A deductible in insurance is the amount of money that a policyholder must pay out-of-pocket for covered services before the insurance company begins to pay its share. Essentially, it is a fixed amount you pay first, and once you meet this amount, your insurance coverage kicks in to share or cover the remaining costs according to your policy terms
. Key points about deductibles include:
- The deductible resets typically every policy year or calendar year
- Deductibles can vary by plan type and coverage, such as individual or family deductibles, and can be higher in plans with lower premiums (and vice versa)
- After meeting the deductible, you usually pay coinsurance or copayments for covered services until reaching an out-of-pocket maximum, after which the insurer pays 100%
- Deductibles are common in health, auto, homeowners, and other insurance types
- Some plans have per-occurrence deductibles, which apply each time you file a claim, common in auto or homeowners insurance
For example, if you have a $2,500 deductible on a health plan, you pay the first $2,500 of covered medical expenses yourself. After that, your insurance starts to pay according to the plan’s cost-sharing rules, such as coinsurance
. In summary, a deductible is a cost-sharing mechanism that requires you to pay a certain amount upfront before your insurance benefits begin to cover expenses. This helps keep premiums lower and ensures that policyholders share some responsibility for their claims
