Understanding Deductibles and Copays

Deductible

Deductible is another way of sharing the cost with the insured. It is a fixed amount that the insured party has to pay before the benefits of the insurance policy kick in. Simply speaking, if your deductible is ₹ 1 Lakh, until you spend that much amount the insurance company would not pay a single rupee. If you claim ₹ 5 Lakh, you will first pay ₹ 1 Lakh and the insurance company will then take care of the balance ₹ 4 Lakh. Deductible can be calculated in two ways:

1. Insurance companies may apply a fixed deductible to each, and every claim made.
2. The other way is to calculate the aggregate deductible during the policy year.

Let us understand this with an example, you make 3 claims during the policy year of - ₹ 9,000/-, ₹ 15,000/- and ₹ 20,000/- respectively and your insurer applies a deductible of ₹ 10,000/- on every claim. The following is how the calculations will look:

1. First claim of ₹ 9,000/-: The insurer will pay nothing. As the claim amount is less than the deductible amount of ₹ 10,000/-.
2. Second claim of ₹ 15,000/-: You pay the deductible of ₹ 10,000/- and the insurer will pay the balance ₹ 5,000/-.
3. Third claim of ₹ 20,000/-: You pay the deductible of ₹ 10,000/- and the insurer will pay the balance ₹ 10,000/.

In summary, you pay ₹ 29,000/- from your pocket of the total ₹ 44,000 claimed.

Let us now suppose the insurer calculates deductible as an aggregate amount of ₹ 20,000/- and yet again, you claim thrice during the year. In this scenario –

1. First claim of ₹ 9,000/-: You will pay everything.
2. Second claim of ₹ 15,000/-: and the insurer will share the rest. You see, you pay your aggregate deductible of ₹ 20,000/-(₹ 9,000/- from first claim and ₹ 11,000/- from the second claim).
3. Third claim of ₹ 20,000/-: You will not pay anything. The entire ₹ 20,000/- is covered by the insurer. You will not pay anything. The entire ₹ 20,000/- is covered by the insurer.

You end up paying ₹ 20,000/- from your pocket of the total ₹ 44,000/- claimed.

The deductible can vary from plan to plan but on an average, aggregate deductible is found to be more cost-friendly for you. At Jio Insurance Broking Limited we assist you understand the details of every product and we recommend best fit products in line with your needs.