Understanding the Difference Between Co-Pay and Deductible in Health Insurance Plans

Health insurance
Health insurance is often regarded as a perplexing decision; the primary reason for it being loaded with jargons. These jargons are often hard to comprehend for the layman thereby making it even more complex. 

The rising instances of lifestyle related ailments, even for those who are young, make health a necessity for all. A health insurance policy not only helps create a financial buffer for emergency situations, but also ensures adequate treatment is available when you need it. When buying a health insurance policy, you need to be sure of your requirements so that you get the best coverage suited to your needs. Make sure to compare health insurance plans that will help you decide which suit you the best. But before that, there are two terms in your policy that are often confused, since they are assumed to be two sides of the same coin, but in reality, are distinct from one another. Here’s what you must know about co-pay and deductibles. 

What is co-pay clause in health covers?

Co-pay, as the name suggests, is where you, the policyholder, are required to contribute for a part of the claim while the other part is borne by the insurer. This explained with a help of an example will help you understand in a better light. 

Say, you purchase a senior citizen health insurance policy. These policies often come with a co-payment clause. Since these elderly individuals often enrolled into the policy coverage are ailing, more often than not, from some or the other disease, termed as pre-existing ailments in the insurance terms, the insurance companies levy a waiting period. This period generally extends for a tenure of 24 months to 36 months depending on the terms of the insurance contract. Alternatively, some policies offer no waiting period at all. This no waiting period is compensated by the co-payment clause where you are required to pay for the treatment cost partially. While there is some outflow from your pocket during the treatment, it lowers the premium you pay for it. 

What are deductible in health insurance?

Deductibles are the amount, that you, the policyholder agree to pay before the insurance claim is compensated for. 

For instance, your policy mentions a deductible clause of ₹10,000. Any cost incurred will require you to pay ₹10,000 from your pocket before the claim is lodged, be it a claim of ₹30,000 or ₹1,00,000. These deductibles help the insurance companies discourage frequent claims and claims for small amounts. Similar to co-pay, deductibles also share an inverse relationship with your premium, i.e. higher the deductible, lower is the premium. 

How are deductibles and co-pay different from each other?

It is common to have confusion since there is a fine line that separates the both from each other. Deductibles are required to be borne by you before any compensation is provided for, but co-pay is where the insurance company and you share the burden of claim as per pre-defined terms. Also, the deductible is defined in absolute amounts whereas co-pay is set as a percentage of the claim.

While both terminologies being a part of your policy impact the premium, you can make use of a health insurance premium calculator to understand how increasing each of them will impact your present premium and future requirement of out-of-pocket expenses during a claim. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.