Co-Pay in Health Insurance: Understand Before Buying a Health Policy

10 min read Posted on 17 july 2025

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About Co-pay in Health Insurance: Meaning and Definition Suppose you go on a trip with your best friend to the dream place you planned to visit years ago. When you are back, you split the bill into 50-50, sharing the burden between both of you. This is what the co-pay in health insurance feature does for you.

Split the hospital bill between you (the insured) and the health insurance company. But not in 50-50. The split percentage depends upon the co-pay clause set by your insurer, which may be 90-10, 80-20, or 70-30.

But is it beneficial to opt for a co-pay in health insurance? How does it work? Is it mandatory, or can you opt out of the co-pay? Keep reading to understand the concept, working, and benefits of paying co-payment charges.

What is Co-pay in Health Insurance?

Co-payment is the percentage of the incurred claim amount you agree to pay out of your pocket. In normal circumstances, the co-pay varies from 10% to 30%. While it is voluntary to opt for a co-pay in health insurance, some policies have made it mandatory, especially those issued for senior citizens and people with pre-existing diseases.

If you opt for co-payment, your insurance premium will also be reduced by the same proportion as the percentage opted for.

What is the Need for a Co-pay Clause for Policyholders?

You may think that a co-pay will increase your liabilities at the time of claim, while you can get a 100% reimbursement at the time of claim (if not opted for). However, every share that you will pay under co-pay will count you certain benefits, mentioned as:

Cost Sharing: When you opt for a co-payment in health insurance, you may reduce the financial burden on both parties (insurer and insured) as it helps share the cost between them.

Lowers Policy Premium: Health insurance with a co-pay clause is available at a comparatively lower premium. The higher the co-pay percentage you choose, the lower the premium will be. This benefit is provided to you as you share the insurance company's liability at the time of claim.

Prevents from Raising Minor Claims: Next time, when you suffer from a minor illness, such as common fever, cough, etc., you file a claim. The insurer will charge for it, requiring you to review the documentation and paperwork. Hence, this will discourage you from filing for minor claims.

Restricts Unnecessary Expenses: Having a co-payment amount to pay out of pocket saves you from conducting unnecessary medical treatments and tests.

Policy Features, Riders & Add-ons

How Does Co-pay Work?

Here’s how the co-pay in health insurance policy works:

1. For Cashless Claim Settlement

If you undergo treatment at any network hospital to gain a cashless facility, the insurer will settle the bills directly with the hospital. When you opt for the co-pay clause, you need to pay a fixed portion of the approved claim amount to the hospital while the insurer settles the remaining amount.

2. For Reimbursement Claim

When you undergo treatment at a non-network hospital, you must pay the amount out of pocket. Then, you can file a claim for reimbursement. The health insurer then pays the eligible claim amount after deducting the co-payment and non-payable costs or deductibles.

Must Read: Difference between co-pay, deductibles, and coinsurance.

Types of Co-pay Clauses in Health Insurance

The co-payment clause is not mandatory for all insurance policies, and different insurers may apply it differently in various circumstances. Here are the various types of co-payments applicable:

Type of Co-Payment	Applicability
Age-Related	When buying a health plan for senior citizens, co-pay clause is mandatory, as the medical expenses are higher at that age
Hospital-Related	Sometimes, a co-pay is applicable only if the treatment is done at a non-network hospital
Location-Related	For the hospitals located in metropolitan cities, as the medical costs in such cities are higher
Illness-Related	Levied for specific illnesses and critical disease policies

Get to Know: Best health insurance plans in India

How is Co-pay Calculated?

The exact co-pay amount can vary depending on the health insurance policy terms, ranging between 10% to 30% of the total medical expenses.

Let’s understand working with an example:

Scenario: Mr. Sudeep purchases a health insurance policy with ₹5 Lakhs sum insured, including a 20% co-payment clause on all claims.

Claim Amount: He underwent major surgery at a multi-speciality hospital, and the total cost of treatment was ₹3 Lakhs.

To calculate Mr. Sudeep's out-of-pocket expenses:

1. Co-payment Amount:

Co-payment Amount = Total Treatment Cost X Co-payment Percentage
Co-payment Amount = ₹3,00,000 X 0.20 = ₹60,000

2. Insurance Coverage:

Insurance Payout = Total Treatment Cost – Co-payment Amount
Insurance Payout = ₹3,00,000 – ₹60,000 = ₹2,40,000

Summary:
Mr. Sudeep's Out-of-Pocket Expenses: ₹60,000
Insurance Company Pays: ₹2,40,000

Note: The above representation is for reference only. The payable amount may vary depending on the terms applicable.

Does Opting for Health Policy with a Co-pay Clause Make Sense?

Here’s how purchasing a health insurance policy with a co-payment clause can impact your decision:

Case 1: When Opted for Co-Payment Clause	Case 2: When Not Opted for Co-Payment Clause
Higher the co-pay, lower the premium	The overall cost of the policy increases but provides better coverage in return
You may have to bear a portion of the claim amount out-of-pocket in case of a medical emergency	The insurer bears all the claim amounts based on the sum insured selected, relieving you of any out-of-pocket expenses related to co-payment
For good overall health, where you do not require extensive treatment, it may give you relief on your premium and out-of-pocket expenses	For those with ongoing medical conditions or who foresee needing regular treatments, it removes the burden of contributing to the cost of claims

Have a look at: Best health insurance companies in India

Things You Should Consider While Opting for Health Insurance with Co-pay

Health Condition: When you think you are in good health and do not have any pre-existing conditions, a policy with a co-pay clause makes sense because it lowers the premium. But, in the most unfortunate cases, you must bear a share of the treatment cost if a medical emergency arises. Hence, select wisely. On the other hand, if you are susceptible to illnesses, choosing a health plan without the co-pay clause will be beneficial.
Financial Conditions: If you have adequate savings to help you pay the hospital bills, the co-payment clause is the right option.
Plan Coverage: Plans with lower coverage (such as no pre-existing coverage, maternity benefits, other medical treatments, etc.) come with an affordable premium option. If any such medical emergency arises, you must bear the complete amount. Hence, one-time affordability can lead to hefty expenses later. Completing coverage with a suitable co-payment clause may provide a discount on premiums and financial relaxation in a medical emergency.
Go with the Lower Co-Pay: Opting for a lower co-pay may mean paying higher premiums, but it will keep you stress-free when the claim amounts are huge.

How Does Co-pay Impact Health Premium?

The co-pay percentage in medical insurance is inversely proportional to your health insurance premium during the policy year. How?

Well, opting for a co-pay, you agree to pay a fixed percentage of the medical expenses out of your pocket. Ultimately, this reduces the burden and financial risk on the health insurance company. As a result, the company incentivises you by lowering the premium.

Remember, the impact of co-pay on medical bills varies based on the policy terms and conditions.

Policy Features, Riders & Add-ons

Over to You!

If you want more clarity on the co-pay amount you will have to pay at the time of raising a claim, connect with our professional RenewBuy Partner. They will help you with any co-pay or insurance-related queries as efficiently as possible.

Disclaimer: The content published in this article is intended solely for the readers' informational purposes and should not be relied upon for personal, medical, legal, or financial decisions. It is advisable to seek advice from a qualified professional regarding specific concerns. The details provided regarding the plan are for reference purposes only. Please visit the insurer’s website for the latest updates on the plan. The company does not guarantee suitability, reliability, timeliness, or accuracy of the information, services, or any other aspects mentioned in this regard for any purpose. We do not endorse any insurance company or insurance product provided by any insurer.