What Is an Insurance Deductible?
When you’re trying to do the responsible thing and purchase insurance, it can be difficult to know what all the different insurance terms mean in a given plan. But whether you’re looking at health insurance or a homeowners policy, you’ll need to become familiar with terms like the insurance deductible in order to make informed decisions about what types of benefits you need and what kind of plan you can afford. Read on to learn more about insurance deductibles and the role they play in the cost analysis and the claims process.
Insurance Deductible Defined
An insurance deductible is the amount of money you, the policy holder, have to pay for services or benefits covered by your insurance policy before your insurance company will help pay for those types of services. Once you’ve paid the deductible, your insurer pays for covered services, up to the plan limit. However, some services might be covered by insurance outside of the deductible amount. Lastly, the deductible may apply on an annual or per incident basis, depending on the type of policy you have.
For example, you may have a car insurance plan that covers damage to your car, but your policy specifies an $800 deductible per claim. If you’re in an accident resulting in $1,000 worth of damage, you’re going to pay for the first $800 worth of repairs and your insurance will cover the remaining $200. Similarly, say your dental plan has a $200 annual deductible, but your first dental visit is a routine check-up. That visit may be covered completely, regardless of the deductible. If your next two dental visits cost $190, you’ll pay for both visits in full, but your insurance will help pay for subsequent visits that occur within the same plan year.
Types of Insurance Deductibles
You can find deductibles in all types of insurance, such as health, auto, and homeowners insurance. But there may also be different deductibles within those categories of insurance. For example, in a health insurance plan, you might have one deductible for general services and another for prescription drugs. Or there might be one deductible for each individual covered under the plan and one deductible for the family as a whole. A home or flood policy might specify one deductible for the structure of your home and another for its contents. A careful reading of your policy should reveal all the different insurance deductibles that could apply to you.
How Much Does an Insurance Deductible Cost?
Deductibles vary widely depending on the type of insurance as well as the benefits offered by your particular insurance plan. Deductibles for more catastrophic events, like floods and earthquakes, tend to be much higher, while deductibles for more routine events, like dental work and doctor’s visits, are comparatively lower. So, while your dental insurance deductible may be only $40, your flood insurance deductible could be $10,000. Additionally, you can generally expect a higher deductible if you pay a lower monthly premium, and a lower deductible if you pay a higher monthly premium.
Deductibles vs. Coinsurance vs. Copays
It’s also important to distinguish deductibles from two other insurance terms: coinsurance and copays. Coinsurance refers to your share (usually a percentage) of the cost of a covered service, while the copay refers to the fixed amount you pay each time you receive services. To illustrate, your health insurance policy might have a $1,000 deductible, a $25 copay for each doctor’s visit, and coinsurance requiring you to cover 20% of the cost of generic prescription drugs.
Defend Your Insurance Rights with the Help of an Attorney
Regardless of the specific amounts of your insurance plan’s deductibles, your insurance company has a legal obligation to act in good faith and abide by your state’s insurance laws, many of which are designed to protect consumers. After all, you’ve been paying your premiums and deductibles with the expectation that the insurance company will live up to its end of the bargain. Whether you think your claim was unjustly denied or your insurer isn’t sticking to the terms of your policy, contact a local insurance attorney who can explain and defend your rights.