A deductible is an upfront or out-of-pocket cost that an insurance policyholder must pay toward a loss or expense covered by an insurance plan before the insurance company will pay for costs. The phrase "no charge after deductible" signifies that once you pay the full deductible amount, the insurance company will cover 100 percent of the cost of an expense up to the limits of your plan.
When your insurance plan specifies there is no charge after your deductible, this means the insurance company will pay the remainder of costs after you pay the entire deductible amount. Insurance companies often set limits to how much they will pay, however.
What Is a Deductible?
A deductible functions as a way for insurance companies to reduce risk by making policyholders pay for small expenses. For instance, if your collision car insurance has a $1,000 deductible and you get in a minor accident that causes $500 of damage, you are liable for the full amount of the damage. On the other hand, if you got in an accident that caused $10,000 of damage and your insurance plan stated that there was no charge after deductible, the insurance company would pay $9,000 after you met the $1,000 deductible.
How Coinsurance Works
The term "no charge after deductible" is frequently used in health insurance plans because these plans often require coinsurance, which is a shared cost that must be paid even after the deductible is met. For instance, if you must pay 10 percent coinsurance on a $10,000 medical procedure and your deductible is $1,000, you must pay the $1,000 deductible and 10 percent of the remaining $9,000 for a total of $1,900. If your insurance plan did not require coinsurance, it might state that there is no charge after the deductible, and in this case you would only pay $1,000 instead of $1,900.
Potential Ramifications of No Charge
In health insurance, you typically accumulate money toward your deductible each plan year, and once you meet the deductible, you no longer have to pay money toward it until the next year. This means if your plan states that there is no charge after deductible for a certain expense and you have already paid your deductible for the year, the insurance company will cover the expense at no cost to you.
Even if an insurance plan states that a certain expense has no charge after deductible, you will have to absorb costs if they exceed the limits of your plan. Insurance companies set a certain maximum limit on the amount of money you can receive for covered costs. For instance, your auto insurance plan might have a limit of $25,000 for collision damage. If your car is worth $50,000 and you total it in a crash, your insurance company will only pay you $25,000.