Difference between Deductible and Co-pay

Posted on: Feb 23, 2023 | 3 mins | Written by: HDFC ERGO Team

Difference between Deductible and Co-pay

When shopping for the best health insurance plans, you must have searched for ways to reduce the premium and most likely came across terms like deductible and co-payment. While a deductible is an amount that a policyholder must pay out-of-pocket before his/her insurance coverage comes into effect, a co-payment is a fixed amount that the person buying the plan is responsible for paying each time he/she receives a covered medical service, regardless of the total cost. But which one to choose when it comes to a deductible and co-pay? Let’s learn the difference between copayment and deductible and how they impact your best health insurance plan.

What Is Deductible In Health Insurance?

Deductible in health insurance is the amount a policyholder must pay for the treatment expenses before raising an insurance claim. The insurer will cover the remaining claim amount only after the deductible has been paid. This means the insurer will cover the claim expenses only if it exceeds the deductible amount. The insured must pay the entire cost if it is below the deductible. For example, you need to undergo surgery, and the treatment cost is Rs 50,000. If your health coverage has a deductible of Rs 20,000, you will pay Rs 20,000 from your pocket, and the insurer will cover the remaining amount. Now, let’s take another example. You have to undergo a minor procedure for which the cost is Rs 15,000. Since the deductible is Rs 20,000, you have to pay the entire cost. You cannot raise any claim because the claim amount is less than the deductible.

Here Are Some Significant Facts About Deductibles in Health Insurance

• One of the primary reasons insurance providers have a deductible in health insurance is to restrict policyholders from making small and unnecessary claims just because they have insurance coverage. Since a part of the total claim amount will be paid by the insured, they will think twice before making any unnecessary claim and will consider filing a claim only in case of major medical expenses.

• There are two types of deductibles – compulsory and voluntary. In compulsory deductible, the amount is fixed by the insurer, and you have to pay that amount whenever there’s a claim. In voluntary deductible, you have the option to choose the amount to pay from your pocket during a claim.

• If you opt for a higher deductible, the premium will be low, but you will have more out-of-pocket expenses. So, it is ideal for a person with no chronic health issues or who does not require much medical attention. Those with prolonged illness should go for a low deductible to reduce out-of-pocket expenses.

When choosing a deductible in health insurance, the premium is not the only deciding factor. It is important to consider your age, current health status, any pre-existing conditions, past medical history, present lifestyle, the frequency of claims, etc.

What Is Copay In Health Insurance?

Copay in health insurance is the fixed amount or percentage of the medical expenses a policyholder has to pay while the insurer pays the rest. If your health insurance policy has copay clause of Rs 2,000 and your claim is Rs 10,000, your share of the payment is Rs 2,000, while the insurer will pay the remaining Rs 8,000. Similarly, if your co-pay clause is 10%, you will pay Rs 1,000, and the insurer will cover the rest of Rs 9,000.

Here Are Some Significant Facts About Copay in Health Insurance

• Some insurance policies have a mandatory co-pay clause, while others leave the option to policyholders. However, copay in health insurance can reduce your premium.

• The insurer pays a major part of the claim amount, while you have to pay a certain fixed amount or percentage of the cost.

• Opting for a lower copay in health insurance will lead to higher premiums and vice-versa.

• Copay clauses are mostly for senior citizen health insurance plans or parents health insurance policies where the probability of claims is higher.

• Copay is popular in metropolitan cities where healthcare expenses are more compared to smaller towns.

• If you want to opt for a health insurance plan with copay, make sure you have enough savings to foot the medical bills when required.

Copayment vs Deductible - Which is Better?

To know which is better, let’s understand the difference between the two terms and their impact on the premium.

Copayment or Copay	Deductible
Copayment is the amount of your medical expenses you must pay while the insurer pays the rest.	A deductible is the fixed amount you must pay before the insurance coverage is effective.
Copay can be a fixed amount or a fixed percentage of the sum insured.	A deductible is in the form of a fixed amount.
Copay has to be paid every time you raise a claim, cashless or reimbursement.	A deductible is usually for an entire policy year.
Copay is mostly levied on senior citizen health insurance plans and critical illness policies where the probability of claim is more.	Most health insurance policies have deductibles.

Whether to opt for a co-pay in health insurance or deductible in health insurance depends on many factors, such as age, present and past medical conditions, pre-existing illnesses, lifestyle, etc.

Conclusion

Both deductible and co-pay lower your health insurance premium, but at the same time, they can mean more expenses from your pocket. This can impact your savings to a large extent. So, while buying the best health insurance, parents’ health insurance, or family health insurance plan, it is important to understand the terms, deductibles meaning and copay meaning, and make an informed decision. Choosing a high deductible or co-pay only to reduce your premium is not always a safe bet.

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

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Intelligent decisions about co-pay will save money on your health plan