Deductible (Health Insurance)
A deductible is the amount a policyholder must pay out-of-pocket before the insurance company begins to pay for covered expenses.
š¬ Video Explanation
Exam Tip
Higher deductible = lower premium. Deductible is what YOU pay first.
What is a Deductible?
A deductible is your share of costs before insurance kicks in. It's a form of cost-sharing that helps keep premiums lower.
How Deductibles Work
- You incur a covered expense (medical bill, car repair)
- You pay the deductible amount first
- Insurance pays remaining covered costs (subject to coinsurance/copays)
Example
- Annual deductible: $1,000
- Medical bill: $5,000
- You pay: $1,000 (deductible)
- Insurance pays: $4,000 (or portion based on coinsurance)
Types of Deductibles
| Type | Description |
|---|---|
| Annual | Resets each year (most health plans) |
| Per-incident | Applies to each separate claim |
| Family | Combined deductible for family members |
| Embedded | Individual deductible within family deductible |
Deductible Trade-offs
| Higher Deductible | Lower Deductible |
|---|---|
| Lower premiums | Higher premiums |
| More out-of-pocket risk | Less out-of-pocket risk |
| Good if rarely use insurance | Good if frequent claims expected |
Study This Term In
Related Terms
Premium (Insurance)
An insurance premium is the amount paid by the policyholder to the insurance company for coverage, typically paid monthly, quarterly, or annually.
Coinsurance (Health Insurance)
Coinsurance is a cost-sharing arrangement where the insured pays a percentage of covered medical expenses after the deductible is met, typically 20% with insurance paying 80%.
Copay (Copayment)
A copay is a fixed dollar amount that an insured person pays for a covered healthcare service, typically due at the time of service, regardless of the total cost.
Out-of-Pocket Maximum
The out-of-pocket maximum is the most you have to pay for covered healthcare services in a plan year, after which your insurance pays 100% of covered costs.
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