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Opting for health insurance comes with a lot of responsibilities. There are several formalities that one needs to take care of and several new and complex terms that one needs to understand in order to make a well-informed decision. Reading the fine print is all that you need to do to find these terms that are often used to formulate health insurance policies. An insurance deductible is one such term that you will often come across when reading about medical insurance. A rather important term, it is of necessity to know the meaning of deductible when it comes to health insurance, the way it works and how does it affect the policyholders.
A certain amount is paid by the policyholders towards their medical bills before the health insurance policies start to cover the cost for them or start paying the insured amount. This particular amount is known as deductible in the terms of health insurance policies. The amount of deductible can differ according to your medical insurance and the premium amount that needs to be paid. It is possible that the higher the premium you have paid for the insurance, the lower your deductible will be while the lower the premium, the higher your deductible will probably be. In easy terms, the deductible is inversely proportionate to the premium of an insurance plan.
Premium is the amount that every policyholder pays for the coverage as they buy any particular health insurance plan. Although, there is another expense that policyholders are liable to pay for their insurance plans. Almost every health insurance plan comes with an additional expense known as the deductible that is to be paid before you can avail the coverage of the insurance plan. A deductible is a set amount that is pre-decided for every insurance. Let’s try to understand health insurance deductible with an example –
Let’s say that your health insurance plan has a deductible amount of AED 3000. This would mean that you will have to pay the medical bills yourself until you touch that AED 3000 mark. As soon as you have reached the AED 3000 deductible mark, your insurance company will start to cover your medical expenses and not before that. In other words, the insurance providers are not liable to cover the deductible amount of an insurance plan. For example, if the total claim amount of your insurance plan is AED 60,000 and the deductible amount is AED 5000, the insurance company would be liable for only AED 55,000 (claim amount – deductible amount).
At first glance, deductibles seem like an added expense for the policyholder which brings up the question – why would anybody opt for deductibles? One of the biggest reasons for policyholders to opt for deductibles is the lowered premium amount as a result. The presence of an insurance deductible amount in your insurance health insurance plan would mean lowered amount of premium for the plan. Also, the higher the cost of the health insurance deductible, the lower the premium. This also works well for folks who can bear the small medical expenses such as prescription drugs and doctor consultations and visits and would like to have their insurance plan as a back to cover for bigger expenses, if they ever happen to come.
Eliminates Irresponsible Claims and Expenses: Since the policyholders have to pay a certain portion of their initial medical bills themselves, they are reluctant to only make unnecessary expenses but also avoid filing an irresponsible claim against the insured amount.
Better Claim Settlement Rate: The presence of an insurance deductible would also mean that you will have fewer claims to file against the insurance plan. That not only increase the chances of claim settlement for you as a policyholder but also allows you a better chance of getting no claim bonus.
Lowered Premium Amount: Paying insurance deductible will mean a lowered amount of premium for you. Since the deductible amount is inversely proportionate to the premium amount of a plan – the higher the deductible you pay, the lower your premium is going to be.
There are five basic types of insurance deductibles and one must have a good understanding of them all to understand the meaning of deductible comprehensively. Following are the two options for insurance deductible that most health insurance policies come with:
|Definition||Fixed amount to be paid on every claim made by the insured||Opted amount to be paid by the insured at the time of claim||Applies to all kinds of covers and adds up till paid in full by the insured||Applies to only a selected covers and expenses||Combined deductibles applied on family or group insurance plans to be paid by every individual insured|
|To be Paid||At claim settlement||At claim settlement||At claim settlement||At claim settlement||At claim settlement|
Compulsory deductibles come attached to particular insurance plans beforehand. Both the insurance deductible amount and the premium are pre-decided in this case. The policyholders are free to opt for or let go of the voluntary deductibles. This amount can be decided by the policyholder themselves and the higher the deductible amount they decide to opt for, the lower their premium becomes.
Comprehensive and non-comprehensive insurance deductible amount can be either fixed or voluntary as per the plan opted for. The only difference is that the comprehensive deductible applies to all the services and expenses covered under the plan and while the non-comprehensive one applies to a few services only for example surgeries, hospitalization, etc. Similarly, the cumulative deductible can also be either compulsory or voluntary and is paid as a group by everyone insured under a group or family insurance plan.
Several factors are vital to the calculation of insurance deductibles in an insurance plan. Your premium amount and deductible can go higher or lower depending on these factors and whether the insurance provider sees you as a high-risk insured individual or not.
Understanding each aspect of your insurance plan before investing is the responsible thing to do. This includes insurance deductible amount as well as it can very well be a blessing in disguise. It may not only help you cut back the cost of insurance premium but will also encourage you to plan and think ahead before getting into any unnecessary expenses. Weigh in all the options via thorough research to find the right kind of deductible that will suit you the best as per your medical history.