The Buyt Desk
After COVID-19 people have started taking their health insurance very seriously. Health insurance gives you a monetary cushion in times of unforeseen health crises. With medical costs shooting up a health insurance plan can help in lessening the cost of treatment/hospitalisation. You pay a premium to the insurance company in a certain interval and buy a cover to protect you in case of a medical emergency. Besides buying insurance, one must be careful about the terms and conditions put in insurance policies by insurers, particularly with restrictive conditions.
The insurance companies use many clauses which sometimes remain confusing to buyers. Two such terms are co-pay and deductibles. You may come across these two terms in your health policy so let us understand what these terms mean.
What Is Co-Pay?
Co-Pay simply means that the insurer and the insured will partner in paying the expenses. It is an agreement between an insurer and an insurance buyer regarding the payment of the claim raised. In this kind of arrangement, insurance buyers agree to pay a specific portion of the claim raised. It is usually expressed in terms of percentage. You can understand this with the help of an example- suppose the hospital claims 1 Lakh for the treatment, and the insurance policy you have has a co-pay clause of 10%. In this case, you will have to pay 10% of 1 Lakh, i.e. Rs 10,000. The rest of the amount will be paid by the insurer. Many insurance companies use the term co-insurance for this arrangement, but don’t get confused with Co-pay. Some insurance companies use this term also.
Some insurers give an option to insurance buyers to amend this arrangement according to their convenience. E.g. Some insurers have divided India into two zones, zone A and zone B. A policyholder paying insurance premium rate of zone B city, taking treatment in Zone A category city, will have to pay a certain percentage on the admissible claim amount.
Furthermore, the insurer has many terms and conditions in this clause which the insurance buyer should be doubly sure of before buying the policy.
Another crucial point to note besides the co-payment clause in an insurance policy with this factor is an insurance cover coming with the co-payment clause charging a lower premium in comparison to the insurance plan not coming with this clause.
What Is Deductible In Insurance?
A deductible is that proportion of the healthcare expense that you pay from your pocket before the insurance coverage kicks in. The deductible has a pre-defined amount instead of a percentage. E.g. If the policy has a clause of Rs 5000 deductible, and the claim is of 1 Lakhs rupees, then the insured person has to pay Rs 5000 and the rest Rs 95,000 will be paid by the insurer.
The thumb rule with both types of policy is that the higher deductible or co-pay amount, the lower the premium.
The aim of the insurance company behind adding these clauses in policy is to discourage insurance buyers from raising multiple claims or small claims.
