Deductible in Medical Insurance: How to calculate and choose before buying VHIS?

In the insurance industry, the term deductible (commonly known as excess ), also referred to as Deductible or Excess in English, is frequently found in indemnity-based policies such as medical insurance and car insurance.

As the name suggests, a deductible is the amount that policyholders must bear and pay themselves when submitting a claim to the insurance company. It is the amount the policyholder needs to pay out-of-pocket when claiming.

Only when medical expenses exceed the deductible threshold will the insurance company compensate the remaining portion, according to the policy terms and coverage limits.

For example, if a policy has a deductible of $20,000, the policyholder must first pay $20,000 in medical expenses before being able to claim the remaining medical costs from the insurance company.

Generally, assuming the insurance product and the insured person/property are the same, the higher the deductible, the lower the premium.

• Lower Premiums: Choosing a medical policy with a deductible usually results in lower premium payments, especially suitable for policyholders who are in good health and rarely require frequent medical attention.
• Prevent Misuse: Deductibles help reduce claims for small medical expenses, preventing the misuse of medical insurance and, in the long run, helping to control premium increases.
• Financial Flexibility: Customers can set a higher or lower deductible based on their financial situation and risk tolerance, flexibly balancing premiums and the deductible amount.
• Ensure Medical Necessity: Policies with a deductible threshold encourage users to assess the necessity of medical expenses, preventing the overuse of medical resources.

For medical insurance (commonly found in high-end medical insurance offering full coverage), the deductible is usually calculated per policy year :

• Policyholders only need to pay the deductible once within each policy year; the insurance company will cover medical expenses exceeding this amount.
• Subsequently, if there are further claims within the same year, the policyholder does not need to pay the deductible again until the start of a new policy year.

Bowtie VHIS Standard and Bowtie VHIS Flexi Plans do not have a deductible, while the deductible for Bowtie Pink VHIS is calculated per policy year , and will be reset on each policy renewal date.

Example: Assume you enroll in the Bowtie Pink VHIS Plan (with a $20,000 deductible), and the policy effective date is December 1, 2025.

From December 1, 2025, to November 30, 2026 (the first policy year), the policyholder must first bear $20,000 in medical expenses (costs claimed from group medical insurance can also be included), after which Bowtie will compensate for the remaining eligible medical expenses.

After understanding the mechanism of deductibles/excess, the most common question is how policyholders bear medical expenses when claiming from an insurance company with a deductible plan.

Simply put, policyholders can refer to the deductible amount specified in their policy. This amount represents the maximum sum the policyholder must bear themselves for claims within each policy year.

To further understand how deductibles work, you can refer to the following examples of subscribing to Bowtie Pink VHIS :

Case 1: Eligible Medical Expenses $1 Million

Assume the medical bill shows eligible medical expenses of $1 million, and your medical insurance has an $80,000 deductible. In this case, you only need to pay $80,000, and the remaining $920,000 of eligible medical expenses will be covered by the insurance company.

Case 2: Eligible Medical Expenses $80,000

If you receive a hospital bill upon discharge, and the eligible medical expenses are $80,000, since your medical insurance has an $80,000 deductible, you will need to pay the full $80,000 yourself.

Case 3: Hospitalized Twice in the Same Policy Year, Total Eligible Medical Expenses $160,000

Suppose you were hospitalized twice for surgical treatment within the same policy year, and your medical insurance deductible is $80,000.

For the first hospitalization, the eligible medical expenses were $90,000. After this hospitalization, you would pay $80,000 yourself, and the remaining $10,000 would be reimbursed by the insurance company. For the second hospitalization, the eligible medical expenses were $70,000. After this second hospitalization, you would not need to pay any further deductible, and the insurance company would provide full reimbursement.

Case 4: Eligible Medical Expenses $1 Million

Assume the medical bill shows eligible medical expenses of $1 million, and your medical insurance policy specifies a $0 deductible. In this case, you would not bear any out-of-pocket expenses when making a claim to the insurance company, and the full $1 million of eligible medical expenses would be reimbursed by the insurance company.

Should I choose a policy with a deductible?

