Health insurance plans are filled with jargons that can often overwhelm new buyers. Buying a policy without understanding these terms may not be the best advice since such terms are critical to understand the policy in detail. For instance, policyholders may be required to share some portion of the treatment cost with the insurance company or the health coverage kicks in only after a specified amount is paid by the policyholder and more. An unclear idea about such policy terms can land unaware buyers in a trap, just when they require financial assistance the most.

Among the many terms that policyholders must know of before buying a policy, deductible is one of them. All health insurance policies specify the quantum of deductibles in their policy terms.

What is a deductible in health insurance?

Deductibles is that amount which policyholders need to pay for before the insurance coverage kicks in. to simplify, policyholders need to pay for a specified amount of treatment cost, only after which the insurance company’s cover pays for the balance cost of treatment subject to the policy coverage. Thus, the insurance company will compensate for treatment only after policyholder has borne the pre-decided amount of deductible.

How do deductibles work?

At first, the deductible component is pre-decided at the time of purchase itself. Thus, there is no ambiguity as to how much the policyholders will be required to pay. If the policy mentions a deductible amount of ₹10,000, any eligible treatment cost over and above such amount is compensated by the insurer.

Deductible have an inverse relationship with the premium amount since they induce out-of-pocket expenses even when covered by an insurance policy. Thus, higher the deductible, lower is the premium and vice versa.

What are the types of deductibles?

Be it individual plans, or health insurance plans for family, or any other type, deductibles are a part of the policy terms and they are divided in the following types:

  1. Compulsory deductible

As the name suggests, this is a mandatory deductible for all health insurance policies. Each time a policyholder raises a claim, they have to pay the compulsory deductible as specified. Such compulsory deductible can also be in the form of a percentage of the total sum insured of the policy. A compulsory deductible differs based on the insurance company and the type of policy. The insurer determines such component for every insurance policy. * Standard T&C Apply

  1. Voluntary deductible

Contrary to a mandatory deductible, the voluntary deductible is optional in nature. Policyholders can opt for one considering how much amount they can bear when a claim is made. While this can be useful in lowering the burden of premiums, it lowers the financial assistance a health insurance policy provides. As mentioned above, the voluntary deductible acts in an inverse relation to the premium, i.e. higher the voluntary deductible, lower is the insurance premium. For determining the impact of a voluntary deductible on the premium, health insurance premium calculator is a nifty tool. Please visit the official website of IRDAI to know more.

Since the deductible requires policyholders to pay from their pocket, it discourages making minor insurance claims. However, carefully deciding on how much deductible to opt for is the decision a policyholder needs to arrive upon. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

Eve Nasir