This document provides explanations of key health insurance terms - co-payment, deductible, coverage amount, and premium. It defines co-payment as a clause where the policyholder shares a portion of each claim amount with the insurer. Deductibles apply to top-up plans and refer to an amount of claims the policyholder must pay before the plan covers further expenses. Coverage amount is the maximum the insurer will pay for claims in a year. Premium is the annual amount the policyholder pays the insurer for the coverage. The document explains how coverage amount determines premium costs and advises choosing optimal levels of both.

2. • A health insurance plan has many technical details which we often tend to ignore.
The reason is simple – we do not understand the complex jargon and we tend to
ignore. However having an health insurance cover is an essential part of our life. We
are trying our level best to simplify these complex terms as much as possible.
• Our intent is to educate people and equip them to take their own decision buying the
right health insurance policy. We will begin our series by picking up each and every
term and explain in simple language. So let's start with Co-payment and Deductible.

3. What is co-payment?
Co-payment is a clause which states that
in the event of a claim, a certain
proportion of the claim has to be borne by
the policyholder. Thus, under this clause,
the insurance company and the
policyholder share the burden of claims
incurred. In the plan features, the co-pay
(short for co-payment) clause is
mentioned beforehand along with a figure
(in percentage). This depicts the
proportion of claim which would be
payable by the policyholder. As such, this
ratio is fixed before-hand depending on
the insurance plan.

4. CLAUSES OF CO-PAYMENT:
In all health insurance plans, the co-pay
clause has the following common features:
• The clause is usually applicable if the age
of the insured is above 60 years and is
compulsory.
• Some plans allow voluntary co-pay clause
which can be opted by the policyholder
even if the age is below 60 years. On
voluntarily choosing the co-pay clause, a
premium discount is allowed.
• The co-pay clause would be applicable at
each instance of claim. The insurer would
only settle the claim after deducting the
co-pay proportion.

5. WHAT IS A DEDUCTIBLE?
Deductibles are applicable in case of top-
up or super top-up health insurance
plans. These are also relevant at the time
of making a claim. Claims up to the
deductible limit are not paid by the
health insurance plan. Only when claims
exceed the deductible limit do they
become payable under the plan.
Let us understand the concept with an example:
Mr. Rahul had a top-up plan of Rs.5 lakhs where the deductible was Rs.2 lakhs. Since he incurred a claim of
Rs.2.5 lakhs, the top-up plan’s deductible limit of Rs.2 lakhs was crossed. In this case, he could make a claim
on his top-up plan which would pay him Rs.50, 000 (the claim exceeding the deductible limit of Rs.2 lakhs).
Now, if his claim would have been Rs.1.9 lakhs or anywhere below Rs.2 lakhs, his top-up plan would not have
come to his rescue. Since the claim is below the deductible limit, no benefit would be paid.

6. In a super top-up plan, the sum of all claims made during a policy year is compared against the
deductible limit. If the sum exceeds the deductible limit, the claim is paid. So, if Mr. Rahul had a super
top-up plan (Sum Assured Rs.5 lakhs and deductible of Rs.2 lakhs) and would have incurred smaller
claims of Rs.1 lakh and Rs.1.25 lakh on two separate instances within the same policy year, his super top-
up policy would have paid Rs.25, 000 (total claims = Rs.2.25 lakhs which exceed the deductible of Rs.2
lakhs).

7. HOW DO THEY DIFFER?
• Though both co-payment and deductible have direct bearings on claims, they are different. Let us see
how:
Co-payment Deductible
A co-payment clause is applicable in almost all health
plans if the insured’s age is above 60 years.
Deductibles are applicable only in case of top-up or super
top-up plans.
Under this clause, the policyholder is supposed to bear a
portion of the claim which is specified before.
Claims below the deductible limit would have to be paid
by the policyholder. Claims exceeding the limit are only
payable.
Co-payment is applicable at each instance of claim
In a top-up plan, deductible limit would be applicable at
each claim instance. However, in Super top-up plans, the
aggregate claims made during a policy year are compared
against the deductible limit.

8. SIMILARITIES BETWEEN THE TWO
Both co-payment and deductible involve the policyholder’s share of the claim. While the co-payment clause
directly specifies the percentage of every claim which is to be borne by the policyholder, deductible acts like
a threshold limit up to which the policyholder is required to bear the claim. Only when the deductible limit
is exceeded, the plan becomes effective and pays the claim.