Whether to choose a medical insurance policy with a deductible can be evaluated based on the following factors:

• Budget Planning: If you prefer lower premiums, a policy with a deductible is more suitable.
• Other Coverage: If you already have company medical insurance or other medical benefits, a personal medical insurance with a high deductible can serve as supplementary coverage.
• Financial Capacity: Bearing a higher deductible yourself requires a certain amount of cash reserves; otherwise, it might cause significant financial pressure when making a claim.

Deductibles can prevent abuse. Imagine if there were no deductibles, policyholders would naturally claim for all minor check-ups/minor surgeries, significantly increasing the pressure on insurance companies to raise premiums.

With deductibles in place, insurance companies only need to compensate for medical expenses exceeding the deductible amount. Compared to situations with no deductible at all, the insurance company’s claims risk is clearly lower. This also explains why the higher the deductible, the lower the premium tends to be.

Taking Bowtie Pink (Ward) as an example, for a 30-year-old non-smoker (same premium for male and female) applying for insurance, the monthly premium difference between choosing the highest ($80,000) and lowest ($0) deductible can be $489, meaning an annual premium difference of up to $5,868!

You can simply understand it as: The higher the deductible, the lower the premium.

Children / Homemakers

If you are concerned about frequent hospitalizations for examinations or treatments (for children), and do not have personal or company medical insurance (e.g., homemakers), you should choose a VHIS plan with a $0 deductible.

For example, if a child has a high fever, a single stay in a private hospital could cost $20,000 to $30,000. However, the total premium for ages 0 to 3 (4 years in total) is only $25,440 ( Bowtie Pink (Ward) ). In other words, the premium cost for several years might be lower than a single hospitalization medical expense, making it a smart choice.

Freelancers / Slashers

Self-employed individuals like freelancers/slashers usually do not have company medical insurance. Does this mean they can only choose VHIS plans with a $0 deductible?

Not necessarily! Self-employed individuals can actually purchase an additional basic personal medical insurance, such as Bowtie VHIS Standard or Bowtie VHIS Flexi Regular (which has sub-limit compensation but no deductible option), to complement a high-end VHIS plan with a deductible (e.g., Bowtie Pink (Ward) ). When making a claim later, the policyholder can use the compensation from the Standard Plan / Flexi Plan (without a deductible option) to offset all or part of the deductible required for the high-end VHIS claim.

One point to note is that when purchasing, you must ensure that the ward levels covered by both medical insurance plans are the same, for example, both for general wards or both for semi-private wards. This is to avoid being forced to downgrade or experiencing a significant discrepancy in the final compensation amount if the ward types covered by the policies do not match when hospitalization is required later.

Employees

Employees with company medical insurance (group medical insurance) can consider choosing a medical insurance plan with a deductible (e.g., Bowtie Pink (Ward) ). When a claim is needed later, the company medical insurance compensation can be used to offset part or all of the deductible. Remember to understand the ward level covered by your company medical insurance, and then choose a VHIS plan with a deductible option that covers the same ward level.

How much can you save by purchasing a VHIS plan with a deductible? For a simple example, take a 30-year-old non-smoking insured person. Assuming the company medical insurance coverage is sufficient to offset a $20,000 deductible, purchasing Bowtie Pink (Ward) with a $20,000 deductible will save up to $46,000 in total premiums over 10 years compared to purchasing the same plan with a $0 deductible.

Individuals with Savings Who Want to Save on Premiums

If you consider yourself healthy and only want high-end medical insurance as a ‘safety net,’ you can also consider choosing a medical insurance plan with a ‘deductible’ to save on premium expenses. However, the prerequisite is that you have sufficient emergency savings to cover the deductible.

Can I change the deductible? Absolutely no problem!

Bowtie Pink VHIS policyholders can request to change their deductible on any renewal date. If you need to lower or remove the deductible, a new underwriting process will be required.

However, if the following 2 conditions are met, Bowtie Pink VHIS policyholders can exercise a one-time right to lower or remove the deductible within a specified period, without requiring new underwriting or proof of insurability for the insured, to accommodate different life stages:

• The Bowtie Pink VHIS plan has been continuously in force for 2 years or more;
• The insured person reaches the age of 55, 60, 65, 70, 75, or 80.

After deciding on the deductible, comparing products is essential. Premiums are a key consideration for many. We’ve specifically selected 4 products with deductibles of no more than $20,000 for comparison. For total premiums from age 0 to 80, Bowtie offers the lowest premiums.