Co-Payment Vs. Deductible - What's The Differences?

Are you planning to buy a health insurance policy? Before you make the final decision to purchase the plan and sign the policy papers, you should take your time to understand the various insurance-related terms.

Often the technical terms may sound confusing. Deductibles and Co-payment are two such features that are an important aspect of health insurance plans. They both imply co-sharing the medical cost, which means a part of the insurance cost must be paid from your pocket, while the insurer will pay the rest.

Today, many insurance companies have co-payment and deductibles clauses in their plans to reduce their liabilities during the claim settlement. If you are debating co-pay vs. deductible - what to choose, you must be aware of the differences between the two.

What is Co-payment?

A co-payment clause in a health insurance policy is an arrangement where the policyholder agrees to pay a part of the claim amount from their pocket while the insurance company pays the remaining amount. It is usually a fixed amount or a percentage of the total claim amount.

Let us understand co-pay with an example:

Assume that you have a health insurance policy with a co-pay clause of 20%. Now, if you file a claim for Rs. 2 lakhs, you must pay Rs. 40,000 from your pocket while the insurer will pay the remaining Rs. 1,60,000.
Generally, the insurance companies give policyholders the flexibility to choose the co-payment percentage. The policies with higher co-pay have a lower premium and vice-versa.

What is deductible?

A deductible is one of the most common features of health insurance. It is a fixed amount that you must pay every year before the insurance covers the cost. The deductible amount must be paid within a specific period, as mentioned in the policy documents, and it is non-refundable irrespective of whether you make a claim or not.
Let us understand the deductible with an example.

Assume that your health insurance policy has a deductible clause of Rs. 5000. If you get hospitalised and file a claim for Rs. 30,000, the insurer will deduct Rs. 5000 and pay the remaining amount.

Co-pay vs. deductible – what are the differences?

The most important difference between co-payment and deductible is the amount that you must pay. Generally, deductibles are higher than co-pay. But, deductibles are paid only once a year, whereas co-payments are recurring. Every time you file a claim, you must pay a part of the cost from your pocket as per the co-payment clause.

Lastly, co-payment is an exclusive health insurance feature, whereas deductibles play a part in general and health insurance.



DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.