How Deductible in Health Insurance Works?

What is Deductible in Health Insurance? A deductible in health insurance is the fixed amount you must pay either out of pocket or through a base policy before your insurer starts covering medical expenses. It can be structured in two ways: on a per-claim basis, where you pay the deductible for each individual claim, or on an aggregate basis, where your total expenses across multiple claims in a policy year are counted until the deductible is met.

You’re browsing health insurance plans and notice something odd. Two plans offer ₹10 lakhs in coverage, but one is way cheaper. You research a little, and you see the reason: it comes with a deductible.

Now you’ve got questions, how does it actually work? Does it apply the same way if you have a personal plan, a family floater policy, or corporate insurance? Well, deductible isn’t just about saving money, it changes how your claims are handled, especially in Top-Up and Super Top-Up plans. And whether or not it works for you depends on your current health plan setup.

Deductibles can be confusing. Are they the same as co-pay? Do they reduce your premium? Should you opt for them at all?

In this guide, we break it down. At the end of this article, you’ll know what a deductible really means in health insurance, how it affects your coverage, and whether it’s the right choice for you.

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What is Deductible in Health Insurance?

A deductible in health insurance is the fixed threshold amount that you must first pay, either out of pocket or through your base policy, before your top-up or super top-up plan begins to cover medical expenses. 

Now, this brings up a common assumption:

“If I choose a deductible, my premiums will be lower.”

And yes, that’s generally true, but there’s a reason behind it. Let’s understand how deductibles impact your premium.

How Deductibles Affect Your Health Insurance Premium

• Higher Deductible = Lower Premium
  When you choose a higher deductible, you're agreeing to cover a fixed portion of your medical expenses upfront. Because the insurer’s liability begins only after this threshold is crossed, they reduce your premium as a reward for sharing the risk.
• Lower Deductible = Higher Premium
  With a low or zero deductible, the insurer starts covering your costs sooner. That means more risk on their end, so your premium will be higher to balance it out.

Put simply, the more you're willing to pay upfront, the less you pay each year in premiums and vice versa. It's all about balancing your risk with the insurer’s.

Now that we’ve seen how deductibles can reduce your premium, it’s worth understanding why insurers offer them in the first place.

Why Do Insurers Offer Deductibles?

• Risk Sharing: Deductibles allow insurers to pass a part of the cost burden onto the policyholder, which helps balance the financial risk.
• Fewer Small Claims: They discourage very small or frequent claims, making it easier for insurers to manage operational and claim processing costs.
• More Thoughtful Usage: When you know you’ll pay the initial amount, you're more likely to use your insurance judiciously.

In short, plans with deductibles are usually cheaper for the same coverage because the insurer doesn’t step in until after a certain amount is paid, either by you or your base policy. The trade-off? You take on some upfront cost before the actual coverage begins.

Where Do Deductibles Apply in Health Insurance?

Before we jump into how deductibles work, or whether you should opt for one, it’s important to understand where deductibles apply in the first place. Contrary to what many believe, not all health insurance plans come with deductibles by default.

Here’s a quick breakdown:

• Primarily Found in Top-Up & Super Top-Up Plans:These plans only activate after you’ve crossed a specific deductible amount, either through your base policy or by paying out of pocket.
• Not Common in Base Health Insurance Plans:Regular individual or family floater policies usually don’t have deductibles as an in-built feature. They start covering expenses right from the first rupee, up to your sum insured.
• Voluntary Deductibles in Some Base Plans:Some insurers may let you add a voluntary deductible to lower your premium.
• But Is It Worth It?The premium savings are often small, while the risk of high out-of-pocket costs remains. So it may not be worth it for most people.

Let’s understand this better through the case of a customer who recently bought a health insurance plan.

This person had a base health insurance policy with coverage of ₹5 lakhs. Aware that rising medical costs can easily exceed this, they decided to add a Super Top-Up plan with ₹20 lakhs of additional coverage and a deductible of ₹5 lakhs. This means the Super Top-Up plan would only start covering expenses once ₹5 lakhs had already been paid, either out-of-pocket or through the base policy.

Now we will look at how Super Top-Up Plan with Deductible Worked in our customer’s case

Scenario	Details	What Happens	Who Pays What
1st Hospitalization	- Customer has a ₹5L base policy - Adds a Super Top-Up plan with ₹20L coverage & ₹5L deductible - Total hospital bill: ₹12L	- the base policy pays the first ₹5L - This satisfies the deductible of their Super Top-Up plan - The remaining ₹7L is covered by the Super Top-Up plan	✅ Base Policy: ₹5L ✅ Super Top-Up: ₹7L ❌ Customer pays: ₹0
2nd Hospitalization (Same Year)	- Another medical emergency happened - Hospital bill: ₹6L	- Deductible already met earlier in the policy year - Super Top-Up covers the full ₹6L directly	✅ Super Top-Up: ₹6L ❌ Base Policy: ₹0 ❌ Customer pays: ₹0

What we learn from this case with deductible in super-top plan:

• First, you don’t pay the deductible every time. 
• Second, in Super Top-Up plans, it’s a one-time threshold per policy year. Once crossed, either through your base policy or out of pocket, your Super Top-Up plan kicks in for the rest of the year, up to the coverage limit.

