Aggregate Deductible in Health Insurance: What It Is and Is It Good or Bad?

Posted on: Nov 12, 2024 | 3 mins | Written by: HDFC ERGO Team

Aggregate Deductible in Health Insurance: What It Is and Is It Good or Bad?

The prices of healthcare facilities are on the rise, and buying a health insurance policy is becoming a must to meet medical expenses. And yet, there seems to be a reluctance to purchase health plans. If you ask around, many people feel that paying a high policy premium is not beneficial if you don’t make a claim in the policy period. However, what many don’t know is that there are ways to reduce the premium amount. An aggregate deductible, for instance, can cap your total out-of-pocket costs if you have multiple claims within a policy year. But are there any drawbacks? Let’s figure it out.

What is Aggregate Deductible?

An aggregate deductible in health insurance is the amount that is calculated cumulatively over a specific period, usually spanning one policy year. It is often used in family health insurance plans and is applied to the total amount of medical expenses incurred during the policy year. Under aggregate deductible, the coverage starts only after the total family deductible is paid out-of-pocket, even if the claim is made by one family member.

Is Aggregate Deductible good or bad?

This depends on individual preferences and affordability. As an aggregate deductible helps in reducing the premium, it is beneficial for those who are healthy and don’t raise claims regularly. However, for those with chronic medical conditions, it is often difficult to predict how much they will end up paying out of pocket over the course of one year because it is calculated on the total medical expenses incurred.

Types of Deductibles

A deductible in health insurance is a portion of the medical expenses you must pay out of your pocket before making an insurance claim. The insurer will start paying up only after you have paid the deductible. This means the insurer will cover the cost only when the claim amount exceeds the deductible.

In India, deductibles are mainly of two types – compulsory and voluntary. The other types are offered in international markets.

1. Compulsory Deductible:

As the name suggests, this deductible is compulsory and governed by the insurance company. When you file a claim, you have to pay this amount mandatorily. For instance, if the compulsory deductible of your health insurance is INR 10,000, and your medical bill comes to INR 60,000, you have to pay INR 10,000, and the insurer will pay the remaining (i.e., INR 50,000).

2. Voluntary Deductible:

This is not compulsory and you can opt for this deductible in order to reduce the premium. The higher the deductible, the lower will be the premium. So, this is ideal for people who do not file claims on a regular basis and want affordable premiums. Choose the voluntary deductible wisely based on your affordability because you have to bear this amount. Let’s say you choose a voluntary deductible of INR 50,000, and the claim amount is INR 85,000. So, you have to pay INR 50,000, and the remaining INR 35,000 will be covered by insurance.

3. Cumulative Deductible:

This applies only to family health insurance plans in which multiple members are covered under one plan. As the sum insured in a family floater is shared among all insured family members, the cumulative deductible is applicable when any member makes a claim.

4. Comprehensive Deductible:

A comprehensive deductible applies across all covers; hence, the name comprehensive. It is a single deductible that keeps adding up till the total deductible amount is paid.

5. Non-comprehensive Deductible:

This deductible does not apply to the entire policy but only to specific covers. You may have to pay for the specific costs before filing the claim.

Advantages

• Deductibles lower your insurance premium. This option is ideal for those who don’t raise claims frequently. The higher your deductible, the lower will be your premium.

• Some insurers offer discounts if you opt for a voluntary deductible.

• As the deductible has to be paid out of pocket, it discourages policyholders from making small claims and also avoid unnecessary procedures. This will also help them earn a no-claim bonus (NCB).

Disadvantages

• A deductible can increase your out-of-pocket expenses because the insurer will pitch in only after you have paid it.

• If you have multiple medical emergencies during a policy year, it can cause a significant financial burden on you because deductibles are applicable to each claim.

• It can deter people from seeking timely medical care to avoid spending from their pocket.

Conclusion

While buying a health insurance policy, it’s essential to be aware of the deductibles, and if you are opting for a voluntary deductible, select the amount wisely. A high deductible will reduce your insurance premium but, at the same time, you may have to pay more for the medical expenses. If you are a healthy person, it makes sense to go for a high deductible, but for people with chronic health issues, a lower deductible is advisable.

FAQs

1. How does a deductible impact the premium?

The premium remains unaffected in the case of compulsory deductibles. But in the case of a voluntary deductible, the higher the amount, the lower will be the health insurance premium.

2. Do I have to pay the deductible first to claim coverage benefits?

Yes, the insurer will start covering your hospital bills only after you have paid the deductible amount. This means once the deductible threshold is reached, insurance will cover the balance amount. If the claim amount is less than the deductible, insurance will not pay anything.

3. Should I opt for a high or low deductible in health insurance?

This depends on your medical conditions and affordability to bear the expenses. If you need frequent medical attention due to chronic issues, it’s better to opt for a lower deductible so that the insurer will pay most of the expenses, reducing your financial burden. But, if you don’t have any chronic illness, a high deductible is advisable as your premium will be low.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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