What is a Deductible in Personal Insurance

What is a Deductible in Personal Insurance?

An insurance deductible is an amount you pay out of pocket before the insurance pays for your medical expenses. For instance, if you have a personal insurance plan with a deductible of $1,000, you must pay $1,000 before the insurance kicks in.  The purpose of the deductible is to keep premiums low via cost-sharing and decrease the number of small claims and unimportant visits to the doctor. 

Every health insurance company sets standardized prices for what they will pay for each type of care. The maximum they are willing to pay is called the “allowed amount.” In-network providers pay the allowed amount set by the health insurance company. Out-of-network providers have not agreed to this amount and can charge higher fees with no restrictions. As a result, going to an in-network provider will usually cost you less.

How Does a Deductible Work?

When you purchase personal insurance, you cover yourself for unforeseen situations such as accidents and unexpected chronic illnesses that may lead to recurring expenses. By taking the health insurance plan, you want the insurance company to take care of your bill, which can otherwise take a financial toll. 

The insurance will cover you, but on the condition that you pay the deductible. The insurance company will inform you how much they will charge you based on the risk and the initial amount you agree to pay.

Your Deductible Amount

Deductibles vary from one plan to another. Fortunately, you determine the amount of money you want to pay into your deductible. The higher the deductible, the lower the cost of your health plan. 

By covering a higher risk via a deductible, you leave the health insurer with a lesser risk to take care of. This usually leads the insurance company to reduce costs on their part. Some personal insurance policies may have a minimum deductible amount of which you must adhere to the terms. The minimum deductible can vary by policy and state.

What to Consider When Choosing a Deductible

As a rule of thumb, a high-deductible plan saves money on monthly premiums, while a low-deductible plan increases monthly premiums. High-deductible insurance covers are also known as “consumer-directed” plans where deductibles exceed the IRS limit on individual coverage and family coverage.  

High-deductible plans are ideal for single individuals and those who are generally healthy. A few doctor visits a year will not cause a financial setback for a healthy individual. Therefore, it is important to consider if you can afford a high-deductible plan in a medical emergency. 

You should avoid a situation where you cannot pay the deductible. So, think ahead when choosing a health plan.

Should I Get a Personal Insurance Policy with Separate Deductibles?

If you’re comfortable seeing the doctors in your network, you may not mind a health insurance policy with separate in- and out-of-network deductibles. However, you may have a doctor who isn’t in-network. Or you may have a medical condition that requires specialized care outside of your network. You may want a policy with a combined deductible in or out of the network.

In either situation, keep in mind that even if you go to an out-of-network provider, the expenses you pay go toward your out-of-pocket maximum. After you meet this limit, your insurance policy may pay for all additional healthcare costs within that year.

Contact Insurance Enterprise for Premier Health Insurance

If you have questions about group or individual health insurance and need personal insurance quotes, contact Insurance Enterprise at 888-350-6605. Speak to a licensed agent and find out more about how you can get an affordable health insurance plan.