What If the Customer Had a Top-Up Plan Instead?

Let’s revisit the same situation, but this time, they buy a Top-Up plan with ₹20L coverage and a ₹5L deductible (instead of a Super Top-Up) and they already have a 5L base plan.

Scenario	Details	With Super Top-Up	With Top-Up
Claim 1 Major Surgery	Total bill: ₹12L Base policy: ₹5L	✅ Base policy pays ₹5L ✅ Deductible met ✅ Super Top-Up pays ₹7L	✅ Base policy pays ₹5L ✅ Claim exceeds ₹5L deductible ✅ Top-Up also pays ₹7L
Claim 2 (Same year) Second Hospitalization	Total bill: ₹6L Base policy used up	✅ Deductible already met in Claim 1 ✅ Super Top-Up pays full ₹6L	✅ Claim exceeded ₹5L deductible on its own ❌ Top-Up does not pay first 5L ⛔ Customer pays ₹5L out of pocket ✅The remaining 1L, is covered by the Top-up

So now you know how deductibles work, especially in Top-Up vs Super Top-Up plans.

If the customer had a Top-Up plan instead, his second claim wouldn’t be fully covered because every claim has to cross the ₹5L deductible threshold. Top-Up plans don’t care how much you’ve spent overall in the year. Each claim has to cross the deductible on its own.

That’s also why Top-Up plans are largely obsolete now. Most insurers offer Super Top-Up plans, which are more useful since they look at your total expenses in a year, not just one bill.

💡 Special Mention: When Deductibles Can Be Waived While deductibles are usually fixed and non-negotiable, there are rare cases where insurers offer a one-time waiver, typically as a loyalty benefit after several claim-free years. Waiver of Deductible (Loyalty Benefit) In some Super Top-Up plans, insurers may waive the deductible amount after you've stayed claim-free OR just renewed it continuously for a set number of years (usually 5). Think of it as a reward for being a low-risk policyholder where your coverage kicks in without needing to meet the deductible, just once.

To be eligible for Waiver of Deductible:

• The age of the eldest insured member must be below a certain limit at both the time of purchase and when availing the waiver.
• The waiver, once exercised, applies to all insured members under the policy.
• Premiums are revised accordingly based on the updated benefits.

Additional points to keep in mind:

• This waiver can be used only once, so it should be used strategically.
• Many insurers continue to honour waiting period continuity even after the deductible is waived.
• Always check the policy wording for specific terms and conditions.

In short, deductibles are not standard in base health insurance plans, they typically begin covering expenses from the first rupee. Some base policies may allow a voluntary deductible to lower your premium, while in top-up and super top-up plans, deductibles are mandatory and must be paid before the policy kicks in.

Ditto’s Take: We usually don’t recommend going for deductibles, unless it’s a complex pre-existing disease (PED) case or for senior citizens struggling with high premiums. For most people, a regular base policy works better. If your base coverage is low, a super top-up with a deductible equal to your base plan is a smarter way to stay fully covered without out-of-pocket costs.

By now, you should have a much clearer picture of what a deductible in health insurance is, along with where it applies. Let us now see how deductible works in health insurance plans.

How a Deductible in Health Insurance Works?

First, and foremost, a deductible can work on a per-claim basis (applied to each individual claim) or on an aggregate basis (where all claims in a year are added up until the deductible is met). Most Super Top-Up plans follow the aggregate model, making them more cost-effective.

Your existing coverage, be it a base plan, floater, or corporate policy, decides when your deductible kicks in and how much your insurer will pitch in after that. So let’s walk you through situations where deductibles apply, what you’ll pay, and when your insurer starts to pitch in. 

If You Have a Standard/Base Health Insurance Policy

In a base policy, there’s usually no deductible. The insurer pays from the first rupee, up to your sum insured.

But if you buy a Super Top-Up plan, it will come with a deductible. In this case:

• Your base policy can cover the deductible amount.
• The Super Top-Up kicks in only when your total bills in a year exceed the deductible.
• The golden rule: Always match your super top-up’s deductible to your base policy’s coverage to avoid any gaps in protection.

Example: You have a base plan of ₹5L and a Super Top-Up with ₹5L deductible. If your total medical expenses in a year cross ₹5L, the Super Top-Up starts covering the rest.

If You Have a Family Floater Plan

In a floater plan, the entire family shares one sum insured.

• The deductible still applies per policy, not per person.
• So, if your Super Top-Up has a ₹5L deductible, it considers all family members’ bills together to cross that threshold.

This works in your favour. If your child is hospitalised for ₹2L and your spouse later for ₹4L, your total bills = ₹6L. Once ₹5L is crossed, the Super Top-Up covers the remaining ₹1L.

