Deductibles in Health Insurance: Meaning, Types & How They Work

Deductibles in Health Insurance: Overview

A deductible in health insurance is the fixed amount you must pay from your own pocket before your insurer starts paying for your medical expenses. Once your total medical bill exceeds this deductible amount, the insurer covers the remaining cost under the policy terms.

Deductibles are most commonly found in super top-up plans, top-up plans, and certain senior citizen policies. They work beautifully when paired with an existing base plan, such as an employer policy, that covers the initial threshold amount.

Introduction

Understanding deductibles in health insurance is crucial because they directly affect both your premiums and what you’ll pay during a claim. Yet most people either overlook them or misunderstand how they work.

In this blog, we break down the meaning of deductibles, the different types you’ll encounter, how they work in cashless and reimbursement claims, their impact on your overall coverage, how they differ from premiums, and when choosing a deductible actually makes financial sense. By the end, you’ll know exactly which deductible structure suits you best.

If you’re unsure about which deductible amount you should pick or whether a super top-up is right for your situation, you can always speak to a Ditto advisor for free. We’ll walk you through your options, assess your existing coverage, and help you choose a structure that gives you the highest coverage at the lowest stress.

How Does a Deductible in Health Insurance Work?

A deductible is a form of cost-sharing between you and the insurer. It represents the portion of the medical bill that you must pay first. The insurer begins to pay only after this threshold is crossed. 

This mechanism helps reduce premiums and ensures that insurance is used primarily for significant expenses rather than routine or minor claims.

For example, if your plan has a ₹5 lakh deductible and you incur a hospital bill of ₹9 lakh, you will pay the first ₹5 lakh, and the insurer will settle the remaining ₹4 lakh.

Deductibles exist to reduce the insurer’s risk exposure, to make premiums more affordable for customers, and to discourage small or frequent claims that can inflate costs for everyone.

Regardless of the plan type, the logic is straightforward. When a hospitalization occurs, the medical bill is generated and the deductible amount is subtracted. You must pay this portion. Once that is settled, the insurer covers the remaining eligible amount.

Now, let's look at three crucial scenarios:

Cashless Claims

The hospital collects the deductible from you directly before the insurer approves the rest of the amount. For example, if you have a ₹4 lakh deductible and a ₹10 lakh bill, the insurer will approve only the remaining ₹6 lakh as cashless, while you must pay the ₹4 lakh deductible at the hospital counter.

Reimbursement Scenarios

You pay the deductible upfront at the hospital counter. The insurer reimburses only the amount beyond the deductible. This applies uniformly whether the deductible is compulsory, voluntary, aggregate, or per-claim.

Employer Health Insurance

Suppose you have a ₹6 lakh employer cover and a ₹20 lakh super top-up with a ₹5 lakh deductible. If you incur a ₹10 lakh hospitalization, claim the entire ₹6 lakh initially through your employer plan. Once this cover is exhausted, the deductible requirement is automatically met since its value was only ₹5 Lakh. Now, you can easily claim the remaining ₹4 lakh directly from your super top-up insurer. You end up paying nothing out of pocket. 

There is also an alternative approach where you pay the ₹5 lakh deductible yourself and later claim it from the employer as reimbursement, but this unnecessarily increases your temporary financial burden and does not offer any benefit.

Types of Deductibles in Health Insurance

1. Compulsory Deductible

This is a fixed deductible built into the policy by the insurer. You cannot modify or remove it, and it applies automatically every time a claim is made. It is commonly found in travel insurance, top-ups, super top-ups, and certain senior citizen plans.

For example, the Care Supreme Enhance super top-up has a compulsory deductible of 5L to 15L for a sum insured ranging from 45L to 95L.

2. Voluntary Deductible

This is a deductible that you choose to take on to reduce your premium. The higher the voluntary deductible you select, the lower your premium becomes. It works best for people who are financially stable, healthy, or already covered by an employer health plan that can help meet the deductible.

HDFC ERGO’s Optima Secure plan has the option to add a voluntary deductible ranging from 25k to 5L.

3. Aggregate Deductible

This deductible applies to the total medical expenses you incur over the entire policy year. All your hospitalization bills for the year are added together, and once the combined amount crosses the deductible, the insurer begins to pay.

Aggregate deductibles are the core feature of super top-up plans.

4. Per-Claim Deductible

This deductible applies separately to every hospitalization. If the per-claim deductible is ₹25,000, you must pay ₹25,000 each time you file a claim, regardless of how many times you are hospitalized during the year. It is seen in top-ups, some travel insurance plans, and a few senior citizen policies.

For example, Galaxy Health Insurance Promise Plan offers an optional per-claim deductible, and Reliance General Health STU has a per-claim deductible of 100 USD for global emergency claims.

Did You Know?

Some insurers offer a long-term aggregate deductible, where you only need to meet the deductible once in your entire policy lifetime, instead of meeting it every year. After this one-time threshold is crossed, the policy activates fully for all future years. For instance, Reliance General Health Super Top-Up allows customers to choose a long-term aggregate deductible instead of a regular annual aggregate deductible.

Is it Possible to Get a Deductible Waived?

Some super top-up plans offer a one-time waiver of the deductible as a loyalty benefit after several claim-free years or continuous renewal. Plans like Aditya Birla Super Health Plus Super Top-Up and Niva Bupa Health Recharge include a feature to waive the deductible after 5 years.

To qualify, the eldest insured must be below the insurer’s age limit at purchase and at the time of availing the waiver. The waiver applies to all insured members but can be used only once, so it should be exercised strategically.

Impact of Deductibles on Health Insurance Coverage

Deductibles influence your policy in several important ways.

• Deductibles help reduce your overall premium because the insurer’s liability begins only after you cross a certain threshold of medical expenses.
• Deductibles require you to plan for out-of-pocket spending since you must be prepared to pay the deductible amount during a medical emergency.
• Claims that do not exceed the deductible amount result in no payout from the insurer, which means smaller hospitalizations may need to be funded entirely by you.

Here is an example (15 lakh base cover, no add-ons, includes 5% digital discount for a 40-year-old male, Delhi):

Let's take another example of a 40-year-old male from Delhi seeking a base plan with 50 lakh sum insured:

Ditto’s Take on Deductibles in Health Insurance

Deductibles can be useful, but only for very specific profiles, and far fewer people should opt for them than most assume. In most cases, a regular base policy without deductibles is the safer, more predictable, and financially sensible choice.

We usually avoid recommending deductible-based plans unless the circumstances truly demand it. They make sense primarily for:

• Senior citizens, where base-plan premiums become extremely high or unaffordable.
• People with complex pre-existing diseases, where premiums shoot up and a deductible may be the only practical way to keep the policy affordable.
• Individuals who already have a strong base plan, such as a ₹5 lakh employer policy or personal policy, because the base plan can absorb the deductible.
• People buying very high coverage, such as ₹20–50 lakh, where the only cost-effective structure is a base plan plus a super top-up with a deductible equal to the base cover.

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Final Thoughts

Deductible-based plans also work best only if you expect to have several claim-free years, because that’s when the premium savings actually accumulate. If you end up needing hospitalization early, the deductible can wipe out years of savings.

Because of these risks, we remain cautious: deductibles should be chosen strategically, not as a shortcut to lower premiums. For most people, a simple base plan or a base plan + super top-up with a sensible deductible (usually equal to the base cover) is the most reliable way to stay fully protected without surprise out-of-pocket expenses.