What is 'deductible' in health insurance?

In health insurance, a deductible refers to the specific amount that the policyholder is required to pay out of pocket for covered healthcare services before the insurance company begins to pay its share. This means that the insured individual must bear the initial costs up to this amount, which ultimately helps to lower the overall cost of coverage by encouraging cost-sharing between the insurer and the insured.

Understanding the concept of a deductible is crucial because it affects how much a policyholder will pay for their healthcare services in a given year. For example, if a health insurance policy has a deductible of $1,000, the policyholder will need to pay that amount themselves for their medical expenses before the insurance provider pays for any claims. This structure can motivate insured individuals to make more informed decisions regarding their healthcare and manage their expenses effectively.

The other choices describe different aspects of an insurance policy: the amount an insurance company pays for a claim pertains to the insurer's responsibilities post-deductible; the total premium amount is the cost of coverage itself; and the maximum limit of coverage refers to the cap on how much the insurance will pay for a particular treatment, which is unrelated to the deductible concept. Understanding these distinctions helps to clarify the role of deductibles in health insurance policies.