Insurance is a financial product where a consumer pays an insurance company a fee called a premium in exchange for the promise of financial compensation if certain losses or expenses arise. Although you have to pay premiums to purchase and maintain insurance coverage, you may also have to pay deductibles when you make an insurance claim before your insurance carrier will give you compensation. The number of times you have to pay deductibles when making claims depends on the specific terms of your insurance policy.
An insurance deductible is a cost you must pay before your insurance company will pay you for a claim. For example, when you buy an auto insurance policy, it might have a $500 deductible on auto accident coverage. If you happen to get into an auto accident that damages your car, you would have to pay the $500 deductible out of your own pocket before the insurance company would give you any money.
For many insurance policies, you must pay the deductible for each claim that you make against the policy. For example, if you get into an auto accident and pay your $500 deductible and then get into another accident a month later, you would have to pay the $500 deductible again under a per-claim deductible. You often have to pay your deductible for every claim you make under auto insurance and homeowners insurance policies.
Some insurance policies have annual deductibles that, once met, you do not have to pay again until the next calendar year. For example, if you had a $2,000 annual health insurance deductible for surgical care and you had a $5,000 surgery early in the year that required you to pay your full deductible, you would not have to pay your deductible again for further surgical operations you receive during the year. Once the calendar year for the insurance policy ends, you must meet the deductible again for the next year before the insurance company will begin to cover costs. Annual deductibles are common in health insurance policies.
A single insurance policy could potentially include a combination of both annual deductibles and per-claim costs. For example, a health insurance policy might have an annual deductible for general medical and surgical care within a certain health network but charge a different amount for every claim that you make when using health care providers outside of a certain network or charge fees called copays on prescription drugs that you purchase. In addition, you might owe coinsurance even after you pay your deductible. Under coinsurance, you must share the cost of an expense with your insurance company. For example, if your policy requires 10 percent coinsurance on surgery, your insurance company will only pay for 90 percent of the cost of surgical operations after you pay your deductible.
- U.S. Bureau of Labor Statistics: Definitions of Health Insurance Terms
- CarInsuranceRates.com: Car Insurance Deductibles Explained
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- Travelers. "Home Insurance Deductibles and Limits." Accessed Aug. 2, 2020.
- Allstate. "What Is Zero-Deductible Car Insurance?" Accessed Aug. 2, 2020.
- Hanover Insurance Group. "Understanding Waiver of Deductible Coverage." Accessed Aug. 2, 2020.
- HealthCare.Gov. "Deductible." Accessed Aug. 2, 2020.
- HealthCare.gov. "Deductible." Accessed Aug. 2, 2020.
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.