In health insurance terms, what is a 'deductible'?

A deductible in health insurance refers to the amount that the insured must pay out-of-pocket before the insurance company begins to cover the costs of medical services. This concept is crucial because it establishes the initial financial responsibility of the policyholder before they can access the benefits of their health insurance plan.

For instance, if a health insurance policy has a deductible of $1,000, the insured must pay the first $1,000 of their medical expenses themselves. Only after reaching this threshold will the insurer start paying for eligible healthcare services according to the terms of the policy, which may include co-pays or co-insurance for subsequent costs.

Understanding the function of a deductible helps consumers budget for healthcare expenses and acknowledges the sharing of costs between them and the insurer. Other terms, like premiums (the regular payments made to maintain the policy) and out-of-pocket maximums, play different roles in health insurance but do not directly define what a deductible is.