It has been observed that insurance companies in India introducing various policies that seek some part of the claim to be paid by the insured person. This term is more useful in general insurance, including car insurance and health insurance.
While both voluntary deductions and co-payments offer benefits for both policyholders and insurers. Majority of insurance seekers are still not aware of the advantages and requirements of both. Below PolicyBoss describes the concepts of voluntary deductions and co-pay in insurance:
• Overview of Co-Payment
The term ‘co-payment’ is generally seen in General Insurance plans, including motor, health, fire and other liability policies. The co-payment clause in insurance highlights to the fact that the insured person is ready to share the claim burden and co-pay pre-determined money.
This concept was first presented by group health insurance and then adopted by general health care plans. Now, this clause is mentioned in various policies. This clause is developed to ensure that group health insurance policyholders do not get any Mediclaim unnecessarily.
As insured pays a part of the expenses, any unwanted hospitalization or expenses was discouraged. The co-payment percentage is predetermined in a policy and can range between 10-25 percent of the approved claim.
• Overview of Voluntary Deductibles
The voluntary deductible is any excess amount or the claim part which is not insured by the insurer according to the policy agreement. It is a fixed amount that the insured person chooses to pay from his or her own pocket before the policy benefits applicable.
Home insurance, Car insurance, general insurance and travel insurance plans include a voluntary deductible clause. As claims are only chances, buying voluntary deductible provides the insured person a benefit of the lower premium amount and at the time, retention of no claim bonus.
Importance of Voluntary Deductible and Co-pay
The main reason behind the introduction of these concepts is the fact that insurers offer to give large coverage for lower premiums raising the risk for the insurers. The individual is decreasing the risk experienced by the insurer effectively when he or she is ready to pay some part of the claim. As per voluntary deductible clause, the insured has to pay the amount due first in case of claim and then insurer would settle the remainder. In case of co-payment, the final claim amount is divided between the insurer and the policyholder based on the predetermined co-payment percentage in the policy.