What Is Deductible In Health Insurance?

When we ask what is deductible in health insurance, it means the amount that you have to pay out of pocket while before claiming your insurance. In simple words, a deductible is a portion of your health expenses that you have to pay from your wallet before the insurance coverage gets activated.

Let’s understand what is deductible in health insurance with an example here.

Example

In February 2025, Karthik bought a health insurance policy worth ₹10 lakh, with a deductible of ₹2 lakh. This means that if he gets hospitalised and the total bill amounts to ₹10 lakh or less, he has to pay ₹2 lakh out of his own pocket first which gets adjusted from the total claimed amount (₹10 lakh - ₹2 lakh = ₹8 lakh in this case).

There can be two types of cases here:

Case 1: Medical Expenses Exceed Deductible

In case Karthik’s medical expenses exceed the deductible, he is eligible to claim the insurance amount. For example, if his medical expenses amounted to ₹12 lakh, which exceeds his deductible of ₹2 lakh. In such a case, he is liable to first pay ₹2 lakh, and then claim an amount of ₹10 lakh from his insurer.

Case 2: Medical Expenses Don’t Exceed Deductible

However, if Karthik’s medical expenses don't exceed the deductible amount, he is liable to pay for the entire medical bill. For example, if the hospital bill had been only ₹1 lakh, he would have to pay for it entirely as it doesn’t exceed the deductible amount.

Also read why your insurer can decline your request to port health insurance.

What Factors Impact Deductible?

Your deductible amount in health insurance can significantly vary based on several factors. These are:

• Your current age
• Pre-existing diseases
• The coverage type you’ve chosen
• Your coverage amount
• Habits of smoking or alcoholism
• Any add-ons chosen, such as a critical illness rider
• Your health history

Based on all of these factors, the underwriter may estimate your insurance deductible amount. Note that deductibles vary across insurers, as all of these factors differ across people.

Also read what is critical illness insurance and its coverage details.

How Insurance Deductible Works?

Many people ask what is a deductible in insurance, but this question becomes simple to answer after explaining how deductibles work. Here’s an illustrated example:

Example

In the case of Raghav Tripathi, the deductible in the insurance claim applied differently. Raghav bought a health policy worth ₹5 lakh in April 2024, where his policy contained a deductible of ₹50,000. After 6 months, Raghav met with renal failure, where his entire medical expense came down to ₹6 lakh.

Raghav consulted his insurance provider to know the payable amount, and he was informed that he has to pay a total of ₹1.5 lakh out of his pocket. The reason is:

• Raghav’s total medical expense: ₹6 lakh
• His deductible amount: ₹50,000
• His coverage amount: ₹5 lakh

From the above information, it is evident that Raghav’s health expenses exceed his insurance by ₹1 lakh, which he has to pay out of his pocket.

His total out-of-pocket expense: Amount by which his health policy is exceeded + Deductible amount = ₹1 lakh + ₹50,000 = ₹1,50,000.

Types Of Insurance Deductible

Health insurance deductibles come in several varieties, each serving different purposes and suited to different circumstances.

Compulsory Deductible

A compulsory deductible in insurance policy is a fixed amount that you have to pay before you can claim insurance benefits. If your health policy has a compulsory deductible of ₹1 lakh, this implies that you need to first pay this amount from your own pocket before getting claim benefits.

Voluntary Deductible

If your health policy has a voluntary deductible, you can choose to pay any amount as you decide as deductible. The benefit of having a voluntary deductible is that you get the complete flexibility to choose the deductible amount based on your capacity to pay.

Cumulative Deductible

This type of insurance applies in cases of family floater plans, where multiple family members are covered under a single policy. In a cumulative plan, the deductible accrues and gets added as different family members submit their claims. Once the family members collectively meet the deductible, the health coverage starts.

Non-comprehensive Deductible

Also called a per-incident or per-hospitalization deductible, this applies to each separate claim or hospital admission. If you have a ₹20,000 non-cumulative deductible and are hospitalized twice in a year, you'll pay ₹20,000 for each hospitalization.

Comprehensive Deductible

This single deductible applies to all covered services under your policy. Once you meet this amount through any combination of covered expenses, your insurance coverage activates for all remaining eligible costs.

