How Does an Individual or Family Deductible Work?

Understanding how health insurance plans work can be a daunting task, especially since these plans are often written using an industry-specific vocabulary. As you read about your insurance deductibles, co-pays, coinsurance and out-of-pocket maximums, you’ll want to know what each of these mean. If you’re part of a family plan, you’ll likely have two deductibles: individual and family.

To understand individual and family deductibles, you’ll first need to understand how insurance deductibles work. Your deductible is the amount you will pay out of pocket before your insurance coverage benefits kick in. For example, if you have a plan with a $500 deductible that you haven't paid and you’re having a surgery, you’ll be responsible for the initial $500 of the surgery, or the amount of your deductible that is unpaid. Once your deductible is met, your insurance will cover qualified treatments at their coinsurance rate. For instance, if your insurance coinsurance is 80 percent, for your surgery you’ll pay the first $500, then 20 percent of the remaining bills.

Most medical insurance plans specify an individual deductible. This is the amount that you must meet out of pocket for the insurance company to start covering treatment. That said, on a family plan, an individual deductible applies only to the person who is receiving the treatment. Let’s say you're on a family plan with your parents and siblings, and your plan has both a family deductible along with individual deductibles. When you see a doctor and pay for the office visit, that goes toward your individual deductible.

Along with individual deductibles, many family plans also include a family deductible. The family deductible can vary depending on your plan, but is often about the sum of two individual deductibles. The nice part of a family deductible is that individual deductibles paid are applied to the family deductible as well. So if you meet your $500 individual deductible and you have a $1,000 family deductible, you’ve already contributed half of the required funds. Once your family deductible is met, full plan benefits kick in for every member of your family, regardless of whether each member has met his individual deductible.

While your plan likely includes an individual and family deductible, it may also stipulate deductibles for various types of treatment or out-of-network providers. For instance, your plan may include a separate deductible for the emergency room, meaning that you’ll need to meet the deductible amount for your emergency room benefits to kick in, even if you’ve already met your individual deductible. You also may need to reach separate, higher individual and family deductibles if you decide to seek treatment from providers outside your insurance company’s network.