How is a deductible defined in the context of health insurance?

In health insurance, a deductible is defined as the amount that a policyholder must pay out-of-pocket for healthcare services before the insurance company begins to cover expenses. This means that the individual must incur this cost themselves before the insurance kicks in to help them with further medical expenses.

For example, if a deductible is set at $1,000, the policyholder needs to pay the first $1,000 of their medical bills, and only after reaching that threshold will the insurance provider start to contribute to further costs according to the terms of the policy.

This differs from paying premiums, which are the regular fees paid to maintain the insurance coverage itself, and from the concept of a co-pay or co-insurance, where a policyholder pays a portion of costs after the deductible is met. Understanding deductibles is crucial because they directly affect the overall out-of-pocket expenses that individuals might face when seeking medical treatment.