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Tuesday, January 31, 2023

Opting for deductible in a health insurance plan

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The world we live in continues to turn more unpredictable, especially as we reel from the aftermath of the pandemic.

While COVID-19 might seem to be out of sight for now, there has been an unprecedented rise in new viruses and medical disorders. Consequently, in a world where medical disorders and medical inflation are rising, the vitality of having comprehensive health insurance cannot be stressed enough.

While many would want to go for health insurance to protect themselves and their families, they also seek ways to save more on premium costs.

One of the most popular ways to do so is by relying only on corporate insurance plan and essentially have a premium-free plan. However, there are many reasons why this could be set for failure. Some of them are low sum insured, no coverage for additional family members, no option to customise plan, absence of riders and so on.

Most importantly, corporate cover ceases in case of a job loss or job switch.

Nevertheless, if one has to cut the corners without risking their financial health, the smarter way to do so is to opt for the deductible in your individual health plan.

What is deductible

A deductible is an option in a health insurance policy where the policyholder is required to pay a fixed amount before the coverage kicks in. Let’s say you opt for ₹50,000 deductible in your policy and you make a claim of ₹2 lakh. In this case, you need to pay ₹50,000 out of pocket, following which, the insurance company will be liable to pay ₹1.5 lakh.

Since the customer has to pay a fixed out-of-pocket sum, it brings down the premium, thereby making it more affordable.

Co-payment

One might wonder if the deductible is the same as the other out-of-pocket expenditure that brings down the premium in health insurance, known as co-payment. However, they’re both different. Co-payment is a fixed percentage or proportion of the claim amount that the policyholder pays out-of-pocket at the time of claim settlement. So, if you have opted for a 10% co-payment clause and make a claim of ₹10 lakh, you’ll end up paying ₹1 lakh.

Deductible, on the other hand, is a fixed amount that has to be paid before the coverage starts. So, if you have opted for ₹1 lakh as a deductible, you can make a claim only after this limit is crossed and borne by you.

Exercising deductible

Before you combine two policies, here’s what to bear in mind:

1) Always disclose existing policies with the new insurer to avoid rejection of the claim

2) You cannot make a claim for the same medical expense from different insurers

3) It’s advisable to use up the group health policy first and claim the remaining excess from your personal health cover

Now, if you have coverage of ₹3 lakh from your employer and you have ₹50,000 deductible in your personal plan, you will pay a lower premium. Especially, if you have a claim-free policy year, this can substantially help you save up on premium.

Alternatively, suppose you only make a smaller claim of under ₹3 lakh. In this case, you still don’t pay anything out of pocket and get adequate coverage even as you continue saving on premiums.

Flipside to deductible

While deductible is a great option to bring down the premium, there’s also a flipside to it. If you don’t have a group health plan, then you may be looking at a large out-of-pocket expense at the time of claim settlement. Also, if you opt for a higher deductible in order to save up on premium, this can turn out to be a disaster as you might have to arrange a large amount, without which, your insurance coverage won’t start. In such cases, one may look at opting for co-payment instead, wherein the amount to be borne by the policyholder is proportional and to be paid at the time of claim settlement.

In a nutshell, comprehensive health insurance is no longer an option but an indispensable protection shield in today’s day and age. While there are ways to preserve your finances by saving premium, always make sure that you don’t go overboard and risk your overall financial health in the process of doing so.

(The author is Head, Health and Travel insurance, Policybazaar)



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