Low Deductible Health Insurance Plan

5 Reasons to Opt for a Low Deductible Health Insurance Plan

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Health insurance is integral to your protection against financial losses caused by high medical expenses. However, insurers use certain jargon that you need to know to purchase a good health insurance policy. A deductible is one such term. To understand whether to go for a high or low deductible health insurance plan, it is important to know the meaning of this term and its various implications.

What is a deductible and how does it work?

Calculate Deductible in Health Insurance

Deductible refers to the amount of money that the insured needs to pay before the insurer covers the claim amount. The insurer is not required to pay anything if the medical bill does not exceed the deductible amount per the health insurance plan. The insurer is required to pay the balance amount if the medical bill exceeds the deductible limit.

For example, if you have a health insurance policy carrying a deductible amount of Rs. 50,000, and your medical bill amounts to Rs. 200,000, then you are required to pay Rs. 50,000 from your resources while the insurer would pay the balance 150,000.

A low deductible health insurance plan has a small amount as the limit, which needs to be paid by the insured, while a high deductible plan has a higher amount which the insurer does not cover.

What are the different types of deductible?

Cumulative deductibles apply to family floater health insurance plans only. The family floater plan covers all family members such as a spouse, children, parents, etc. Cumulative deductible becomes active when any member of the family claims the family floater plan.

Voluntary deductibles are the deductibles that the policyholders can choose. The person can opt for a Low deductible health insurance plan or high deductible health insurance plan voluntarily as per their income capacity, medical condition, insurance needs, and other factors.

Compulsory deductibles are fixed deductibles. The insurance companies fix the amounts of compulsory deductibles for their health insurance plans, and the customers have no say in fixing the amounts. Depending upon the figure of compulsory deductible, the plan can either be a high or low deductible health insurance plan.

What are the benefits of deductibles?

Deductibles are inversely proportional to premiums, and this is the primary advantage of deductibles. The higher the deductible amount of the health insurance plan, the lower is the premium to be paid. A low deductible health insurance plan has a higher premium than a high deductible health insurance plan. A high deductible plan means the policyholder can save a lot of money in the long run due to low premiums.

Deductibles lower the frequency of claims. Since the insurance policy does not pay the minor and moderate medical expenses, the assured sum is intact for major medical needs. In addition, deductibles increase the frequency of no-claim years, thereby increasing the chances of claiming premium discounts called the No-claim bonus or NCB.

Deductibles discourage policyholders from raising claims for trivial medical treatments and getting admitted to hospitals unnecessarily.

High or low deductible health insurance plan – which one to opt for?

High or Low Deductible Health Insurance

The coverage by a Low deductible health insurance plan starts early because the insured does not need to bear the costs for long. The premium to be paid upfront for such a policy is high. However, the insurer does not need to pay much from his/her own pockets because the deductible amount is low.

The premium to be paid upfront for a high deductible health insurance plan is lower than a low deductible plan, and the amount of money saved in the long run is high due to low premiums. But a high deductible plan means the insured enjoys no health cover until and unless the medical expenses exceed a fixed amount. The expenses below the limit have to be borne by the insured only.

Some factors need to be considered when choosing between a high deductible health insurance plan and a low deductible health insurance plan. They are as follows.

  • Health status and medical history of you and your family members if you opt for a family plan. The medical condition is an important factor in deciding whether your medical expenses are suitable for a high or low deductible health insurance plan.
  • Income is another important factor. You need to analyze your annual income and expenses to decide the amount you are ready to pay from your own pockets for medical expenses without suffering financial loss.
  • Giving priority to low premiums to save money over the long term or no compromise in insurance cover needs to be decided to choose between high and low deductible health insurance plans.
  • Future healthcare needs must be considered before deciding between high and low deductibles. These include pregnancy, infant care, elderly parents staying with you, the possibility of major surgery in the coming years, etc.

Are high deductibles worth it?

Whether you need a high or low deductible health insurance plan depends upon your specific requirements as both have their pros and cons. 

  • High deductible plans are suitable for young people having no adverse medical history. Unmarried people are perfectly suited for high deductible plans because they have no dependents such as children.
  • A high deductible plan is suitable if it does not cover elderly parents and other members of the family who are in the senior citizen category. People enjoying good health and not expecting to be hospitalized shortly can opt for high deductible health insurance plans to reap the benefits of low premiums.
  • High deductible plans are only for people who can pay even significantly high medical bills from their own pockets.
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