If You Have a Corporate Health Plan

Many people rely only on their employer-provided insurance, but here's the thing:

• Corporate plans do not last forever (you lose it when you leave your job).
• So relying solely on it for meeting your deductible is risky.

What you should do:

• Consider buying a personal base plan.
• Make sure your deductible amount matches the sum insured of your base health insurance policy. This way, your base plan can fully cover the deductible, and your super top-up plan can kick in seamlessly without you having to pay anything out of pocket.

Now that you understand where deductibles apply and how they work, it’s time to address the big question:

Should You Opt for a Deductible in Your Health Insurance Plan?

Not really. If you have a comprehensive base policy or employer cover, most bills should be covered without the pressure of paying out-of-pocket. Here we clarify exactly when a deductible is a smart move and when you're better off skipping it.

When a Deductible Might Make Sense 

• You’re a senior citizen with co-morbiditiesFor older individuals, getting a comprehensive base policy is often tough as insurers may restrict coverage or hike up premiums. In such cases, choosing a base policy with a lower cover and adding a Super Top-Up with a deductible can offer better protection without breaking the bank.
• You have complex pre-existing conditions (PEDs)If your policy options are limited due to health conditions, a deductible-based Super Top-Up helps. It ensures high coverage while keeping costs manageable, even if the base policy has restrictions.
• You’re choosing between co-payment and deductibleA deductible often makes more sense than a co-payment. Why? Because a deductible is a one-time threshold for the policy year (aggregate basis), while co-payment applies to every bill, making it unpredictable and harder to manage as healthcare costs rise.

When You Probably Don’t Need a Deductible 

• You’re young, healthy, and have enough financial bufferIf you can afford a standard policy with adequate coverage, there’s no strong reason to complicate things with a deductible.
• You already have a comprehensive base planIf your existing policy gives you sufficient coverage without major limits or exclusions, you’re probably better off skipping the deductible altogether.

Now, what if you already have a corporate policy? Does a deductible still make sense?

It’s tempting to rely entirely on your employer’s health cover, and we see that a lot. But here’s the catch: once you leave your job, that safety net disappears. And suddenly, the deductible in your top-up plan becomes a real out-of-pocket expense.

Instead, it’s better to invest in a personal base policy first. That way, you’re not dependent on your job for health coverage, and any additional top-up with a deductible may add value.

Before we wrap up, there’s one last thing we should clear up: Deductibles are often confused with another common clause in health insurance: the co-payment. But they work very differently. 

Deductible vs Co-payment: What’s the Difference?

Before you make a decision on choosing a health insurance plan with a deductible, it's important to not confuse it with another commonly used term: co-payment (or co-pay).

While both involve some out-of-pocket expense, how and when you pay makes all the difference.

By far, you must have understood what a deductible in health insurance is. 

• It applies only once per policy year.
• It’s a threshold, not a recurring payment.
• You get full coverage for eligible claims after crossing the deductible.
• Common in Top-Up and Super Top-Up plans.

Think of it like a safety gate that unlocks your extra coverage, only once you’ve paid a certain amount upfront.

Co-payment, on the other hand, is a fixed percentage of every medical bill that you must pay each time you raise a claim, no matter the size of the bill, and the rest is covered by the insurer.

• Applies to every claim.
• You always share the cost with your insurer.
• No cap unless explicitly stated.
• Common in senior citizen policies or certain PED-inclusive plans.

 It’s more like a recurring toll you pay every time you use your insurance.

Read more about What is Copay in Health Insurance?

Quick Comparison Table

Feature	Deductible	Co-payment
What you pay	A fixed amount once per policy year	A fixed % of every bill
Frequency	One-time (per policy year)	Every claim
Impact on coverage	Coverage kicks in only after deductible is met	Partial coverage from the start
Predictability	More predictable (you know your threshold)	Less predictable (varies by bill amount)
Commonly found in	Top-Up / Super Top-Up Plans	Senior citizen plans, high-risk cases
Best for	Budgeting large claims	Sharing costs in expensive policies

So, what’s better?

If given a choice, a deductible is usually more manageable than a co-payment. That’s because:

• You deal with it once a year, not every time.
• Once crossed, your insurer pays in full.
• It gives you cost certainty. You know exactly what you’ll pay upfront.

However, in some cases (like senior citizens or complex PEDs), you may have to choose between the two. In such cases, a deductible generally offers more control and predictability compared to co-payments.

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Final Takeaways

• A deductible in health insurance is what you must pay (or your base plan must cover) before your top-up/super top-up kicks in.
• Base plans cover from day one; top-up/super top-up plans start after the deductible is met.
• Pick a deductible equal to your base plan’s coverage, it helps avoid out-of-pocket surprises.
• Deductibles reset every policy year.
• Only actual hospital bills count toward your deductible. Non-medical stuff like gloves or admission kits won’t help you cross that threshold.

Health insurance can be tricky, but you do not have to figure it out alone. Our advisors will guide you through your options and help you choose what actually works for your needs and budget. Get free 1-on-1 advice from our team today.

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