Reduce your premium with health insurance deductibles

Neeraj from Nagpur is grappling on how to purchase affordable health insurance for his elderly parents. His concern is valid. Health issues tend to escalate with age and the cost of treatment can strain even strong financial plans.

Healthcare inflation is rising rapidly, more than three times the general inflation rate (15% compared to 4.75%). However, IRDA has clarified that insurance companies cannot deny coverage to the elderly. The question remains: what can be done about rising costs?

If you’re facing a similar dilemma like Neeraj, take a deep breath, because there is an option that could ease your worries. It involves choosing a policy with a deductible or co-payment option for parents. This choice could reduce premiums by up to 25%. Let’s understand this with an example.

What is deductible policy?

In a deductible policy, the policyholder pays a predetermined amount towards treatment costs from their pocket. If Neeraj chooses a deductible of ₹25,000, he would need to pay that amount upfront for any claims. The insurance company would cover expenses exceeding this deductible.

Typically, deductible payments are made once per policy year, either in cash or from another policy. If the claim amount is up to ₹25,000, the insurance company won’t make any payment.

With the co-payment option, the policyholder bears a pre-agreed portion of the claim from their pocket. For instance, if Neeraj opts for a 20% co-payment and makes a ₹1 lakh claim, he would need to pay ₹20,000 himself. If multiple claims are made in a year, he would have to pay 20% of each claim.

If the premium amount is still beyond your budget, then there’s another option. If Neeraj has group health insurance from his employer that covers his parents, it’s advisable to keep that policy for them. He should buy a separate health plan for himself. Since Neeraj is young, he might find insurance coverage more affordable, possibly without additional loading for any pre-existing conditions. Another significant benefit would be avoiding waiting periods for treatment of any existing illnesses.

Deductible vs. Co-payment option

Jitendra Solanki, a personal finance expert, suggests that choosing a policy with a deductible or co-payment clause can significantly lower health insurance premiums. If you have to choose one option, a deductible is generally better. It requires you to pay a fixed amount from your pocket only once a year during treatment. On the other hand, the co-payment option could prove costly.