scorecardresearchWhat is the difference between insurance Copay and Deductible?

What is the difference between insurance Copay and Deductible?

Updated: 16 Jun 2022, 10:07 AM IST
TL;DR.
A deductible is a set amount that serves as the starting point for your health insurance policy while copay is the amount of your health insurance claim that you must pay. 
The terms copayment and deductible are frequently used in health insurance policies. 

The terms copayment and deductible are frequently used in health insurance policies. 

Nothing is more valuable than one's health and well-being, but it is also the most vulnerable. It is critical to have a good health insurance policy in a society where diseases, infections, and other health-related dangers are abundant.

A hospitalisation cover, a critical illness cover, and an ambulance cover are only a few of the advantages of health insurance. The addition of critical illness insurance to your health insurance coverage provides an extra layer of financial protection. When purchasing health insurance, it's easy to become perplexed by terminology that appear to be interchangeable but aren't. The terms copayment and deductible, for example, which are frequently used in health insurance policies, have various meanings.

What is Deductible in Health Insurance?

A deductible, as the name implies, is a set amount that serves as the starting point for your health insurance policy. To put it another way, it is the minimum amount that your medical expenses must reach in order for you to be eligible for your health insurance plan's benefits.

Let us use an example to better grasp the notion of deductible in health insurance. Ms Naina has a health insurance policy with a 1,000,000 sum insured and a 5,000 deductible. This implies she'll only be able to use her health insurance benefits if her medical bills total more than 5,000.

Naina is responsible for the payment of medical expenses for claims that do not meet the deductible level. If, on the other hand, the total medical expenses exceed the deductible set at the time of the health insurance policy purchase, say 10,000, Naina can file a claim for 5,000 after paying the deductible ( 1,000) out of pocket.

Important facts about deductibles in the field of health insurance

  • Deductibles are set at the time of purchase or renewal of a health insurance policy; the smaller your deductible, the higher your premium, and vice versa.
  • Deductibles shield insurers against routine and minor health-care claims.

What is Copay in Health Insurance?

Another term commonly used in the context of a health insurance policy is copay. A copay in health insurance is the amount of your health insurance claim that you must pay, as the name implies. The concept of a copayment stems from the insurer and the insured sharing the financial burden of health insurance payments.

The copay portion of your health insurance coverage can be a set amount or a set percentage of the total amount protected under the plan. Let's use an example to better grasp the notion of copay in health insurance. Mr. Aalekh has a health insurance coverage with a sum insured of 1,000,000.00 and a 10% copay.

When filing a health insurance claim under the above policy, Aalekh will be responsible for 10% of the total claim amount, with the insurer covering the remaining 90%. For example, if the health insurance claim is for 50,000, Aalekh will copay 5,000 and the insurer will pay the remaining amount, which is 45,000.

Important facts about copay in the field of health insurance

  • In health insurance, the fixed amount or percentage of copay is determined at the time of purchase or renewal of the policy.
  • The higher your health insurance copay, the lower your health insurance premium will be, and vice versa.
  • In most health insurance policies, the insurer is responsible for the maximum portion of the copayment.

Which is better: Copayment or Deductible?

If you're trying to decide between a copay and a deductible, keep in mind that they're two different concepts with different implications for your health insurance policy. The main distinctions between a copay and a deductible in a health insurance coverage are listed below.

CriteriaCopaymentDeductible
MeaningThe amount of your health insurance claim that you must pay out of pocket is referred to as a copayment.In health insurance, a deductible is a set amount of money that your medical bills must exceed in order for your policy to be valid.
FormThe copayment can be a set amount or a percentage of the amount covered by your health insurance coverage.In health insurance, deductibles are usually in the form of a defined amount.
FrequencyEvery time you utilise your health insurance policy to get cashless insurance or file a reimbursement claim, you must pay a copayment.The deductible on a health insurance policy is calculated throughout the course of the policy year. You can use your health insurance plan without having to account for deductibles for each claim once you've reached the cap of medical expenses set by your health insurance deductible.
HopeCopayments are common in certain types of health insurance policies, such as Senior Citizen Health Insurance Plans and Critical Illness Insurance Plans.A health insurance deductible is typically included in most health insurance policies to provide an extra degree of protection for the health insurance provider against small claims.

Although a copay or deductible in health insurance lowers your premium, they can increase your financial exposure to medical bills. As a result, it's critical to grasp the nuances of these concepts and keep them in mind while choosing a health insurance policy.
 

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First Published: 16 Jun 2022, 10:07 AM IST