May 25, 2024

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Health Insurance Deductibles You Should Aware Off

High deductible health plan (HDHP) pros and cons

Health insurance is an essential part of life. It can help protect you from financial emergencies and provide you with the peace of mind that comes with knowing that you’ll be able to save for other goals in life. It essentially makes sure that you can focus on better things and not worry about affording the right healthcare. 

However, many people tend to get confused with the terms and terms used by insurance companies when it comes to choosing a policy. Before buying a health insurance policy, it’s important to understand what the plan entails. Understanding the terms that are commonly used in insurance jargon can help you make an informed decision. One of these terms is deductibles. Here is a brief explanation what deductibles are and how they affect your health insurance:

What are deductibles? 

A deductible is the portion of your medical expenses that you have to cover before you can make a claim. Usually, the insurance company will only pay the claim amount once the deductible is paid. Once the deductible is paid, the insurance company can later pay the rest of the claim amount either to you or directly to the hospital.

If the claim is over and above the insurance deductible, then the medical insurance company will cover it after you pay the deductible. On the contrary, if the claim is below the insurance deductible, then the company will reject it.

The deductible amount is added as a part of a health insurance plan to prevent frauds and scams. This ensures that only genuine claims are made.

Types of deductibles 

There are three types of deductibles in health insurance. They are based on their surrounding conditions and the effect they have on your policy. They include:

  • Voluntary deductible

A voluntary deductible is a type of insurance that the insured person can choose to have. This type of insurance allows the policyholder to set the deductible amount themselves.  It is essentially a part of the medical expenses that you agree to cover out of pocket. The decision to opt for a voluntary deductible can be made depending on your financial situation and insurance needs. The higher the voluntary deductible the lower the premium.

  • Compulsory deductible

A compulsory insurance deductible is a policy feature that is fixed by the insurance company. It does not affect the policy’s premium as long as the rules are followed by the insurance provider. The reason for that is that the compulsory deductible is fixed and will not see any change. Hence, it is not possible for it to affect the premium of your policy. 

  • Cumulative deductible

A family floater health insurance plan is only applicable to members of the same family. These people include people like the spouse, children, mother, and father. A cumulative deductible is applicable only to family floater insurance plans. In such plans, the insurance coverage is shared among all the people who have signed up for the policy. The cumulative deductible is applicable if a claim is made by any of the people who are covered under the plan.

Why you should opt for an insurance deductible?

Every policy has 2 types of deductible. One is compulsory deductible and the other is a voluntary deductible. You will have to pay the compulsory deductible in the event of a claim. However, you can also choose to pay your voluntary deductible. While it means you’ll be pay more money at the of claim, it has a lot of advantages. Deductibles help lower your insurance premium. They can help you save money in the long run.

Deductibles are great for reducing the frequency of claims. They can also help lower the extra insurance costs related to your policy. If you make lesser claims, your insurance coverage amount remains the same. It can be then utilized in the event of an actual need. Moreover, insurance providers offer rewards like the No claims bonus (NCB). This helps you save more money even at the time of renewal.