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What is Deductible in Health Insurance? How does it Work?


Feb 19 2020


The next generation is well aware of the advantages of buying health insurance policies along with their regular life cover. Life insurance helps you safeguard your loved ones’ financial future behind you, whereas health insurance is a tool through which you get enough financial support to cover medical expenses. 

While buying health insurance, you need to understand the nitty-gritty of the policy as well as terms and conditions. There are multiple jargons in the policy document, which aren’t that clear to understand. People often get confused between co-pay and deductibles. Both of these terms are different and possess individual applications. In this article, let’s see all the basics of health insurance deductibles. 

Health Insurance Deductible

Whenever you purchase health insurance, there is always a lower limit below which the insurance cover doesn’t work. Any expenses below this lower limit have to be settled for from your pocket. This concept is called deductible. In other words, the health insurance deductible is the amount that you bear from your pocket. The health Insurance benefits kick-in only once your expenses cross the threshold of the lower limit. 

The health insurance deductible is determined based on the plan you choose and the overall premium amount you pay. It may also depend on your medical history, analyzing what the probability of falling prey to a particular illness you are covered for. 

Is the Health Insurance Deductible Constant?

Generally, the higher the premium, the lower the deductibles are, and vice-a-versa. If you are sure about your health and don’t even count minor health conditions, you can increase your health insurance deductible. This benefits you in a way that the premium amount is lowered straightaway. The deductible is not constant all the time in terms of percentage; you can analyze the need for health insurance and decide the deductible. 

How Is Health Insurance Deductible Beneficial?

We have already seen that deductible can increase/decrease your premium amount in inverse proportion. Besides, it helps you prevent from making insignificant claims or going for any medical treatment randomly. Smaller claims can affect your overall sum insured and can cause an issue while making for future claims within the tenure. Similarly, No Claim Bonus is another side of the benefits that you can avail by not claiming for smaller claims. 

How does Deductible Work?

Consider that your health insurance policy has a deductible of Rs.5,000. Now, in case of any viral infection, if the overall medical bill falls under this amount, you will have to pay it personally, and the insurance company will not re-pay it to you. However, if the expenses exceed the limit of Rs.5,000, the insurer will consider your claim as ‘eligible’ and initiate the claim-settlement process. Sometimes, healthcare and prescription drugs may have different deductibles. 

In short, the deductible is the preliminary amount which is deducted from your medical coverage. If the expenses fall under this limit, the policy benefits are not paid and you have to bear them from your pocket. It is the provision for the insurer to minimize claim-related risks; moreover, it is beneficial to you in terms of saving your hard-earned money by reducing premiums.