Implications of‘deductible and ‘co-pay clauses in health insurance

Health insurance policies have ‘deductible’ and ‘co-pay’ clauses that have financial implications for the policyholder. These clauses limit the amount of claim payable by the insurance company in the event submission of claim by the insured. Under these clauses, the limit of the company’s liability is specified in the policy document. Since these clauses determine the extent of liability of the insurance company, let us understand the meaning and the impact of these clauses on the claim settlement. 

The ‘deductible’ in an insurance policy is a specified amount payable by the policyholder before the insurance company pays up the claim amount. For example, if the deductible specified in the policy is Rs 25,000 and if the amount of claim is Rs 40,000, the policyholder would have to pay Rs 25,000 before the insurance company pays up the balance amount of Rs 15,000. However, if the amount of claim is Rs 20,000, the insurance company is not liable to pay any amount. It must be remembered that the higher the deductible amount, the lower will be the premium, and lower the deductible, higher the premium. Also, the deductible is a one-time expense that the insured has to incur in a year.

In the case of co-pay clause, the policyholder is liable to pay up an agreed amount every time a claim is made. The co-pay amount is usually a percentage of the claim that the insured is required to pay up, while the insurance company is liable to pay the remaining amount. For example, if the co-pay clause specifies 20% of the claim amount as the amount payable by the insured and if the medical claim is for an amount of Rs 50,000, the policyholder will have to pay up Rs 10,000, while the insurance company is liable to pay Rs 40,000.