Texas General Lines — Life, Accident, Health and HMOHealth InsuranceEasy
A client is reviewing their new medical expense policy and notices a clause that states the insurer will only pay for expenses above a certain amount, and the client is responsible for the initial portion of the covered medical costs before the insurer begins to pay. What is this initial portion called?
- ADeductible
- BPremium
- CCoinsurance
- DCopayment
Show answer & explanationAnswer & explanation
Correct answer: A. Deductible
The deductible is the initial amount the insured must pay for covered medical services before the insurance company starts to pay. It serves as a cost-sharing mechanism.
Why the other options are wrong
- B. A premium is the regular payment made to the insurance company to keep the policy in force.
- C. Coinsurance is a percentage of costs the insured pays after the deductible is met.
- D. A copayment is a fixed amount the insured pays for a covered service, typically at the time of service.
Deductible
The amount the insured must pay out-of-pocket for covered services before the insurance company begins to pay.
- Applies per policy period (e.g., annually)
- Must be met before coinsurance or benefits kick in
- Higher deductibles typically mean lower premiums
Memory trick: Many plans share costs; the first hurdle is always the 'D'eadline.