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What is a deductible in insurance? (With examples)

Sometimes complicated terms used in insurance policies can be confusing. Don’t worry, let us help you understand them simply and easily. Let us understand what is an insurance deductible.

What is a health insurance deductible?

A deductible is a fixed sum that a person has to pay himself before the insurance company takes care of the rest of the medical expenses of the policyholder.

Example of a deductible in health insurance

Lets us understand this using a simple example. Let us assume that Mr. Jamnalal has taken a Rs.3 Lakhs insurance policy with a deductible amount of Rs.30,000. Let us further assume that Mr. Jamnalal is hospitalized and his hospital bill comes up to Rs.1 Lakh.

Since Mr. Jamnalal has opted for a health insurance policy with a deductible component of Rs.30,000, all expenses up to Rs.30,000 will have to be paid by Mr. Jamnalal himself. Any expense over Thirty Thousand will be covered by the insurance company (up to Rs.3 Lakhs). Thus, Thirty Thousand is the deductible component for Mr. Jamnalal which he will have to pay himself before the policy benefits kick in.

Deductible in a top-up health insurance policy

First, let us understand what is a top-up policy. A top-up policy is an insurance policy that looks after your hospital treatments and gives you extended coverage after your base policy coverage has reached its limit.

What is deductible in a top-up policy

In a top-up health policy, a fixed amount of the sum will be borne by the policyholder towards their medical treatments before the insurance company starts to cover their medical expense. This deductible cost will be paid by the insured after every claim.

What is deductible in car insurance

Lets us understand what a deductible is in car insurance with a simple example.


Let us assume that Mr. Kishan bought a motor insurance policy from HDFC ERGO. He opted for a voluntary deductible component in his motor insurance policy so that he could reduce his premium. Mr. Kishan’s deductible is Rs.5000.

Now, let us further assume that Mr. Kishan’s car has met with an accident and the claim amount is Rs.10,000. As he opted for a deductible component of Rs.5000, Mr. Kishan will have to pay Rs.5000 from his pocket and the insurance company will pay the remaining expense.

Types of deductibles in car insurance

Now, there are two types of deductibles in car insurance, compulsory and voluntary deductibles. Let us understand them in detail:

Compulsory deductible

It is a compulsory amount that a car policyholder has to pay towards his policy claim. It is a mandatory expense a vehicle owner has to bear in case of a claim. It is as per the guidelines of the Insurance Regulatory Development Authority of India (IRDAI).

As per IRDA guidelines, the rates of compulsory deductibles in cars are given below accordingly: Rs.1,000 for cars up to 1,500 cc and Rs.2,000 for cars exceeding 1,500cc

Voluntary deductible

A voluntary deductible comes into action when a policyholder himself decides to pay an extra amount for his car expenses during his claim. The policyholder must carefully decide on the limit he chooses to pay according to his affordability with the help of his insurance advisor.

When one opts for a voluntary deductible they usually pay a lesser premium. A voluntary deductible also encourages the insurer to drive carefully and take care of their respective vehicles by maintaining them. If a claim is made, the car insurance policyholder will have to pay both the voluntary deductible with the compulsory deductible.

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