What is the Difference Between Premium and Deductible in Health Insurance?
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Wondering what the relationship is between deductibles and premiums in health insurance? A premium is an amount that you have to pay regularly. However, you have to pay deductibles from your pocket for the medical expenses covered under your policy. After that, your insurer starts paying.
A plan with higher premiums and higher deductibles will be expensive for individuals. Therefore, know about deductibles and how they affect your health insurance premium to pick the right health insurance policy with a balance of adequate financial protection and affordability.
What is the Difference Between Premium and Deductibles in Health Insurance?
Key Differences | Premium | Deductibles |
What to Understand? | This is the regular fee you pay to keep your health plan active. | A fixed amount you pay from your own pocket for medical bills before your insurer starts paying. |
When You Pay? | You pay it every month or year, even if you never go to a doctor or make a claim. | You only pay it when you get treatment. If you have a ₹5,000 deductible, you cover the first ₹5,000 of Admissible costs. |
What is the Purpose? | It keeps your insurance policy alive so you stay covered. | It shares the cost with you and lowers how often small claims are filed. |
What Affects it? | Your age, city, health condition, and the plan type decide the amount. | The plan you pick decides the amount. Plans with higher deductibles usually have lower premiums. |
What are Exceptions? | There are no waivers. | Preventive care, like yearly checkups or vaccines, is usually covered 100% before you meet your deductible. |
How Do Deductibles in Health Insurance Impact Premiums?
Policyholders have to pay mandatory deductibles before applying for a health insurance claim. But mandatory deductibles have no impact on premiums. There are non-comprehensive deductibles that apply to certain services, treatments, or coverage options, not the entire insurance premium. But with voluntary deductibles, policyholders are responsible for paying out of their pocket before the policy coverage kicks in.
- High deductibles mean low premiums. If policyholders agree to pay a larger amount of medical bills out of pocket initially, insurers charge a lower premium.
- On the other hand, lower deductibles refer to higher premiums. Once your insurer covers the entire medical bill from the very first, policyholders have to pay higher premiums.
Suppose you purchase a health insurance plan with a deductible of ₹10,000. Now, if you are hospitalised and your hospital bill is ₹40,000, you have to pay ₹10,000 from your pocket first. After that, your insurer will pay the remaining ₹30,000.
But if you choose a policy without any deductible, your insurer will pay the full ₹40,000 hospital bill. However, you will pay a higher premium amount.
Final Words
Understanding the relationship between deductibles and premiums in health insurance helps you purchase a plan that fits your budget and health requirements. Typically, the deductible amount and your premium cost affect each other.
Higher deductibles mean lower premiums and vice versa. Before choosing health insurance with a higher cost, make a smart decision on whether you want to pay upfront during emergency medical care or pay a little more premium annually or quarterly for your coverage.