What is a deductible?

• A. The amount you have to pay before the insurance company will make a payment
• B. The fixed monthly premium
• C. The limit of coverage per year
• D. The co-insurance percentage

Answer: (C)

A deductible is the amount you pay out-of-pocket before your insurance starts covering eligible expenses. It’s the upfront threshold you must meet each policy period before the insurer begins to pay for services, not the monthly premium you owe to keep the policy active. It’s also different from the annual limit, which is the maximum the insurer will pay in a year; once you reach that limit, there’s no coverage for additional costs within that year.

After you’ve met the deductible, many plans require coinsurance, where you share future costs with the insurer (for example, you pay a certain percentage of covered services). For instance, with a deductible of $1,000, if you incur $1,200 in covered expenses, you pay the first $1,000. The remaining $200 would be split according to your coinsurance terms until you reach your out-of-pocket maximum.