and can control the risk of more out-of-pocket spending. A smaller deductible with a higher premium could be more helpful, though, if you wish to reduce financial stress after an unplanned medical incident or foresee major healthcare costs.

Ultimately, it's about developing a strategy that fits your financial capacity to cover expenses as needed and your present state of health. Examining the trade-off between deductible and premium carefully will allow you to select the best plan for your health and financial situation.

Your medical demands and financial position determine whether a high or low-health insurance plan is best for you. Both choices have benefits; nevertheless, knowing which fits your budget and way of life will enable you to decide with knowledge.

A high deductible plan typically comes with lower monthly premiums, making it an appealing option for individuals who are generally healthy and don’t expect frequent medical visits or treatments. It’s ideal for:

However, high deductible plans can lead to significant out-of-pocket expenses in the event of an unexpected illness or accident, so consider your financial readiness before opting for this choice.

A low deductible plan comes with higher monthly premiums but reduces out-of-pocket costs for medical care. It’s suitable for:

While this option ensures quicker insurance contributions, the higher premiums can strain monthly budgets, so it’s best for those with steady financial resources.

Ultimately, the choice between a high or low deductible comes down to balancing your healthcare needs with your ability to manage costs. Assess your medical history, risk tolerance, and financial flexibility to select the plan that works best for you.

When navigating health insurance plans, understanding deductibles and coinsurance is crucial, as these terms directly impact how much you pay out-of-pocket. While both help share healthcare costs between you and your insurer, they work differently. Here’s a deeper look at how each functions with examples.

Coinsurance refers to the percentage of medical costs you must pay after meeting your deductible. For instance, if your plan has a 20% coinsurance rate, you will pay 20% of your healthcare costs, and your insurer will cover the remaining 80%. This applies after you've paid your deductible.

Example 1:

Let’s say you’ve already met your ₹50,000 deductible for the year, and you undergo treatment worth ₹1,00,000. With a 20% coinsurance rate, you’ll be responsible for 20% of ₹1,00,000, which amounts to ₹20,000. Your insurer will cover the remaining ₹80,000.

So, for a ₹1,00,000 treatment:

Example 2: Comparing Two Plans

Consider two plans:

If your medical expenses for the year amount to ₹2,00,000, here’s how the costs would differ:

Although Plan B has a higher deductible, the lower coinsurance means that over the course of the year, you would pay ₹5,000 less than with Plan A.

Lower deductibles can help you save on healthcare costs. This entirely depends on your policy and its offerings. Read through your health insurance terms and conditions before buying it, and make sure you check for deductibles.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.