What is a “deductible”?

A deductible is defined as the amount the insured must pay out-of-pocket before their insurance provider begins to cover the expenses of a claim. This means that the policyholder is responsible for paying this specific amount for health services or treatments before their insurance kicks in. For example, if a health insurance policy has a deductible of $1,000, the insured would need to pay the first $1,000 of their medical bills before the insurance company starts to pay its share according to the policy terms.

This concept is crucial in insurance because it helps to share the cost between the insurer and the insured, discouraging unnecessary claims and keeping overall insurance costs down. Understanding the role of a deductible in an insurance policy helps insured individuals budget for healthcare costs and comprehend how their insurance coverage operates.