Sep 13, 2024
The lack of a proper health insurance plan can be financially stressful in the event of a medical emergency. It not only gives you a financial cushion but at the same time, ensures that you and your loved ones receive the best treatment out there. If you visit a hospital that is recommended or is in the insurance provider’s network, you can avail yourself of cashless benefits as well. Individuals planning to buy a health plan will most likely come across the term Deductible. Here is evelYthing that you need to know about deductibles in health insurance plans.
What is a deductible?
A deductible is an out of pocket expense that the insured must contribute when they raise a claim on their policy. When the insured needs to claim their health insurance plan, and it has a deductible component, the insurance provider will only start with the settlement of claim, once the deductible is exceeded. Here is an example to better understand what a deductible is.
Let us consider health insurance for parents and it has a deductible clause of Rs. 10,000. The parents of the insured undergo any medical treatment and the treatment costs Rs. 50,000. When the insured raises a claim for the policy, he or she must pay Rs. 10,000 first and then the insurer will settle the remaining amount i.e. Rs. 40,000 depending on other policy conditions.
The deductibles in health insurance policies work similar to the ones in motor insurance plans. You must pay the deductible amount to the medical service provider, either the doctor or hospital and the insurance provider will pay the remaining amount.
Types of Deductibles
Health insurance plans have two types of deductibles: mandatcny and voluntary.
1. Mandatory Deductible:
A mandatory deductible, as the name suggests, is mandated by the insurance provider. When you raise a claim on your policy, the insurance provider will only settle the claim once you have paid the mandat01Y deductible or the compulsory deductible. It is a fixed amount.
2. Voluntary Deductible:
A voluntary deductible, on the other hand, is chosen by the insured. The insured can choose a deductible that they are comfortable to pay when they file for a claim. One might wonder, what is the benefit of opting for additional out of the pocket expenses. Well, deductibles help you to reduce the policy premium.
Perks of Deductibles in policy
It might seem countelproductive at first, to buy a health insurance plan and opt for voluntary deductibles, since the insured ends up paying both. Here are a couple of straight forward benefits of choosing deductibles.
1. Choosing a policy with a deductible will reduce the policy premium by a considerable margin. Thus, allowing you to benefit from lower premiums for your health care plan.
2. Conversely, the dip in policy premium will allow you to opt for a policy that offers higher coverage in terms of the sum insured. By choosing a volunta1Y deductible, you can now afford a policy with a higher sum insured for a similar premium, as you would have without a voluntary’ deductible.
3. Insurance providers include a deductible clause in the policy to avoid frequent or unnecessa1Y claims. This is a blessing in disguise for the insured, as it helps retain the policy’s NCB, or no-claim bonus. The NCB leads to a higher sum insured over time.
Sensibly choosing a volunta1Y deductible for your health insurance policy will result in higher savings and even assist you to get access to a higher sum assured.
Disadvantage of Deductible
Deductibles bring a strong case for themselves to the table. However, there are a couple of disadvantages of deductibles in policies.
1. Should you opt for a higher deductible amount, in a bid to lower the policy premiums, you will need to pay the amount during a claim. During emergencies and crunch situations, the higher deductible can pinch you a little.
2. Not opting for a deductible will prevent you from making any out of pocket payments during a claim. However, it will result in a higher policy premium.
There is a thin line between convenience and financial burden when it comes to deductibles. Thus, choosing a deductible sensibly will make way for lower premiums and at the same time not be a burden during claims.
Deductible vs Copayment
While buying a new health insurance plan, quite a few policy buyers get confused between deductibles and copayments. Though both are out of pocket expenses for the insured, there is a considerable difference.
Copayment or copay is the cost sharing of healthcare related expenses between the insured and the insurance company. In the policy wordings, the insurance company usually outlines the percentage of copayment for the insured. Let us consider an example.
A policyholder chooses a plan with a sum insured of Rs. that has a copayment clause of 10%. In the event of a medical emergency, if he or she raises a claim for Rs. the insurance provider will not settle the entire amount. The insured must first pay 10% of the claim amount, which in this case is Rs. 50.000.
The insurance provider will settle the remaining Rs. once the insured has paid the copayment amount to the medical establishment.
Some insurance companies have the copayment as a certain percentage of the claim amount, while others have it as a fixed amount. Making it crucial to read the policy wording carefully.
Should you opt for deductibles?
In most of the cases, opting for a deductible is a more sensible option. If you are someone who is healthy and does not anticipate major treatments or regular treatments, choosing a deductible will make things easier. Not only will you save money on premiums but you can also choose a policy with a higher sum insured. It also aids with the no claims bonus, which can fulther enhance the sum insured of the policy.
On the other hand, if you are someone who needs regular medical treatment, deductibles can add to your financial burden. Since you will need to pay the deductible before your insurance provider can start to settle the medical expenses.
Conclusion
Health insurance for parents is almost unavoidable given the ever-rising medical expenses in the country. Being aware of the finer details of the policy will help you make the most of it. And deductible is one such cmcial component. It is an out of the pocket expense for the insured, when they raise a claim for the policy. However, deductibles can lower your policy premiums and help you secure a policy with a higher sum insured. Thus, saving you money in the long run.
Source: Economic Times