All that you wanted to know about co-pay and deductibles in insurance

People often get confused between co-pay and deductibles. Read on to understand the differences between both.

All that you wanted to know about co-pay and deductibles in insurance

It can be confusing to fully understand health insurance terminology when purchasing an insurance plan. In most policies, you will come across commonly used terms such as co-pays, deductibles, etc. For any prospective policyholder, it is essential to be aware of what these terms mean along with having a comprehensive understanding of how these add to your overall premium of the healthcare plan. 

Let’s take a look at how these definitions work, how frequently you need to make payments and the amount that is added to your health policy premium. It is equally important to understand the correlation of these terms along with the plausible differences. 

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What is co-pay?

Co-pay is the shortened form for co-payment. In India, the term co-pay is equivalent to co-insurance. 

  • When your insurer and you share the cost of medical expenses, then it is known as co-payment. 
  • There may be instances where the policyholder only has to pay towards the co-pay if there is no deductible.
  • There can be different types of co-pays within the same plans depending on the variety of services.
  • This is particularly important when it comes to the terms of service that is deemed to be quite crucial or routine.
  • There may be others which may be considered as less stringent or may fall under the purview of a specialist. 

Related: 5 New-age features of health insurance plans to know

What are the general terms of co-pay?

Co-pay in an insurance policy is a clause where the policyholders have come to an agreement with the insurance company to pay a part of the claim that is raised. Typically, it calculated as a percentage. 

  • Co-pay may be applicable to all forms of hospitalisations under a specific policy. Let’s look at an example. If there is a claim raised for Rs. 2 lakh with an existing 10% co-pay clause in the policy, then the policyholder has to bear Rs. 20,000 of the expenses whereas the remaining is borne by the insurance company. 
  • The insurance company may opt to apply it to non-network hospitals or for hospitals located beyond the home city or state of the insurance holder.
  • This can be applied even at the time of treating pre-existing conditions.
  • If other terms remain as is, an insurance policy with a clause on co-payment will charge a lower premium in comparison to a plan minus the co-payment clause. 

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Is it compulsory to have a co-pay clause in your insurance cover?

Not all insurance plans have the co-payment clause while some plans may have both co-pays and deductibles. Generally, vehicle insurance and overseas travel insurance policies include deductibles. Moreover, health policy top-up plans usually have a deductible limit which is applicable once the basic sum insured is exhausted.

  • This typically depends on the type of covered service. 
  • A part of the service may be insured at no out-of-pocket cost to you, for example, annual medicals and particular precautionary care services.

Related: Lesser known features of health plans that you should take advantage of

What is Deductible?

The amount of money that is paid to avail covered health care services prior to the policy starts paying is referred to as a deductible. For example, if your policy has a deductible clause at Rs. 10,000 and you raise a claim of Rs. 2 lakh, as the insured you will have an outlay of Rs. 10,000 with the remaining of Rs. 1,90,000 being paid by the insurance company.

  • Beneficiaries of the insurance coverage generally have to pay a co-payment or co-insurance for any of the availed services covered under the plan post payment of the deductible.
  • There can be a variety of policies that will only pay for basic services such as medicals or disease management services. This is prior to a deductible being met.
  • Other specialised covers may include fill routine check-ups and other diagnostic screenings that are deemed to be preventive, for example, mammograms, or a colonoscopy for someone over a certain age.

How can you decide what deductible amount to choose?

There are typically two options available to you when you decide on the deductible amount.

  • If you consider yourself to be reasonably healthy and estimate that you will not be needing any expensive medical services during the year, you may opt for an insurance policy that has a higher deductible with a lower premium.
  • Alternatively, if you do have medication conditions that require costly care, a policy that has a lower deductible with a higher premium will be a better fit for you. This plan will also ensure that it covers a greater percentage of your medical expenses.

Related: Your guide to choosing the best Health Insurance Plan

Co-pay vs. Deductible: What's the difference?

All health insurance plans feature co-pays and deductibles. However, your specific plan may have either one or both. 

  • Both involve payments that are borne by the policyholder.
  • The payment amounts and the frequency may differ depending on the specific plan chosen by the insured.
  • Co-pay is paid by the insured towards receiving a specific health care service with the balance that he or she has remained on their policy. 
  • A deductible is also a fixed amount that the beneficiary has to pay in given time duration, generally a year, before the health benefits start covering the costs once again. 

Both have their merits if used judiciously. A lot depends on the health of the policyholder and the beneficiaries covered under the insurance plan. The only difference between the two is that deductibles represent the amount that has to be paid before a claim is raised as opposed to co-payment clause that bifurcates an existing claim into two or more parts as per the terms and conditions of the insurance policy. Have a look at these 8 health insurance jargons that can help you understand health insurance policy better.

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