What are the Deductibles in Health Insurance in India?

Health insurance is crucial for managing healthcare expenses and providing financial security in times of medical crisis. To make a well-informed decision, it's important to grasp the aspects of a health insurance plan. One key element to understand is the deductible, which influences both your premium payments and out-of-pocket costs when making a claim. In the health insurance landscape, deductibles play an important role in determining the policy’s cost-effectiveness and coverage scope. This article explores the concept of deductibles, how they work, their types, and their implications for policyholders.

Understanding Deductibles in Health Insurance

A deductible refers to a specified sum that policyholders must pay out of pocket before their health insurance provider starts covering the expenses. Essentially, it represents the amount you commit to paying towards your healthcare expenses before your insurance kicks in. Deductibles are usually calculated on a yearly basis, meaning once you've paid your deductible for the year, the insurer will take over covering medical costs as per the policy terms for the rest of that year.

Types of Deductibles in Health Insurance

In the realm of individual health insurance in India, deductibles can be broadly categorised into two groups:

Voluntary Deductibles

These deductibles are chosen willingly by the policyholder to lower his/her premium. By opting for a higher deductible, the policyholder can enjoy reduced premium costs.

• Advantages: Opting for voluntary deductibles is advantageous for individuals with good health who do not expect frequent medical expenses. It can also be a wise decision for those with coverage like corporate health insurance, aiming to cut down their personal policy premiums.

• Disadvantages: The main drawback is the increased out-of-pocket expenses if a major medical event occurs, as the policyholder must cover a large portion of the costs before insurance coverage kicks in.

2.   Compulsory Deductibles

• Advantages: Since these deductibles are fixed by the insurer, it simplifies decision-making for the policyholder.

• Disadvantages: Unlike voluntary deductibles, policyholders do not have a say in the amount, potentially leading to higher out-of-pocket expenses than expected.

Deductibles and premiums follow an inverse relationship. Opting for a higher deductible typically results in a lower premium, whereas a lower deductible translates to a higher premium. This is because a higher deductible reduces the insurance company's risk, enabling them to offer a reduced premium.

For instance, if you select a policy with INR 10,000 deductible, your yearly premium will be less compared to one with INR 5,000 deductible. However, when making a claim, you will need to cover INR 10,000 from your pocket before insurance coverage kicks in.

Choosing the Right Deductible: Factors to Consider

Picking the right amount is crucial and should be influenced by various factors like

• Health status: A higher deductible could be beneficial if you are generally healthy and rarely require medical attention. Conversely, if you foresee regular expenses, a lower deductible might be a cost-effective option.

• Financial position: Your capacity to handle out-of-pocket costs during emergencies is another factor to consider. If you've saved some money, you might want to go for a higher deductible to save on your insurance premium costs. If your financial situation is tight, a lower deductible can help ensure you don't end up with substantial out-of-pocket expenses when you need medical care.

• Age and family size: Younger individuals or small families with dependents may choose higher deductibles if they have fewer healthcare needs. On the other side, families with kids or senior citizens might prefer lower deductibles for better coverage without hefty out of pocket costs.

• Other Insurance Coverage: If you have more than one individual health insuranceplan like a corporate policy and a personal policy, it could be smart to go for a higher deductible on your personal healthcare plan. This way, you can use the corporate policy for regular expenses while keeping the premiums low on your personal policy.

 Pros

• Lower premiums: Plans with higher deductibles are more budget-friendly when it comes to monthly or yearly premiums.
• Managing medical expenses: These plans encourage policyholders to be mindful of their healthcare spending, promoting judicious use of medical services.

• Out-of-pocket expenses: When faced with a medical crisis, the policyholder has to fork out a substantial sum before insurance kicks in to cover the remaining expenditure.
• Limited benefit for regular health needs: Individuals requiring frequent medical attention may incur significant out-of-pocket costs throughout the year with a high deductible plan.

• Opt for a higher deductible if: You are in good health, have an emergency fund, and aim to cut down on premium expenses. This choice is suitable if you do not foresee needing frequent medical care and prefer reduced ongoing insurance premiums.
• Opt for a lower deductible if: You expect to require regular medical care, have dependents, or seek peace of mind that comes with knowing your out-of-pocket expenses will be minimal. This option is ideal for those who prioritise predictability in their healthcare expenses and are willing to pay a higher premium for that assurance.

Deductibles play a crucial role in health insurance policies as they impact the affordability of your healthcare policy. Whether you opt for a high or low deductible, it is essential to strike a balance between your healthcare requirements and financial capabilities without compromising on the scope of coverage.

Moneycontrol Journalists are not involved in creation of this article.