What is Co-Pay in a Health Insurance Policy?

Written by : Knowledge Centre Team

2026-03-06

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Co-pay meaning (co-payment) in health insurance, refers to a fixed percentage of the insurance claim amount that is borne by the policyholder. The remaining amount is settled by the health insurance company.

Several insurance companies provide health insurance with a compulsory co-pay scheme, while others offer a voluntary co-pay option. The Insurance Regulatory and Development Authority of India (IRDAI) does not mandate co-pay clauses, but they are often used at the insurer’s discretion for certain products. With a voluntary option, you can enjoy a reduced premium.

Key Takeaways

Co-pay is a shared-cost model to lower premiums.
Higher co-pay = lower premium but higher personal cost.
Voluntary co-pay can save money if you rarely claim.
Insurers use co-pays to promote responsible usage and discourage unnecessary or inflated claims.
A well-chosen co-pay plan can help you earn No Claim Bonus (NCB).

Understanding Co-pay in Health Insurance

Co-pay in health insurance makes it affordable as this clause shares the claim between the insured and the insurer which reduces the liability of the insurer. Generally, the co-pay percentage varies from 10% to 30%, which is paid by the insurer from it's pocket. The insurer bears the remaining claim amount. Co-pay schemes are commonly availed in senior citizen health insurance policies.

For instance, the co-pay of 10% for a claim amount of ₹ 80,000 will be ₹ 8,000. The remaining ₹ 72,000 will be paid by the insurance company.

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Examples of Co-Pays in Health Insurance

To better understand the meaning of co-pay and how it works in health insurance, consider the following example:

You purchase a health insurance policy with a 20% co-pay on all the claims made during the policy period. This is how the co-pay will work under different amounts insured.

Policy Sum Insured (Your Policy Limit)	Claim Amount Hospital Bill	Co-Payment (Your Co-Pay)	What Insurer Pays	What You Pay (Out of Pocket)
₹ 1 Lakh	₹ 2 Lakh	20% of ₹ 2 Lakh= ₹ 40,000	₹ 1 Lakh	₹ 60,000
₹ 2 Lakh	₹ 2 Lakh	20% of ₹ 2 Lakh= ₹ 40,000	₹ 1.6 Lakh	NIL
₹ 5 Lakh	₹ 2 Lakh	20% of ₹ 2 Lakh = ₹ 40,000	₹ 1.6 Lakh	NIL

Type of Co-Pay in Health Insurance

There are mainly four types of co-pay clauses in health insurance:

On Medical Bills: Co-pay in medical billing is for all the claims you raise on the policy. The insured needs to pay a portion of the claim amount.
On Senior Citizen Policies: Senior citizen policies usually have a compulsory co-pay clause. This is because the treatment costs for senior citizens are comparatively much higher.
On Reimbursement and Treatment at Non-Network Hospital: Occasionally, insurance providers impose a co-payment clause only on reimbursement claims or in instances where treatment is taken from a non-network hospital. In such situations, the insurance provider bears the cashless claims.
For Hospitalisation in Metro Cities: Generally, the cost of treatment in metropolitan cities is much higher as compared to smaller cities and towns. Thus, insurance providers levy a co-pay clause for hospitalisation in metro cities.

Advantages and Disadvantages of Co-Pay

Co-pay clause allows you to pay lower premiums towards your insurance policy. Although you must pay a certain percentage of your claim, it lowers the premium of the policy.

A higher co-pay percentage will increase the pocket cost of hospitalisation and treatment for you. It may also discourage youfrom filing a claim for daycare treatments, which you could claim.

Thus, while you can save on your premiums with a higher co-pay, you might end up spending more on the treatment cost.

However, zero co-pay is also not good, as you will not file a claim for every little treatment expense. But you end up paying a higher annual premium.

Why do Insurers Apply Co-Pays in Health Insurance?

There are several reasons why insurance companies impose a co-pay clause. The primary reason is to save a portion of the cost incurred via claims. Some of the other reasons include:

To Prevent the Misuse of Policies: By levying a co-pay clause, companies can prevent unnecessary claims made by the insurer or policyholder. If a person wants to raise a claim against the treatment of diseases that do not incur high treatment costs, a co-pay helps avoid such claims and prevents misuse of the policy.
To Promote Genuine Usage of Insurance Policies: The co-pay clause allows the policyholder to make only genuine claims since a percentage of the claim goes from their pocket. When one is required to pay a portion, their stakes increase, and thus, one would want to raise only honest claims.
To Encourage Consideration of Options, Before Seeking Healthcare: Since the insurer is required to pay a fixed percentage of treatment costs, their stakes are higher, and thus they will think twice before choosing expensive healthcare.
For example, if you have a 10% co-pay clause and you claim a bill of ₹ 10,000, you must pay ₹ 1,000 from your pockets. But if you seek the same treatment from an expensive hospital, and your bill comes up to ₹ 50,000, you will have to pay ₹ 5,000. Therefore, you will choose the first option and avoid expensive options to save money.
To Mitigate the Risks of Insurance Providers: The co-payment clause allows the insurance providers to minimise risks as they do not have to pay 100% of the total claim amount.

Difference Between Co-pay and Deductible

Health insurances come with two options. One is a co-pay and the other is deductible. The primary difference between the two is that while a co-pay means a fixed percentage of the claim amount, a deductible is the fixed sum/amount to be paid for the claim. Another crucial difference is that the percentage of co-pay in health insurance is always mentioned in the policy documents, while the deductible sum is calculated every year. However, both costs need to be paid before the insurance cover comes in during a claim.

Additionally, a co-pay is usually applicable only to certain covers or services. As an example, a co-pay may be available for critical illnesses that have high treatment costs or require the insured to go to a different network of hospitals for the treatment. On the contrary, deductibles apply to the overall cost of medical care.

Should You Buy Health Insurance with a Co-Pay?

Filing a claim for every little repair expense also has a cost. This is one cost that both you and the insurer would like to avoid. Thus, you need to find a balance between co-pay and premium costs. A 10-20% co-pay clears out most small claims from the insurance claim but also reduces your premium.

The right balance will allow you to avoid the hassles of filing claims very frequently. At the same time, it also allows you to avoid 80-90% of the cost of major treatment.

The purpose of insurance is to safeguard your long-term financial health from setbacks due to sudden hospitalisation. Co-pay clause lowers the cost of looking after this purpose of the health insurance plan.

Another angle is of no-claim bonus. Health insurance policies will increase your sum insured for every claim-free year. With a maximum sum insured growth of up to 100% of the base sum insured, you only stand to gain if you avoid filing smaller claims.

For example, if you can avoid filing a small claim (say ₹ 5000) in the year, your sum insured increases by ₹ 25,000. That is a huge gain considering your premium cost will also be lower.

Thus, a balanced co-pay clause will ensure that your family floater cover continues to increase despite the small medical expenses. And you pay a reasonable amount to maintain it.

Conclusion

A co-pay clause in health insurance can be a smart financial tool if you understand how to use it. It lowers premiums, promotes responsible usage, and discourages unnecessary claims. But it also means bearing some treatment costs from your pocket.

Choose a policy with a co-pay only if you're willing to manage smaller expenses yourself while relying on insurance for major medical events. Done right, it can help you save significantly without compromising on core coverage.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.