Non-Comprehensive Deductible

A non-comprehensive coverage applies in case of multiple health policies with individual deductibles. For example, non-comprehensive applies if you have two policies, one with a ₹10,000 deductible and another with a ₹8,000 deductible.

Also read what the principle of indemnity means.

How Does Insurance Deductible Differ From Insurance Copay?

There is a general confusion between what is deductible amount in health insurance and what is an insurance copayment or copay. These two concepts are different in many ways, as described below:

For example, if your deductible is ₹50,000 and the copay is 10%, that means the policyholder first needs to pay ₹50,000 before claiming the insurance benefits. It is only after paying the deductible, when the policyholder needs to pay the 10% amount while the rest amount is paid by the insurer.

How Does Insurance Deductible Differ From Out-of-Pocket Pay?

An out-of-pocket expense includes deductible and several other payments too. Here are they:

• Deductible in insurance claim
• Copayments
• Coinsurance
• Any expenses that exceed policy limits
• Any treatments that are not covered by the policy

This shows that all deductibles are out-of-pocket expenses, but not all out-of-pocket expenses are deductibles.

Example To Understand

Let’s take a quick example of Naveen. He holds a health policy worth ₹5 lakh that has a ₹1 lakh deductible and a 20% copay after the deductible is met.

Naveen undergoes a treatment that costs him ₹7 lakh.

His out-of-pocket expenses will be:

• Deductible of ₹1 lakh
• Copay of 20% or ₹(5 -1) lakh x 20% = ₹80,000
• Expenses uncovered by his health insurance = ₹(7 - 5) lakh = ₹2 lakh

Now, Naveen’s health expense is ₹7 lakh, where his policy covers only ₹5 lakh, which means that his healthcare expenses exceed his health insurance. He has to pay out of pocket the remaining amount, which is deductible + copay amount + the rest amount after deducting the deductible and copay. His total out of pocket expenses will be: ₹1 lakh deductible + ₹80,000 copay amount + ₹2 lakhs uncovered expenses = ₹3.8 lakh

How To Choose The Right Deductible?

After knowing what is deductible in health insurance, let’s now understand how to select the correct deductible for your team.

Assess Your Team’s Healthcare Needs

Before buying a health policy, you need to assess your team’s healthcare needs properly. If your employees take leave for frequent hospitalizations, lower deductibles are best to choose. Comparatively, if your employees rarely use healthcare services, you can go with higher deductibles and lower premiums.

Evaluate Your Employee’s Financial Ability

Your team’s financial capacity matters to a great degree, also. You need to choose a policy where your employees can comfortably pay off the deductible amount in a health emergency. This is the reason for you to select a plan where the employees can easily spend the deductible, and not be financially strained.

Consider Employee Profiles

Junior and healthier employees might benefit from high-deductible plans as they don’t need frequent hospitalisation. On the other hand, the senior employees might need lower deductibles, as they are often exposed to frequent hospitalizations.

Opt For Lower Deductibles For Employees With Chronic Conditions

According to research, chronic conditions are common in people aged 45-54. If your team has more employees around this age range, you may select a lower deductible plan. It’s also recommended that you inquire about their health conditions such as chronic diseases which may help to decide the deductible limit.

Know Employee Family Coverage Needs

In case you’re choosing family floater coverage for your employees, always select plans based on cumulative deductible coverage. A cumulative deductible is a better option to select than an individual deductible for every team member.

Connect With IRDAI Licensed Insurance Advisors

Insurance advisors can offer you quick and expert guidance on selecting the right deductible plan. If you contact licensed experts like Covrzy, you’ll get to know the right plan that fits your team size and matches the health needs of your team. At Covrzy, we identify the best deductibles based on premium, business goals, and employee demographics.

Conclusion

A deductible is the portion of health expenses that one has to pay before claiming insurance benefits. When selecting the best deductible, always think of the health needs of your team. There is no concrete rule about always selecting a policy with a lower deductible, as choosing a deductible depends on age and health conditions. Always determine the deductible amount and policy coverages while you’re still in the free look period, as you can avoid paying penalties in case of cancellation.