What is a deductible in health insurance?

A deductible is the amount you must pay out-of-pocket before your health insurance coverage kicks in. For example, if your deductible is ₹35,000, you must pay this amount before the insurer covers the remaining expenses.

What are the types of deductibles?

The types of deductibles include compulsory deductibles, which are mandatory and set by the insurer or IRDAI, and voluntary deductibles, where you choose a deductible amount in exchange for lower premiums.

Why do some insurance plans have deductibles?

Deductibles are included in some insurance plans to encourage cost-sharing between the insurer and the policyholder, which can help reduce premium costs or manage claims more effectively.

Do all insurance policies have deductibles?

No, not all insurance policies come with deductibles. It depends on the type of policy and the terms set by the insurer. Always check your policy document for details.

How does a voluntary deductible affect premiums?

Choosing a voluntary deductible reduces your insurance premiums since you agree to pay a portion of the claim amount. However, it also means higher out-of-pocket expenses during a claim.

D: Deductible

Welcome to our brand-new series, A-Zs of Insurance. In this series, we will venture into the world of insurance to breakdown insurance jargon for you, so you’re empowered to make informed decisions about your financial security.

Insurance is meant to be a suit of armour that shields you from unexpected expenses. You buy it to cover a myriad of things, like medical treatments, vehicles, life risks, and more, expecting that the insurer will take care of the costs.

However, sometimes, there is something known as a deductible that affects how your coverage operates. In this article, we’ll talk about what deductibles are and how they work.

What is a deductible?

A deductible comes into play when you make an insurance claim. It is a certain amount of money that you need to pay before your coverage kicks in. With this arrangement, you and the insurer agree to share the costs when a claim arises.

Note: Not all insurance plans come with deductibles.

Types of deductibles

Deductibles typically are of two types -

1. Compulsory deductible

The insurer levies this deductible as a mandatory part of your insurance policy. The amount you need to pay is fixed by either the IRDAI or the insurer.

For instance, if your parents are senior citizens and are an elevated risk to cover, their health insurance plan may come with a compulsory deductible. This will need to be paid each time a claim is made. Only then will the insurer step in to cover the remaining expenses.

2. Voluntary deductible

Some insurance plans give you the option to choose a deductible. Voluntarily choosing a deductible shows that you’re open to a greater level of cost-sharing with the insurer, and so, your premiums will be lowered in return.

However, keep in mind that if you go for a voluntary deductible, this may lead to higher out-of-pocket costs when you make a claim.

How does a deductible work?

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Let's understand this with an example. Say you own a health insurance plan with a cover amount of ₹15 lakhs. Your policy document specifies a deductible of ₹35,000 which you must pay every time you make a claim. Once you do so, the insurer will take care of the remaining amount.

Types of insurance policies come with a deductible

Typically, you’ll find deductibles with a few types of insurance plans, like health insurance, motor insurance, top-up plans, super top-up plans, and more.

Please read the terms and conditions of your policy carefully to understand if and how this applies to you.