What does 'deductible' mean in health insurance?

The concept of a deductible in health insurance is crucial for understanding how insurance policies function. A deductible refers to the specific amount that the insured individual must pay out-of-pocket before their health insurance begins to cover medical expenses. This means that if a policy has a deductible of, say, $1,000, the insured will need to pay that amount for their medical costs in a given policy year before the insurance company contributes toward further expenses.

This structure incentivizes individuals to manage their healthcare costs since they bear the initial expenses. It also helps to keep insurance premiums lower since the insured shares some of the initial financial burden. Understanding deductibles is vital for assessing one’s potential out-of-pocket expenses and planning for healthcare costs effectively.