There is no doubt that buying a health insurance policy is imperative amid skyrocketing medical expenses. At the same time, it is vital to understand different nuances of an insurance policy to make the most of your plan.
When you buy a medical insurance plan, there are a few ways to save on your premium outgo. One way is to opt for ‘deductible’ wherein policyholder is required to pay a fixed sum before the claim kicks in.
For example, when a policy of ₹3 lakh carries a deductible of ₹40,000 then at the time of making a claim, the policy holder must pay ₹40,000 before the insurer pays the balance.
This brings down the amount of premium for policyholders. Experts believe that buying a deductible is economically wise for senior citizens because insurers tend to charge a higher premium from them, and deductible allows them to pay a lower premium.
“Deductibles are most effective for senior citizens over the age of 60 because a small deductible significantly lowers the premium. For those below 60, I would suggest not having a deductible if that is affordable,” said Kapil Mehta, Co-founder and CEO of SecureNow Insurance Brokers.
Deductible vs co-payment clause
While ‘deductible’ entails payment of a fixed amount at the time of making an insurance claim, there is another way to cut down on premium outgo i.e., through co-payment clause. This is different from deductible since the co-payment refers to a fixed percentage of out-of-pocket claim money.
For instance, when co-payment is 10 percent, it means when a claim of ₹5 lakh is made – policyholder will have to cough up 10 percent of total sum i.e., ₹50,000. On the other hand, in case of deductible — policyholder will be made to pay a fixed sum, say ₹40,000 regardless of the amount of claim.
Implications of each of the plans
It is important to note that once you have a deductible of a particular amount, you can claim your insurance only when it is over and above your deductible amount. For example, in case of ₹40,000 deductible – a claim of ₹30,000 can not be made, but when the insurance claim crosses ₹40,000, you can make the claim.
Another disadvantage of choosing a deductible is that in order to save on premium – you end up spending money every time you make a claim. Also, if the deductible amount is considerably high, it will be inconvenient to spend a huge out-of-pocket sum – without which the claim won’t even start.
In such a situation, it is considered economically more feasible to opt for co-payment clause where out-of-pocket expenditure is calculated at a certain percentage of the total claim amount, and falls or increases in proportion to the total amount of claim.
So, before opting for deductible or co-payment clause, it is really vital to think through all the pros and cons.