A deductible is the amount of money you have to pay from your own pocket before your health insurance starts covering the costs. In simple words, you pay the initial part of the hospital bill, and only after that does your insurance company step in to pay the rest.
How Does a Deductible Work?
Let’s break it down with an example.
Imagine you have a health insurance plan worth ₹10 lakh with a deductible of ₹50,000. If you need to make a claim for ₹4 lakh, you’ll first have to pay ₹50,000 yourself. Only then will your insurer cover the remaining ₹3.5 lakh.
But here’s the catch—if your medical bill is less than the deductible, like ₹40,000 in this case, your insurer won’t pay anything because it’s below the deductible limit.
Why Do Insurance Companies Have Deductibles?
Insurance companies use deductibles to avoid getting small claims for minor treatments. It encourages people to file claims only when necessary and helps prevent fraud or misuse of the policy.
Plus, by not filing small claims, you can protect your No Claim Bonus (NCB). This bonus is like a reward given by insurers for not filing any claims during the year—and it can help increase your coverage without increasing your premium.
Also Read: What does an Out-of-Pocket Maximum Mean?
Types of Deductibles in Health Insurance
There are two types of deductibles you should know about:
1. Compulsory Deductible
This is a fixed amount decided by the insurer. You must pay it when making a claim, and you can’t change or remove it. It doesn’t reduce your premium.
2. Voluntary Deductible
This is an amount you choose to pay when you make a claim. You can set it based on what you can afford. The higher the deductible you choose, the lower your insurance premium will be. It’s a way of sharing the cost and getting rewarded for it.
Why Should You Consider Adding a Deductible?
Here are a few reasons why opting for a deductible can be a smart move:
- Lower Premiums – By choosing a higher deductible, you reduce the insurer’s risk, which lowers your premium.
- Preserve No Claim Bonus (NCB) – Avoiding small claims means you can keep building your NCB year after year.
- Save Coverage for Big Expenses – If you don’t use up your insurance for minor issues, you’ll have full coverage available when a serious medical issue arises.
How to Decide the Right Deductible Amount?
Here are some things to keep in mind:
- Pre-existing Conditions – If you already have health issues, it’s better not to choose a deductible. You might need to file frequent claims.
- Your Health Status – If you’re generally healthy, choosing a deductible can save you money on premiums.
- Age – Younger people usually don’t need medical care as often, so deductibles can work well for them.
- Lifestyle – If you smoke, drink heavily, or don’t exercise, it’s riskier to choose a deductible because you may need medical care more often.
- Family Medical History – If your family has a history of chronic illnesses, you might want to avoid deductibles to avoid paying out-of-pocket frequently.
Also Read: Are Employer-Sponsored Plans Better than Private Plans?
Deductible vs Co-payment – What’s the Difference?
| Feature | Co-payment | Deductible |
|---|---|---|
| What it means | A fixed percentage of each claim you pay yourself. | A fixed amount you pay before insurance kicks in. |
| When it applies | Every time you make a claim. | Only before the claim gets approved. |
| Insurer’s Role | Pays the remaining percentage after your share. | Pays the full claim after you pay the deductible. |
| Example | You have to pay 10% of your ₹1 lakh surgery bill (₹10,000); insurer pays ₹90,000. | With a ₹30,000 deductible and ₹1 lakh bill, you pay ₹30,000; insurer pays ₹70,000. |
Final Thoughts
Deductibles can be a great way to save on premiums if you’re healthy and don’t expect to make frequent claims. But they’re not ideal if you have health issues or a risky lifestyle. Always consider your health, budget, and risk before choosing a deductible amount in your health insurance plan.
