Co-pay means the insured bears an agreed percentage of each admissible claim (e.g. 10% or 20%). It lowers the premium because the insurer's exposure drops, and it discourages over-utilisation - but it's a real cost to employees at the point of illness. Co-pay may be blanket, or apply only to certain groups (e.g. parents) or certain cities (Zone-based).
In India
Frequently applied to parental cover to keep that high-claiming segment affordable. A “zero co-pay” policy is a strong employee-experience signal.
In practice
A policy with 20% co-pay. A ₹2 lakh hospitalisation means the insurer pays ₹1.6 lakh and the employee pays ₹40,000 from their own pocket.