9. WHAT IS “COVERAGE AMOUNT”?
• This is the MOST important thing you must understand about any health insurance plan. The
coverage amount, also called the Sum Assured or the Sum Insured, is the maximum amount of money
payable by the insurance company when a claim is made. This amount is the amount for which the
insurance company covers your medical expenses. It is also called the amount of risk covered by the
insurance company.
• Basically, it means, that Coverage Amount is the Maximum amount that the insurance company
would pay in case you are hospitalized! Thus, if you have a Health Insurance Plan for say Rs 10 lakhs,
then under all circumstances, over the entire year, the maximum amount of total money that the
Insurance Company will pay for your medical treatment on hospitalization cannot be more than Rs 10
Lakhs.

10. HOW MUCH HEALTH INSURANCE COVER SHOULD YOU CHOOSE?
• Thus, you need to opt for health insurance coverage depending on your need. You may choose a lesser
coverage if your company has provided some medical coverage as well. Also, you need to choose as per the
hospitalization expenses you may incur, the type of bed you would be choosing, your previous history of
hospitalization, etc.
• There is a range of cover amount or Sum Assured options available under health insurance plans and you
have to choose a cover amount from the available range.

11. WHAT IS “PREMIUM”?
• The premium is the amount of money
which you, as a policyholder, are required
to pay to avail insurance coverage from a
company. The premium is also called the
cost of insurance.
• Basically, premium is the amount of
money you need to pay every year to the
insurance company so as to buy the
Health Insurance Coverage for that
particular year. It needs to be paid
annually and renewed every year with
fresh policy document being issued.

12. HOW IS THE COVER AMOUNT (SUM ASSURED) AND THE PREMIUM
RELATED?
• A health insurance policy is a legal contract between the insurance company and you (policyholder).
Under the terms of the contract, the company promises to cover you for the chosen level of Sum Assured.
You, on the other hand, promise to pay the premium for availing the cover. The amount of premium
depends on the Sum Assured selected.
• Thus, premium is what you pay the insurance company for the Health Insurance coverage that it
provides for you for the entire year. So, if you (Age 30) buy a Health Plan for Rs 10 Lakhs and pay a
premium for Rs 8200 approximately without tax, then Rs 8000 + tax is your Annual Premium payable for
the entire policy year for coverage till Rs 10 lakhs.
• However, if you choose Rs 15 lakhs of coverage instead of Rs 10 lakhs, your premium would
approximately rise to Rs 9800 + tax. Thus, the premium payable is directly proportional to the cover
amount opted for. Higher the level of Sum Assured, higher would be the premium and vice-versa.

13. HOW ARE THEY RELEVANT?
There is a constant battle among individuals to choose between the Sum Assured and the premium rates.
Sadly, our pockets always win the battle and we buy plans with cheapest premium outgoes. This results in
a very minimal cover amount, the brunt of which is felt at the time of claims. Since our coverage is limited,
we end up paying any excess claim from our pockets. Here is where the relevance of a plan with a balanced
Sum Assured and premium feature comes in –
• The cover amount denotes the maximum liability of the insurance company in case of claims. You would have to
bear the expenses exceeding the cover amount. Thus, you should choose an optimal Sum Insured in your health
plan.
• The premium denotes your liability. It is the amount of money you are required to pay for the coverage. Though an
optimal coverage is essential, you should factor in your affordability while choosing the health plan.

14. IMPORTANT POINTS TO NOTE
Now you know what a cover amount and the premium means. While the latter is the financial extent up to which your plan
would pay the claim, the former is the cost of availing the cover amount. So, premium depends on the cover amount (Sum
Assured).
Here are some important points which you should remember:
• The optimal level of Sum Assured when you are insuring only yourself and when you are also insuring your family
members differs. When family members are also covered in your health plan, you should choose a higher cover
amount.
• Premium not only depends on the cover amount. Other factors which influence the premium rate are age of the
insured, number of members covered under the plan, optional coverage features added in the plan, medical history
of the insured, etc.
• Under no circumstances would the claim paid exceed the cover amount.
• The cover amount (Sum Assured) can be increased when the health plan is renewed.
• There is a limit on the maximum Sum Assured which is allowed under a health plan. This limit varies among the
different plans.
Now you know what a cover amount and premium of a health plan denote. So, the next time you are asked about it, you
would be sure.

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