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What is the purpose of a 'deductible' in a health insurance plan?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

The amount the insured must pay out of pocket for covered services before the insurer begins to pay

  1. A The maximum the insurer will ever pay
  2. B A monthly fee to keep the policy active
  3. C A payment the insurer makes to the insured
  4. D The amount the insured must pay out of pocket for covered services before the insurer begins to pay

Why this is the answer

A deductible is the amount an insured must pay out of pocket for covered health services within a plan period before the insurer starts paying its share. For example, with a $1,000 deductible, the insured pays the first $1,000 of covered costs before coverage kicks in (some services may be covered before the deductible, such as certain preventive care). The premium, by contrast, is the ongoing amount paid to keep the policy in force. Deductibles are part of cost-sharing along with copayments and coinsurance. Understanding the deductible as the insured's upfront cost-share before benefits begin is fundamental health insurance content.
Source: Health Insurance — Deductibles

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About this topic: Health Insurance Basics

Health insurance basics cover the types of health coverage, the risk and underwriting concepts behind them, and the terms every policy uses — premium, deductible, coinsurance, copayment, out-of-pocket maximum. This is one of 7 Health Insurance questions on health insurance basics, each with a full explanation on a single study page.

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