Health Insurance is beneficial for providing financial backup against hospitalisation expenses. Keeping in mind the rising medical inflation and being financially prepared for unforeseen medical emergencies, securing yourself and your family becomes essential. Most of us find it difficult to understand the terms and conditions of the policies. But it is crucial to know them, only then we get to know how those benefits will work for us. Knowledge about the policy benefits and coverage will help dispel claim-related queries.
Let us discuss how co-pay and deductibles work in Health Insurance.
Co-payment
Co-payment or co-pay is one of the features of Health Insurance policies. Co-payment defines the fixed percentage of the claim amount the insured pays, irrespective of the claim. In simple words, a co-pay means cost sharing between the insured and the insurance company. The insured has to pay a fixed percentage of the claim amount for every eligible claim raised by him/her.
For example, if your claim amount is One lakh rupees and your policy is subjected to a co-pay of 20%, then you become liable to pay 20% of your claim amount which is Rs. 20,000/-. The rest of the claim amount will be paid by the insurance company as per the terms and conditions of the policy.
Co-payment is made mandatory in some Health Insurance policies while others make it an optional feature leaving the decision to the insured whether to opt for it or not. The fixed percentage of the co-pay is policy specific. Moreover, co-pay is a mandatory feature in most Health Insurance policies that are crafted for senior citizens, as elderly people are more prone to health risks when compared to young ones.
One benefit of choosing a co-pay is that the policy will have a low premium when compared with the other policies which do not have this clause. Also, be mindful of the co-pay percentage and go for the policy that offers a low co-pay percentage to minimize your out-of-pocket expenses. Because if the claim amount is high you might end up paying a hefty amount. The co-pay clause is not mandatory if the policy is bought at a young age, which is why it is a wise decision to buy a Health Insurance policy at a young age.
Deductible
Deductible in Health Insurance defines a fixed amount that should be paid by the insured. Therefore, the insurance company becomes liable to pay only when the claim amount exceeds the deductibles. The working principle of deductible may sound similar to that of co-payment, yet they hold significant differences. In co-pay, the cost is shared for every eligible claim by a certain percentage, whereas in deductible the company becomes liable to pay the eligible claim amount once the deductible limits are paid out by the insured.
For example, if your eligible claim amount is Rs. 80,000/- and as per the terms and conditions of the policy, you are entitled to a deductible of Rs. 30,000/-, then you become liable to pay the deductible amount and the difference amount of Rs. 50,000/- will be paid by the insurance company.
What if the claim amount is less than the deductible? Then, the insurance company is not liable to pay the claim amount. Some Health Insurance companies make deductibles compulsory, while others make it voluntary. In the case of compulsory deductible, the deductible percentage is fixed by the insurance company and the insured has to abide by the terms and conditions of the policy. A compulsory deductible will leave no impact on the premium.
In contrast, a voluntary deductible entitles the insured to choose the deductible percentage. The insured is offered a choice to select a feasible deductible percentage while keeping in mind the family’s income and medical expenses. Opting for the voluntary deductible will impact the premium. The higher deductible limit will lower the premium. Also, be mindful while choosing deductible percentage, because if you choose a high deductible then you may end up paying a hefty amount.
Understanding both the terms is necessary as you can be careful while choosing co-pay and deductible. Both co-payment and deductible may help to cut the cost of your premium, but make sure to check the terms and get clarification on how these benefits will work in your favour. It is wise to choose the policy that suits all your requirements.
