What does the term "deductible" mean in health insurance?

In health insurance, the term "deductible" refers to the amount that an insured individual must pay out-of-pocket for healthcare services before their insurance plan begins to cover those costs. This mechanism is designed to encourage insured individuals to share some of the financial responsibility for medical care, ensuring that they have a vested interest in the cost of services used.

When individuals face a deductible, they will need to pay this specified amount for their medical services—this cost must be incurred before any of the insurance benefits apply. For instance, if a health insurance plan has a $1,000 deductible, the policyholder needs to pay that amount in medical expenses before the insurance starts to contribute.

The other choices provide different concepts related to health insurance. The percentage of costs shared between the insurer and the insured is typically referred to as "coinsurance." The maximum amount an insurer pays for covered services pertains to the "policy limit" or "cap" of coverage. A fixed fee paid for specific medical services is known as a "copayment" or "copay." Understanding these distinctions helps individuals navigate their health insurance policies more effectively.