The deductible is a fixed amount applied to insurance contract specifying a monetary limit only after which, the insurer starts to pay the claim. It is a fixed amount and generally applied to health and motor insurance policies.
In motor policies, there are two types of deductibles at work:
- Compulsory Deductible
- Voluntary Deductible
Voluntary deductible is also known as excess, it works same as any other deductible with a difference that it is selected by the insured, while the insurer will impose compulsory deductible.
Compulsory deductible in motor policies is as following:
Possible Discount on Premium for Voluntary Deductible/Excess (may change from one insurer to other):
Deductible is also applied in group/individual health policies and Top-up health plans. It can be applied either per treatment, per year, or per life.
However, co-pay clause (see What Is Co-Pay?) is more prominent with health insurance.
Case on Deductible in Insurance
Mrs. Suman decided to buy a health insurance cover for herself. She approached a health insurance provider to get a quote for a total cover of Rs. 2,00,000. Suman did not have any significant health issues so, she was not keen on spending too much money on the premium. Taking care of this, the insurance agent advised Suman to buy a health insurance with a deductible so that she could get a discount on premium. The deductible was set at Rs. 2000 per event.
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