Co-pay refers to the part of the claim amount in an insurance policy which is borne by the insured out of pocket. It is generally provided in a percentage term and is applicable on the claim amount in General Insurance Policies.
It may range from 10% to 50% in health policies. In motor insurance, this is also known as voluntary deductible (see What is Deductible?) and helps the insured to insure at reduced rates.
Co-pay can be applied to health policies in any of the following manners:
- Co-pay on All Bills: A general co-pay where you share the medical bill regardless of the illness, treatment or the person treated.
- Only on Parents: This applies to family floaters, especially when senior citizen parents are insured.
- Only for Reimbursement Claims: Whenever you submit any bills for OPD or day care charges co-pay will apply, but for direct cashless treatments will be processed without any co-pay deduction.
- Only for Non-Network Hospitals: This is more like the reimbursement claim, but in case you happen to land up in a non-network hospital which considers your insurance, co-pay clause will apply.
Click Here to know More: Different types of Health Insurance plans to cover medical costs
There are many reasons insurers use co-pay clause:
- To avoid fraudulent claims
- Avoid unnecessary or small claims
- To encourage discretionary use of insurance
Can You Buy Insurance Without Co-Pay?
Yes. Insurance policies can be bought without co-pay or deductible clauses. However, the premium may increase substantially depending on the type of policy it is. Also, some policies like, auto insurance, contain compulsory deductible/co-pay clause, which must be adhered to by the insured.
Case on Co-Payment Clause in General Insurance
Mr. Rama Krishna is a senior citizen living in Mumbai. He gets a regular check-up at a reputed hospital nearby his house, every 6 months. Despite his age, he maintains good health. He has taken a health insurance policy with a co-pay clause of 10%.
During one of the visits to the doctor, Mr. Rama was advised to go in for a small treatment, which was costing Rs. 12,000. Fortunately, the treatment is covered under his insurance policy.
However, since there is a co-pay clause of 10%, Mr. Krishna will need to bear an expense of Rs. 1200 out of his own pocket, while the rest Rs. 10,800 will be borne by the insurer.
Ravi Krishna, son of Mr. Rama Krishna, is working with an MNC and is covered by a group health policy bought by the employer. The group health policy has zero co-payment clause; i.e. the employees need not pay any money out of their pocket for the covered medical expenses.
Ravi got the benefit of this feature when he got ill and had to be hospitalized. Fortunately, the hospital was included in the list of affiliated hospitals, and the treatment was cashless. Ravi only incurred a total cost of Rs. 1300 in three days of hospitalization, for the commutation and other expenses of caretaker.
Co-Pay in Family Floater
Siddhartha and Mansi have bought a family floater policy which also covers their parents. They decided to this setup after realizing that the previous senior citizen policy had a very high co-pay (30%) and had also included a loading for the premiums (25%).
Thus, if there was a claim for Rs. 10,000, their parents had to shell out Rs. 3000 from their own pocket and faced a premium increase of 25% for the next year.
This made the policy quite expensive with each claim, and the parents also had to pay a hefty amount out of their own pocket for each bill. Lower co-pay clause (10%) and loading (5%), allow the family to cover the expenses and keep the premiums from hitting the rooftop after a claim year.
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