A Basic Guide to Understanding Deductibles, Co-pays, and Premiums

Health insurance can be confusing, but understanding three simple terms—deductibles, co-pays, and premiums—can make it easier to navigate.

Premiums are what you shell out, most of the time monthly, just to keep the health insurance alive. For instance, in India, an average Indian couple's annual premium for a ?20 lakh family floater policy for a 40-year-old couple would be about ?24,940. 

Deductibles are what you pay out of your pocket before your insurance kicks in. For example, you have a ?10 lakh policy with a ?50,000 deductible, so sure enough, you'll pay the first ?50,000 in medical costs each year; insurance pays for the rest. 

Co-pays are fixed amounts you pay while the insurance company pays for the rest on a per-service basis. Having a co-pay option usually helps one reduce the premium. The case when opting for 20% co-pay will, for instance, cut down on premium by 20-25%. 

Health insurance premiums have been increasing these days. A survey indicates that within the last year, 52% of policyholders in India had their premiums increased by over 25%. Managing costs would be: 

Consider higher deductibles or co-pays: This can lower your premium but will create higher out-of-pocket costs at times when you need care. 

Compare policies: Compare premium and out-of-pocket costs across different insurers to know where you can get the most for your money. 

Be fit: Some insurance companies offer discounts on the premiums of the insured who participate in wellness programs. 

Go for it: Your understanding of these terms will help you choose a health insurance scheme according to your needs and budget.