What is Deductible in a Life Insurance Plan?

2024-06-18

1403 Views

8 minutes read

Locate branch

Resume journey

Pay Premium

Live Life More Confidently

Get best insurance from our experts

Name is required Name should be Valid

Mobile Number is required Mobile Number should be Valid

Email is required Email should be Valid

DOB is required DOB should be Valid

Annual Income*

< 3 3-5 5-7 7-10 > 10

Annual Income is required

I agree that even if my contact number is registered with NDNC / NCPR, I would still want the Company to contact me on the given number and email id for the clarifications/product information sought by me and agree that I have read and understood the Privacy Policy and agree to abide by the same.

Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

Deductible is the amount you pay before your insurance policy starts to pay. For example, with Rs.30,000 deductible, you pay the first Rs 30,000 of covered services. Insurer will only cover the claim amount if it is more than the deductible amount. Insured will reject any claim below the insurance deductible.

In other words, deductible refers to the amount of insured loss that you have to retain. Generally, more the deductibles involved in a policy, the lesser will be the premiums that you need to pay.

Key Takeaways

A deductible is the amount you have to pay from your pocket before receiving the insurance coverage.

Deductibles are common in health insurance, car insurance, property insurance, and marine insurance but are not typically found in life insurance policies.

Your insurer only pays the amount that exceeds your deductible.

Deductibles help reduce moral hazard, ensuring you take the necessary precautions and don’t act recklessly, knowing that your insurer covers you financially.

It is essential to know the difference between compulsory and voluntary deductibles to make the right decision.

How Do Insurance Deductibles Work?

A deductible is the amount you pay out-of-pocket for healthcare services before your insurance starts covering any of your medical costs. It’s important to note that the deductible insurance is different from your premium, which is the amount you pay regularly to keep your insurance active.

Let’s gain some clarity on this with the help of an example.

You have a health insurance policy with a coverage of ₹15,00,000 and a deductible of ₹50,000. If you file a claim for ₹5,00,000, you will first need to pay the ₹50,000 deductible. After that, your insurance will cover the remaining ₹4,50,000, i.e., ₹5,00,000 – ₹50,000.

So, if you are wondering, "What is deductible in insurance? It’s just like your share of the bill before the insurer picks up the tab!

Begin securing your future

Full Name* Please enter correct name Please enter the Full name

Mobile Number* Please enter valid mobile number Please enter Mobile Number

Email* Please enter valid email Please enter Email

...Read more Consent is required

Insurance Policies that may Include Deductible

Deductibles apply to the defined contribution insurance plans and not defined benefit insurance plans like life insurance policies. The following policies may include deductibles:

Health Insurance
Car insurance
Property Insurance
Marine Insurance

Why Do these Policies have Deductibles?

Insurance is built based on 7 principles. One of the principles is loss avoidance and minimization. This principle governs that the insured must take all the necessary precautions and try to avoid or minimize the loss.

But the risk involved here is that some people might behave carelessly knowing that they have insurance. To remove this moral hazard deductibles are used. Since, the policyholder will also be responsible to bear part of the costs, he may not be as reckless and will try to avoid the loss.

Also, if the insurance is specifically designed to meet huge expenses, losses. Without deductibles, they will be put in a position to cover everything. Deductibles provide a safety cushion for companies since they only have to pay when the amount exceeds the deductibles.

What is Deductible in Health Insurance?

Deductible in health insurance is the limit of incurred expense after which the insurer will start accepting the claims. Deductible ensures that the insurer can avoid minor and frequent claims. This is also to cover against the moral hazard of using insurance indiscriminately.

For example, if you have a health cover of Rs 5 lakh with a deductible of Rs 5000, the insurer will accept the claims if they are above this amount.

Thus, if you spent Rs 10,000 on a covered medical treatment, you will pay Rs 5000 and the insurer will pay Rs 5000. But if you spent only Rs 4999, or even Rs 5000, you will bear the entire amount.

Did You Know?

A higher deductible can save you money on premiums, but it's important to balance it with your ability to pay out-of-pocket.

Types of Insurance Deductibles

There are different types of deductible insurance, and it's important to have a clear understanding of each one:

Compulsory Deductibles: As the name implies, a compulsory deductible is a fixed amount set by your insurer that you must pay when settling a claim. This deductible is non-negotiable, meaning it cannot be changed or removed. Once you pay the compulsory deductible, your insurer will cover the remaining claim amount, so you don’t have to worry about additional costs beyond that.
Voluntary Deductibles: A voluntary deductible is an amount you choose to pay out-of-pocket. By choosing a higher deductible, you can lower your insurance premiums. Since you're agreeing to pay more upfront in the event of a claim, some insurers may offer you a discount on your premium as a reward.

Life Insurance - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.

Family Shield: Enhanced Protection

iSelect Smart360 Term Plan

3 Plan options
Life cover till 99 years
Steady income benefit
Block your premium at inception

Start Young, Pay Less, Stay Secured

Young Term Plan

Life cover till 99 years
Coverage for spouse
Block your premium rate
Covers 40 critical illness

Fixed Returns, Zero Risks & Worries

iSelect Guaranteed Future Plus

4 Plan options
Life cover + Guaranteed benefits
Accidental death benefit
Premium protection cover

How to Choose the Right Deductible for Your Insurance?

Choosing the right deductible insurance is an important decision, as it can impact your finances.

Here’s how you can do it:

Age:- Consider your age. For instance, if you are in your 20s or early 30s, you are likely in your healthiest years. Opting for higher deductibles can be advantageous for you. This is because, during your healthy years, you are less prone to diseases, which lowers your chances of filing claims. Remember, higher deductibles often result in lower premiums.
Medical History:- If you have a medical history of chronic diseases, then a plan with higher deductibles can increase your financial stress. In such a case, you must opt for a lower deductible; this will help you avoid high upfront costs.
Genetics:- If your family has a history of chronic or long-term health conditions, you might be more likely to encounter similar health challenges. In this case, selecting a lower deductible can be a prudent decision. It reduces the financial strain, allowing you to access your insurance benefits more quickly without having to pay a large amount out-of-pocket first.

Conclusion

Selecting a reliable insurance company is just the first step; you also need to choose the right health insurance plan with an appropriate deductible amount to prevent any additional financial burden. To make an informed choice, carefully evaluate your health, financial circumstances, and potential future medical needs. Aim to strike a balance between affordability and adequate 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.