The health insurance premium is the amount paid by the policyholder to the health insurance company for the coverage. It is possible to reduce existing premiums while ensuring adequate health cover with a deductible.
What is a deductible for health insurance?
A deductible is a clause in a health insurance policy due to which the insurance company is not liable to pay up to a specified amount of the total claim presented. That part of the claim is needed to be paid by the insured out of his/her pocket. The deductible amount can be either specific, a percentage of the claim amount, or a specific amount of time after which the insurance company becomes liable to pay the benefits. Usually, the higher the deductible amount, the lower is the premium for the same coverage.
The deductible can be applied on a per claim basis, i.e. the insurance company becomes liable to pay only if any claim exceeds the deductible amount or it can be applied on the aggregate basis wherein the deductible amount is computed based on the total claims in a year.
Types of deductibles:
Compulsory deductible: The compulsory or the mandatory deductible is built-in the health insurance and you cannot opt out of it. It is that part of the claim that you must compulsorily pay out of your pocket before the insurance company becomes eligible to pay for the rest of the claim amount. It can also be in terms of time in some cases.
For example: Mr. Vishal takes a health insurance policy that provides for a coverage of Rs 2,50,000 for hospitalization with a deductible of Rs 20,000. Mr. Vishal met with an accident and was hospitalized for 5 days. The hospital bills came out to Rs 75,000. The insurance company paid for Rs 55,000 (Rs 75,000-20,000) and Vishal needed to pay Rs 20,000 out of his own pocket.
Voluntary deductible: It is optional for the policyholder to go for this deductible and is over and above the compulsory deductible. It increases the amount that the policyholder needs to pay out of his own pocket.
The higher voluntary deductible you agree upon, the more shall be the discounts on the premium amount. So, if you know that there are fewer chances of you being hospitalized, then you should opt for higher voluntary deductibles to save big on the premium amount.
How can you optimize your premiums with deductibles?
The lower health insurance premium does not necessarily mean the lower coverage. You can get a sufficient coverage on your health insurance with lower premiums if you adopt certain smart measures that are deductibles.
When an insurer imposes a deductible, policyholders do not approach the insurer for every single claim. As it lowers the number of claims, the insurer happily passes on the benefit to policyholders in the form of lower premium rates. The savings made by the policyholder can be used to buy other insurance policies like life insurance and personal accident policy. Further, if you have pre-existing ailments, like heart issues, diabetes, etc.; you can go for the higher deductible option to keep a check on premium rates. Also, when you agree to share the claim with the insurer, the latter also agrees to offer you a policy without strict conditions.
Further policies like top-up and super top-up also come with deductibles. These policies cover medical costs after a certain threshold, i.e.; deductible is crossed. For instance, the super top-up policy of Rs 10 lakhs comes with a threshold limit of Rs 5 lakhs. It means the policy benefit of Rs 5 lakhs will kick in only when you have incurred the hospitalization expenses of Rs 5 lakhs.
While top-up considers the single claim in a year, super top-up considers the total claims occurred in a year.
Tread with caution
Though deductibles lower your health insurance premium rates, it is not advised to go for them if you can’t afford. The reason is simple: You buy a health insurance to get coverage against rising medical expenses, however, if you choose a higher deductible amount you would have to pay a substantial part of medical expenses from your pocket. It defeats the entire purpose of buying the insurance. Therefore, be cautious while choosing the deductible and choose only that amount which you can afford.