Most people compare health insurance policies based on only two factors,

·       Sum Insured

·       Premium

As a result, many policy holders choose a policy with a lower premium without understanding the conditions that are attached to it. To reduce your premium significantly, there is one such condition known as "AGGREGATE DEDUCTIBLE."

While it can reduce your premium, it can also create significant financial liability during a medical emergency.

What is an Aggregate Deductible?

An aggregate deductible is the amount you must pay from your own pocket before the insurance company starts paying eligible claims. Example

·       Health Insurance Cover = Rs 10,00,000/-

·       Aggregate Deductible = Rs 1,00,000/-

This means in a policy year, on your 1st claim, you are responsible for your first Rs 1,00,000/- of eligible expense.  Only after this limit is exhausted, the insurance company starts paying according to the policy terms and conditions.

How does an Aggregate Deductible work?

Scenario 1 – Hospital Bill = Rs 80,000. Since the total medical expense are below the deductible amount,  

·       Your contribution = Rs 80,000/-

·       Insurer’s contribution = Rs 0/-

The insurer will not pay because the deductible limit has not been crossed

Scenario 2 – Hospital Bill = Rs 1,50,000. Since the deductible is 1 lakh,

·       Your contribution = Rs 1,00,000/-

·       Insurer’s contribution = Rs 50,000/-

The insurance company pays only the amount exceeding the deductible
 

Why do people choose deductible?

As you agree to bear a portion of the risk, the insurance company may offer the policy at a lower premium. While this may look attractive at purchase, it is important to understand the financial commitment involved.

The part most policyholders miss?

Many buyers assume that “Aggregate Deductible” can be removed easily before new health insurance renewal. However, depending on the policy terms and conditions, deductible removal may only be allowed after

·       3 years of continuous coverage

·       5 years of continuous coverage

·       Any other period specified by the insurer

Therefore, before choosing a policy with a deductible, understand how long you may have to continue with that arrangement.

Questions to ask before choosing a deductible?

Before opting for a deductible that allows you a lower premium, ask yourself,

·       Can I comfortably pay the deductible amount every policy year, on my first claim?

·       Do I have an emergency fund available?

·       Am I choosing a policy only because it is cheaper?

·       Have I understood the conditions for deductible removal?

A lower premium should never come at the cost of inadequate financial protection.

Key Takeaway 

Health insurance is purchased to protect your savings during medical emergency. Before choosing any policy, understand not only the coverage but also the liabilities that may fall on you at the time of claim. Remember, in health insurance, small terms and conditions can create big surprises at the time of claim.

INSURANCE AWARENESS > INSURANCE IGNORANCE