Deductible

What is a deductible?

A deductible is the amount of an admissible claim that the policyholder pays before the insurer starts paying. If a policy has a ₹25,000 deductible and the admissible hospital bill is ₹1,00,000, the insurer pays ₹75,000. If the bill is ₹20,000, the insurer pays nothing. In return for carrying the first slice of each loss, the customer pays a lower premium.

IRDAI's Customer Information Sheet format, issued with the 2024 Master Circular on Health Insurance Business, describes a deductible in two parts: an amount up to which the insurer pays no claim, and which is deducted from the total claim when the claim is larger.

How a deductible works in Indian health insurance

A deductible can be applied in two ways, and the Customer Information Sheet must state which one, or both, a policy uses:

Deductibles turn up in three common forms in India:

• The defining feature of top up and super top up plans. These policies pay only above a high threshold, often matched to a base policy's sum insured. See top up and super top up.
• A voluntary deductible on a base policy. Some insurers let a customer choose a deductible in exchange for a premium discount. It suits a customer who already has employer cover to absorb small claims.
• Product filing. Insurers declare in their product filing with the Product Management Committee whether a deductible applies, whether it is mandatory and what amounts are offered, using IRDAI's prescribed filing forms.

A deductible is different from a co-payment. A deductible is a fixed rupee amount taken off first. A co-payment is a percentage of the admissible claim that the policyholder shares. A policy can have both, plus sub-limits. The order in which they are applied changes the final payout, and is set out in the policy wording.

Worked example. A policy has a ₹50,000 per claim deductible and a 10% co-payment, applied to the amount left after the deductible. The admissible bill is ₹3,00,000.

The figures are illustrative. Check the policy wording for the actual order.

What a deductible means for distribution

Deductibles are a pricing tool and a source of claim-time disputes. Customers who chose a deductible for a lower premium often forget it by the time they claim, and see the deduction as an unfair cut.

Practical points for advisers and sales teams:

• Say it in rupees. "You pay the first ₹50,000 of every hospital bill" is clearer than "this plan has a deductible". Put the figure in the sales illustration and in the welcome call script.
• Per claim or per year. For customers with chronic conditions or frequent admissions, a per claim deductible can cost far more over a year than an annual one of the same amount.
• Check who pays the deductible. If an employer policy or base policy will absorb the deductible, the customer should know how a claim is coordinated across the two. IRDAI's rules let the customer choose the primary insurer when holding more than one indemnity policy.
• Premium savings vs risk. A voluntary deductible makes sense only when the customer can actually pay that amount at short notice. For a family with no savings buffer, the discount rarely justifies the risk.
• Cashless experience. At a network hospital the deductible amount is collected from the patient at discharge. Explaining this in advance avoids complaints at the billing desk.