What is the term for the amount of money that an insured must pay before health insurance takes effect?

The correct term for the amount of money that an insured must pay out-of-pocket before their health insurance starts to cover expenses is known as the deductible. This amount must be met first in terms of total medical costs incurred within a specific timeframe, typically a year, before the insurance provider begins to pay its share of the covered services.

Understanding the deductible is important because it directly influences how much an insured person will contribute to their healthcare costs before receiving benefits from their insurance plan. For instance, if a deductible is set at a certain amount, the insured will need to pay all of their medical expenses (that are not covered by insurance) until that limit is reached.

Other terms can be confusing as they relate to health insurance costs but serve different functions. Coinsurance represents the percentage of costs the insured pays after the deductible is met. Premiums are the recurring payments made to maintain the insurance coverage, and copayments are typically a fixed dollar amount paid for specific services at the time of receiving care. Understanding these distinctions helps clarify how health insurance operates in terms of out-of-pocket expenses.